- 03 Dec 2015
- Op-Ed
How "New Nuclear" Power Could Save the Planet—If Regulators Would Allow It
The barriers to rapid progress in next-generation nuclear power are certainly not technical and probably not even economic, argues Joseph Lassiter. The greatest barriers today are in outdated nuclear regulations. Open for comment; 0 Comments.
- 27 Jan 2015
- Working Paper Summaries
College Admissions as Non-Price Competition: The Case of South Korea
College admissions is a matching market—applicants cannot simply choose which college to attend, they must be admitted. From the perspective of colleges competing for top applicants, how can these institutions make the best strategic decisions and increase their own desirability? South Korea offers an ideal case study for analyzing efficiency in college admissions matching because the national government sets the rules in centralized fashion and South Korea has made several important changes in the rules in 1994. The authors develop a model to study the incentives for colleges before and after the reforms, and compare the predictions of the model to stylized facts about the behavior of South Korean colleges given each set of rules. The authors then assess the success of the reforms before and after these changes to admissions rules. Findings show that the 1994 South Korean college admission reforms increased the efficiency of the assignment process in two ways. First, these reforms reduced congestion, ensuring that all students could apply to at least three highly-ranked colleges (once in early admissions and then on two different dates in regular admissions). Second, this reform provided new information to colleges, enabling them to promote specialized matches in their regular admission decisions. Closed for comment; 0 Comments.
- 20 Nov 2014
- Working Paper Summaries
Entrepreneurship and Business Groups: An Evolutionary Perspective on the Growth of the Koç Group in Turkey
This working paper examines the emergence and growth of diversified business groups in Turkey, where such groups played a critical role in the creation of modern industries and remain dominant in the economy even today. Specifically, the authors focus on the origins of the Koç Group, which grew to be the largest business group in Turkey. They explore the dynamics of its growth from its foundation in 1917 until the late 1980s. Overall, this research supports prevailing explanations of business groups which identify the role of institutional voids, government policies, and contact capabilities. However, the authors also stress that entrepreneurship needs to be incorporated into the determinants of business group growth, especially to account for why particular entrepreneurs built such groups while others, faced with similar conditions, did not. Key concepts include: Diversified business groups are the dominant organizational form in many emerging markets, including Turkey. Their emergence and importance has been explained in terms of institutional voids, government policies, and contact capabilities, but entrepreneurship also mattered. Entrepreneurship mattered not only in the origins of such groups, but in their subsequent growth as large businesses. In this case study, there is evidence of entrepreneurship that was alert both to the new opportunities offered by the Republic, and prepared to disrupt and create new opportunities. The founder, Vehbi Koç, was creative in his search for new knowledge and skills, reaching out both to ethnic minorities within Turkey and Western multinationals. As he grew his business, he also pioneered corporate philanthropy within Turkey, which included having to lobby to change the legal framework of Turkish business. He also took the lead in Turkey in modernizing traditional organizational methods, although he and his family stayed firmly in control of the group. Closed for comment; 0 Comments.
- 28 May 2014
- Research & Ideas
Building Histories of Emerging Economies One Interview at a Time
Much of modern business history has been written on experiences in the United States, Europe, and Japan. Now, the unheard stories of emerging markets in Africa, Asia, and Latin America are being told on a new website by the Business History Initiative. Open for comment; 0 Comments.
- 04 Dec 2013
- Research & Ideas
The Fantastic Horizon: How to Invest in a New City
Rapid urbanization and resource scarcity pose problems—and opportunities—for businesses and governments all over the world. Senior Lecturer John Macomber writes about his recent investigative visits to nascent privately-funded municipalities in Saudi Arabia and Vietnam. Closed for comment; 0 Comments.
- 23 Mar 2011
- Research & Ideas
China’s 60-Year Road from Revolution to World Power
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. Key concepts include: Essays in the book address four main themes: politics; social transformations; wealth and well-being; and culture, belief, and practice. Kirby refers to the first three decades of the PRC as "a regime of wasted, and wasteful—not to mention criminal—youth." However, he says, many of the essays in the book show how the country has taken good advantage of the last three decades. Mid-century revolutionaries and scholars cited the economy as a major reason that China needed a revolution. However, the country actually sustained decent financial growth, fueled by private enterprise, from the 1910s until the onset of the global depression of the 1930s and the Sino-Japanese war in 1937. While China's central government was weak in the first half of the twentieth century, the country during that time developed strong methods of institution-building at the national, provincial, municipal, and local levels. Closed for comment; 0 Comments.
