New research from Assistant Professor Roy Y.J. Chua investigates the difficulties for foreigners doing business in China, and what they can do to overcome the challenge.
In South Asia, which regional traits encourage local entrepreneurship? While multiple studies have considered this question in advanced economies, especially for the manufacturing sector, there has been very little empirical evidence for developing countries like India. While India has historically had low entrepreneurship rates, this weakness is improving and will be an important stepping stone to further development. In this paper, the authors explore the spatial determinants of local entrepreneurship in India for both manufacturing and services. At the district level, their strongest evidence points to the roles that local education levels and physical infrastructure quality play in promoting entry. They also find evidence that strict labor regulations discourage formal sector entry, and better household banking environments encourage entry in the unorganized sector. The paper then evaluates how incumbent industrial structures of cities shape the type of entrants that emerge in local areas. Startups are more frequent for a city in industries that share common labor needs or have customer-supplier relationships with the city's incumbent businesses. This is among the first studies to quantify the spatial determinants of entrepreneurship in India. Moreover, it moves beyond manufacturing to consider services, which are very important for India's economic growth.
In China, Yum! Brands is opening a KFC store every day. But this is not the KFC you know in America. A recent case study written by professor David Bell and Agribusiness Program director Mary Shelman reveals how the chicken giant adapted its famous fast-food formula for the local market.
A billion people in developing countries have no need for a savings account–but they do need a financial service that banks compete to provide. The new HBS case Mobile Banking for the Unbanked, written by professor Kash Rangan, is a lesson in understanding the real need of customers.
In deducing why some nations are more developed than others, it makes sense to look at their educational systems. While comparative studies on the subject focus either on developed nations or on differences between developed and developing economies, this paper hones in four of the largest developing nations at the turn of the twentieth century: Brazil, Russia, India, and China (BRIC). Research was conducted by Aldo Musacchio of Harvard Business School, Laktika Chaundhary of Scripps College, Steven Nafziger of Williams College, and Se Yan of Peking University.
Protecting the rights of disadvantaged citizens remains a challenge in both developing and developed countries. These individuals often are targets of verbal abuse, discrimination, and violent crime. Using evidence from India, this paper shows that political representation of disadvantaged groups is an important means of giving them a voice in the criminal justice system. Research was conducted by Lakshmi Iyer of Harvard Business School, Anandi Mani of the University of Warwick, and Prachi Mishra and Petia Topalova of the International Monetary Fund.
In a new book, The People's Republic of China at 60: An International Assessment, HBS professor William C. Kirby discusses common assumptions about pre-revolutionary China and its development into an economic power.
Harvard Business School faculty share their views and insights about the challenges that lie ahead for Japan's business leaders and for global companies operating there.
The historic events in North Africa and the Middle East are examined by three professors: Deepak Malhotra, an authority on negotiation strategy; Noel Maurer, an expert on the politics and economics of the energy business; and Magnus Thor Torfason, an authority on how behavior is influenced by the social structures of individuals and organizations.
Published in 2010
Going global is one thing, targeting emerging economies quite another. In this collection from our archives, HBS faculty discuss strategy development, government relations, exploiting local opportunities, and risk management when dealing in emerging economies.
The researchers set out to explain differences in China's antidumping actions against importers in the petrochemical and steel industries. During the study period, 66 percent of the country's antidumping cases targeted petrochemical imports, while steel imports were targeted only in 5 percent of the cases. Why did China's petrochemical and steel industries behave so differently in seeking trade protection? The answers put forward by researchers Regina Abrami (Harvard Business School) and Yu Zheng (University of Connecticut) point toward the structural nature of the industries themselves, and against arguments that antidumping actions in China have been driven by retaliation or national industrial strategy alone.
While the economic crisis has caused countries to revisit growth strategies, it has also raised serious concerns about whether the traditional strategy of export-led growth is producing the right answer. Harvard Business School's Christian Ketels argues that the focus of debate now needs to be on the actual policies that can increase competitiveness rather than exports per se.
