Cultural embeddedness and global competitiveness: trust-based organizational logic in India’s informal diamond sector
Purpose This study investigates how trust-based governance, cultural embeddedness and informal organizational practices contribute to the global competitiveness of informal sector firms (ISFs), using India’s diamond cutting and polishing industry as a case. The study aims to challenge conventional management paradigms by highlighting how verbal agreements, kinship-based hiring, religious rituals and community reputation serve as effective substitutes for formal contracts and legal frameworks. Through qualitative fieldwork and statistical validation, the research demonstrates that culturally embedded informal systems can foster resilience, scalability and international market integration, offering alternative models of global entrepreneurship rooted in indigenous socio-economic logics. Design/methodology/approach This study adopts a qualitative, exploratory case study design, focusing on India’s diamond cutting and polishing industry. Data were collected through semi-structured interviews, ethnographic observations and informal interactions with 60 stakeholders, including ISF owners, brokers, workers and industry experts. NVivo software was used to code and analyse 1,148 qualitative references. Thematic analysis identified key patterns related to trust, cultural practices and informal governance. Complementary statistical techniques – including Kruskal–Wallis tests and logistic regression – were used to validate qualitative insights and examine relationships between firm size, cultural embeddedness and export performance, ensuring methodological triangulation and analytical robustness. Findings The study reveals that 83% of ISF transactions are based on verbal agreements, and 95% of firms prioritize community reputation over legal contracts. Firm size significantly affects export performance (Kruskal–Wallis H = 18.76, p < 0.01), with small firms showing higher variability. Logistic regression indicates firms with grading systems are 3.6 times more likely to retain international buyers. Cultural practices – such as kinship-based hiring and religious rituals – are positively correlated (p < 0.05) with scalability. The angadia courier system, handling over $2.4bn annually, shows a theft rate of only 0.001%, highlighting the efficiency of trust-based informal systems. Originality/value This study challenges conventional, Western-centric models of organizational formality by demonstrating how ISFs achieve global competitiveness through culturally embedded practices. Using India’s diamond industry as a case, it highlights how trust, reputation, kinship and religious norms function as effective governance mechanisms in the absence of formal contracts and legal infrastructure. The research introduces a hybrid model of informal institutional logic and empirical validation, offering new theoretical insights into globalization from below. It contributes to the decolonization of management theory by foregrounding indigenous business practices that are often overlooked in mainstream international business literature.
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