- 31 Aug 2010
- Working Paper Summaries
Multinational Firms, Labor Market Discrimination, and the Capture of Competitive Advantage by Exploiting the Social Divide
Women and ethnic minorities are frequently discriminated against in the labor markets of both developed and emerging economies, particularly in opportunities for management positions. Multinationals entering such markets must decide whether to aggressively hire and promote the excluded group, thus reaping the benefits of their underutilized talent, or conform to local practice and avoid provoking some bigoted policymakers, executives, purchasers, and/or supply agents. In this paper, HBS professor Jordan Siegel, Lynn Pyun, and B.Y. Cheon find that multinationals gain significant competitive opportunities by scanning the host-market social landscape, identifying social schisms in the labor market, and exploiting such schisms by actively hiring and promoting members of the excluded group to positions of management responsibility. Key concepts include: Foreigners achieve a competitive advantage by exploiting the social divide in a host market. This competitive advantage is not unique to foreigners. However, foreign multinationals, who are not affected by prior social network obligations, may often find it easier than some domestic firms to in effect form an alliance with the excluded group. Foreign multinationals can exploit market failure where the excluded group is talented but underutilized. This competitive advantage is associated with a significant profit benefit, and one that is only very slowly being whittled away through imitation. Closed for comment; 0 Comments.
- 10 Dec 2009
- Working Paper Summaries
State Owned Entity Reform in Absence of Privatization: Reforming Indian National Laboratories and Role of Leadership
Is privatization necessary? In India and across emerging markets, state-owned entities (SOEs) continue to make up a large proportion of industrial sales, yet they lag behind private counterparts on performance measures. But SOEs may be able to significantly improve performance even in the absence of property rights, according to HBS doctoral candidate Prithwiraj Choudhury and professor Tarun Khanna. As they document, 42 Indian state-owned laboratories started from a base of negligible U.S. patents, yet in the period 1993-2006 (during which the Indian government launched an ambitious privatization program), the labs were granted more patents than all domestic private firms combined. The labs then licensed several of these patents to multinationals, and licensing revenue increased from 3 percent to 15 percent as a fraction of government budgetary support. Findings are relevant to firms and R&D entities around the world that depend on varying degrees of government budgetary support and government control, especially in emerging markets like India, where SOEs control up to one-third of all industrial activity. Key concepts include: Despite the absence of property rights, 42 Indian state-owned laboratories significantly increased U.S. patents and licensing revenue from multinationals without negatively affecting publication quality and quantity. This development may be due to incentive policy change and leadership change at the labs. U.S. patents as well as revenue from multinationals increased sharply in response to director changes, an event whose timing was dictated by rigid government employment rules. Private firms including multinationals can play a catalytic role in driving up revenue at SOEs. The state-owned labs leveraged the U.S. institutional context in effecting their turnaround. The general point is that organizations in emerging markets can leverage institutions from outside their location of origin, once they have some established source of competitive advantage (in this case, their R&D-generated know-how). Although the labs were able to commercialize projects without sacrificing publication quality and quantity, a question remains as to whether and why national labs should concern themselves with commercialization. Closed for comment; 0 Comments.
- 18 Nov 2009
- Working Paper Summaries
India Transformed? Insights from the Firm Level 1988-2005
Between 1986 and 2005, Indian growth put to rest the concern that there was something about the "nature of India" that made rapid growth difficult. Following broad-ranging reforms in the mid-1980s and early 1990s, the state deregulated entry, both domestic and foreign, in many industries, and also hugely reduced barriers to trade. Laura Alfaro of Harvard Business School and Anusha Chari of the University of North Carolina at Chapel Hill analyze the evolution of India's industrial structure at the firm level following the reforms. Despite the substantial increase in the number of private and foreign firms, the overall pattern that emerges is one of continued incumbent dominance in terms of assets, sales, and profits in both state-owned and traditional private firms. Key concepts include: In sectors dominated by state-owned and traditional private firms before liberalization (with assets, sales, and profits representing 50 percent or higher shares), these firms remain the dominant ownership group following the reforms. Rates of return remain stable over time and show low dispersion across sectors and across ownership groups within sectors. The high levels of state ownership and ownership by traditional private firms in India raise the question of whether existing resources could be allocated more efficiently and whether remaining barriers to competition jeopardize the effectiveness of reform measures that have been put in place. Closed for comment; 0 Comments.
- 30 Jul 2009
- Working Paper Summaries
Fluid Teams and Fluid Tasks: The Impact of Team Familiarity and Variation in Experience
In the context of team performance, common wisdom suggests that performance is maximized when individuals complete the same work with the same people. Although repetition is valuable, at least up to a point, in many settings such as consulting, product development, and software services organizations consist largely of fluid teams executing projects for different customers. In fluid teams, members bring their varied experience sets together and attempt to generate innovative output before the team is disassembled and its individual members move on to new projects. Using the empirical setting of Wipro Technologies, a leading firm in the Indian software services industry, this study examines the potential positive and negative consequences of variation in team member experience as well as how fluid teams may capture the benefits of variation while mitigating the coordination costs it creates. Key concepts include: As organizations continue to depend on the output of teams, and teams, in turn, rely on members with varied prior experience, it becomes critical for teams to manage these differences and dependencies successfully. If the most valuable assets of many companies are their employees, then organizations need to shift from only thinking about their project portfolio to also considering their employee-experience portfolio. Managing employee-experience portfolios will require managers to consider the breadth of types of experience (e.g., customer, technology, etc.) captured across the members of a team as well as their familiarity with each other. Doing so may offer managers an important new lever for improving organizational performance. Closed for comment; 0 Comments.