The concept of good old-fashioned realpolitik-politics primarily shaped by practicality and power-has returned to Europe, clashing with the traditional ideologies of the European Union, says Harvard Business School professor Rawi Abdelal. Citing supporting evidence from the Russian gas giant Gazprom, he argues that scholars need to pay better attention to the role of large corporations in international relations.
Business cycle fluctuations in developed economies tend to have very strong effects on developing countries, says a new study by Harvard Business School professor Diego Comin, Norman Loayza and Luis Serven of the World Bank, and Farooq Pasha of Boston College. The researchers have developed a quantitative model capable of explaining the amplitude and persistence of the effect that U.S. shocks have on Mexico's macroeconomic variables. The model is then used to provide an account of the drivers of business fluctuations in developing economies.
What is the impact of trade policies on firms' ownership structures? Drawing on analysis based on a unique database from Dun and Bradstreet that contains both listed and unlisted plant-level observations in more than 200 countries, HBS professor Laura Alfaro and coauthors describe a simple model in which firms' boundaries depend on the prices of the products they sell: The higher the prices, the more integrated firms will be. More generally, when equilibrium prices converge across economies, so do ownership structures. The reason behind these predictions is that integration, although more productive than non-integration because of its comparative advantage in the coordination of firms' operating decisions, also imposes higher private costs on enterprise managers. At low prices, the productivity gains from integrating have little value, and managers choose non-integration. As prices rise, the relative value of coordination increases, favoring integration.
In 2008 and 2009 the world economy suffered the deepest global financial crisis since World War II. Countries around the globe witnessed major declines in output, employment, and trade, and world trade volume plummeted by more than 40 percent in the second half of 2008. Using a new dataset that reports operational activities of over 12 million establishments worldwide before and after 2008, HBS professor Laura Alfaro and George Washington University professor Maggie Chen study how multinationals around the world responded to the crisis relative to local firms, and the underlying mechanisms of those differential responses. By taking into account establishments both at the epicenter and on the periphery of the crisis, their analysis also considers multinationals' role as an international linkage in transmitting economic shocks.
In response to the global financial crisis that began in 2007, governments worldwide are rethinking their approach to regulating financial institutions. Among the financial institutions that have fallen under the gaze of regulators have been private equity (PE) funds. There are many open questions regarding the economic impact of PE funds, many of which cannot be definitively answered until the aftermath of the buyout boom of the mid-2000s can be fully assessed. HBS professor Josh Lerner and coauthors address one of these open questions, by examining the impact of PE investments across 20 industries in 26 major nations between 1991 and 2007. In particular, they look at the relationship between the presence of PE investments and the growth rates of productivity, employment, and capital formation.
Published in 2009
While the global economic downturn will affect China's exports, the domestic economy is expected to remain strong, agreed panelists at the HBS Business Summit.
Why do some countries adopt the European Union (EU)-based International Financial Reporting Standards (IFRS) when others do not? To expand our understanding of the determinants and consequences of IFRS adoption on a global sample, HBS professor Karthik Ramanna and MIT Sloan School of Management coauthor Ewa Sletten studied variations over time in the decision to adopt these standards in more than a hundred non-EU countries. Understanding countries' adoption decisions can provide insights into the benefits and costs of IFRS adoption.
Why is there apparently limited demand for financial services in emerging markets? On the one hand, low-income individuals may not want formal services when informal savings, credit, and insurance markets function reasonably well, and the benefits of formal financial market participation may not exceed the costs. On the other hand, limited financial literacy could be the barrier: If people are not familiar or comfortable with products, they will not demand them. These two views carry significantly different implications for the development of financial markets around the world, and would suggest quite different policy decisions by governments and international organizations seeking to promote "financial deepening." HBS professor Shawn Cole and coauthors found that financial literacy education has no effect on the probability of opening a bank savings account for the full population, although it does significantly increase the probability among those with low initial levels of financial literacy and low levels of education. In contrast, modest financial subsidies significantly increase the share of households that open a bank savings account within the subsequent two months.
