Author Abstract
This working paper integrates the role of entrepreneurship and firms into debates on why Asia, Latin America, and Africa were slow to catch up with the West following the Industrial Revolution and the advent of modern economic growth. It argues that the currently dominant explanations, which focus on deficient institutions, poor human capital development, geography, and culture are important but not sufficient. This is partly because recent research in business history has shown that several of the arguments are not empirically proved, but especially because the impact of these factors on the creation and performance of innovative business enterprises is not clearly specified. Modern economic growth diffused from its origins in the North Sea region to elsewhere in western and northern Europe, across the Atlantic, and later to Japan, but struggled to get traction elsewhere. The societal and cultural embeddedness of the new technologies posed significant entrepreneurial challenges. The best equipped to overcome these challenges were often entrepreneurs based in minorities who held significant advantages in capital-raising and trust levels. By the interwar years, productive modern business enterprise was emerging across the non-Western world. Often local and Western managerial practices were combined to produce hybrid forms of business enterprise. After 1945 many governmental policies designed to facilitate catch-up ended up crippling these emergent business enterprises without putting effective alternatives in place. The second global economy provided more opportunities for catch up from the Rest and saw the rapid growth of globally competitive businesses in Asia, Latin America, and Africa. This is explained not only by institutional reforms, but also by new ways for business in the Rest to access knowledge and capital, including returning diaspora, business schools, and management consultancies. Smarter state capitalism was also a greater source of international competitive advantage than the state intervention often seen in the past.
Paper Information
- Full Working Paper Text
- Working Paper Publication Date: March 2013
- HBS Working Paper Number: 13-076
- Faculty Unit(s): General Management