- 15 May 2009
- Working Paper Summaries
Barriers to Household Risk Management: Evidence from India
Insurance markets are growing rapidly in developing countries. Despite the promise of these markets, however, adoption to date has been relatively slow. Yet households often remain exposed to movements in local weather; regional house prices; prices of commodities like rice, heating oil, and gasoline; and local, regional, and national income fluctuations. In many cases, financial contracts simply do not exist to hedge these exposures, and when contracts do exist their use is not widespread. Why don't financial markets develop to help households hedge these risks? Why don't more households participate when formal markets are available? HBS professor Shawn Cole and coauthors attempt to shed light on these questions by studying participation in rural India in a rainfall risk-management product that provides a payoff based on monsoon rainfall. The results suggest that it may take a significant amount of time—and substantial marketing efforts—to increase adoption of risk-management tools at the household level. Key concepts include: To increase the insurance penetration rate of insurance products, it is important to minimize transaction and administrative costs and foster competition among insurance providers. Technological advances and contractual innovations may improve these products. The estimated significance of trust and vendor experience suggests that product diffusion through the population may be relatively slow until a track record is established. Optimal contract design could help by paying a positive return with sufficient frequency. "Catastrophe"-type insurance might be most beneficial for households, since it provides payouts that are concentrated in states of nature where the marginal utility of consumption is particularly high. Closed for comment; 0 Comments.
- 15 May 2009
- Working Paper Summaries
Money or Knowledge? What Drives Demand for Financial Services in Emerging Markets?
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. Key concepts include: Subsidies or price reductions may represent a more cost-effective way of drawing households into the financial system. Financial literacy efforts targeted at the general population may be relatively ineffective. These results do not necessarily constitute support for financial literacy education even among the low-literacy subpopulation. Even if financial literacy programs are carefully targeted, they may still not be cost-effective. Closed for comment; 0 Comments.
- 26 Mar 2009
- Working Paper Summaries
The Bloody Millennium: Internal Conflict in South Asia
What accounts for the disturbing trend of increasing terrorism and associated fatalities in South Asia? In 2007, a quarter of all terrorist attacks worldwide were committed in South Asia, second only to Iraq. HBS professor Lakshmi Iyer presents the first comprehensive analysis of internal conflict in South Asia using multiple data sources and incorporating a long-run time frame. She finds that the intensity of internal conflict in the post-2001 period is strongly associated with poverty, both in a cross-country comparison and in a comparison of districts within India and Nepal. Measures implemented by regional and national governments to combat internal violence vary considerably across countries and over time. Typically, the use of military force or relying on unofficial militias has not proved to be a successful counterinsurgency tactic in South Asia; strengthening police activity and using a political accommodation approach has led to some successes in the past. Key concepts include: Since 2001, incidents of terrorism and associated fatalities have been rising steadily in South Asia. The increasing trend in incidents of terrorism and associated fatalities is observed primarily in the economically lagging regions of South Asia. There is a clear difference in conflict trends in leading and lagging regions. Economic backwardness can have adverse security consequences in the long run. Global events are likely to increase conflict within individual countries. Closed for comment; 0 Comments.
- 30 Oct 2008
- Working Paper Summaries
Do Voters Appreciate Responsive Governments? Evidence from Indian Disaster Relief
In a functioning democracy, politicians' ability to win reelection declines when they perform poorly. This idea fits well with models of political accountability. Recent evidence suggests, however, that voters may punish politicians even for events outside their control. This behavior may violate standard models of democratic accountability, and has been advanced as evidence of voter irrationality. This paper uses detailed weather, electoral, and relief data to identify the relationship between government responsiveness to an emergency and electoral decisions. Specifically, the authors look at the decisions that Indian voters made in provincial elections, using the intensity of the monsoon rains as an exogenous shock to welfare. They find that voters, on average, punish incumbent politicians for being in office during weather events beyond their control. However, the degree of voter punishment is reduced somewhat when the government responds more vigorously to the crisis. Key concepts include: Voters do a better job of holding governments accountable during these emergencies. Voters punish politicians following adverse weather events, but the degree of punishment depends critically on the quality of the ruling party's response: Those distributing greater amounts of relief aid suffer smaller subsequent electoral losses. Closed for comment; 0 Comments.
- 21 Aug 2008
- Working Paper Summaries
Traveling Agents: Political Change and Bureaucratic Turnover in India
Politicians and bureaucrats are two important pillars of governance, but while politicians are motivated by short-term electoral pressures, bureaucrats are driven by long-term career concerns. This difference in the nature of their incentives is, in most cases, deliberate and constitutionally provided for. Iyer and Mani address two key questions in this paper: How do politicians facing short-term electoral pressures control bureaucrats with low-powered incentives? In turn, how do bureaucrats respond to these incentives? The authors develop a simple framework and provide empirical evidence on both the politicians' and the bureaucrats' strategies, using a detailed data set on the entire career histories of officers in the Indian Administrative Service, the top layer of government bureaucracy in India. Key concepts include: The framework suggests that instituting limits to a politician's power to transfer bureaucrats across posts will favorably affect junior officers' incentives to invest in expertise. In India there is significant political influence on the bureaucracy through frequent transfers of bureaucrats across posts, despite the constitutional insulation provided to them against political pressures. Not all officers face the same odds of being transferred. High-skilled officers are much less likely to be transferred by an incoming politician and have more even career paths. Belonging to the same caste as the politician's party base was a factor that helped officers to secure more important posts. Closed for comment; 0 Comments.
- 06 Aug 2008
- Working Paper Summaries
Fixing Market Failures or Fixing Elections? Agricultural Credit in India
There are strong theoretical reasons to believe that politicians manipulate resources under their control to achieve electoral success. Yet, compelling examples of this manipulation are heretofore rarely documented in scholarly literature. Cole's paper presents evidence that government-owned banks in India serve the electoral interests of politicians. It also analyzes how resources are strategically distributed. Key concepts include: Findings show that the costs of redistribution are considerable: The estimated effect of 5 to 10 percent higher levels of credit in election years is substantially larger than the average annual growth rate of credit. Efforts to isolate government banks from political pressure, as is done with many central banks, may reduce these effects. Agricultural credit lent by public banks is substantially higher in election years. More loans are made in "swing" districts in which the ruling state party had a narrow margin of victory (or a narrow loss) than in less competitive districts. This targeting is not observed in nonelection years or in private bank lending. Closed for comment; 0 Comments.
- 04 Jun 2008
- Working Paper Summaries
Accountability and Inequality in Single-Party Regimes: A Comparative Analysis of Vietnam and China
While both China and Vietnam have experienced rapid annual growth over the past two decades, income inequality has risen more rapidly in China than in Vietnam during the same period. Structural and socio-cultural determinants fail to account for these divergent paths, as nearly every variable predicts higher inequality in Vietnam. This paper by Regina Abrami and colleagues focuses on differences in political institutions to explain these divergent paths. In so doing, it contributes to a growing body of literature describing variation in authoritarian regimes, but focuses on variation within one authoritarian regime type. Key concepts include: Compared with China, Vietnam's institutions empower a larger group of insiders and place far more constraints on the party leadership, both through vertical checks and through semi-competitive elections. As a result, Vietnamese economic policies must consider a larger cross section of society. Vietnam spends a far larger portion of its revenue on transfers, and has been able to engender greater equalization among provinces and individuals. It is still too early to tell whether the development paths in China and Vietnam will converge or diverge. Growing income inequality has pressured the Chinese government to shift its focus from promoting all-out economic growth to solving social tensions. Closed for comment; 0 Comments.
- 26 Mar 2008
- Sharpening Your Skills
- 28 Feb 2008
- Working Paper Summaries
Colonial Land Tenure, Electoral Competition and Public Goods in India
How is the impact of historical institutions felt today? This comparative analysis by Banerjee and Iyer highlights the impact of a specific historical institution on long-term development, specifically the land tenure systems instituted during British colonial rule. The paper compares the long-term development outcomes between areas where controls rights in land were historically given to a few landlords and areas where such rights were more broadly distributed. The paper also documents the impact of these differing historical institutions on political participation and electoral competition in the post-colonial period. Key concepts include: There are large differences in the development trajectories of areas that had different land tenure systems under British colonial rule. In particular, areas that were put under the control of landlords lag behind in the provision of public goods such as schools and roads compared with areas in which control rights in land were given to small cultivators. These differences are discernible even four decades after the end of colonial rule, and three decades after the landlord-based land tenure systems were officially abolished. Political participation and literacy levels are lower in landlord areas, but these differences are not sufficient to explain the differences in public goods provision. Closed for comment; 0 Comments.
Economic Growth Draws Companies to Asia. Can They Handle Its Authoritarian Regimes?
The efficiency of one-party governments might seem appealing, but leaders need a deep understanding of a country's power structure and "moral economy," says Meg Rithmire. Her book Precarious Ties: Business and the State in Authoritarian Asia explores the delicate relationship between capitalists and autocrats in the region.