Going global: why some firms from emerging markets are more successful at internationalisation than others
Sourindra Banerjee, BP PhD Scholar
The recent rapid internationalisation of emerging market firms has generated a great deal of interest among academics and practitioners alike. How did firms that were operating in protected and relatively backward economies achieve such remarkable global expansion? In this paper we argue that the CEOs of emerging market firms have played an influential role in their internationalisation. In particular, we argue that firms with CEOs who gained foreign market knowledge through international education or international experience are more successful at internationalisation than others, especially if these firms belong to a business group. We also argue that CEOs with foreign market knowledge made the firms affiliated to business groups more competitive internationally. We test our hypotheses using a uniquely compiled archival database of 23 years (1986 to 2008) on 255 domestic, non-state owned firms from the BSE 500 index of the Bombay Stock Exchange. Our findings suggest that emerging market firms affiliated to business groups used CEOs foreign market knowledge to overcome their unfamiliarity with international markets and to make them internationally competitive. Greater familiarity with foreign markets and greater international competitiveness helped the emerging market firms affiliated to business groups internationalise more.
Innovation at the bottom-of-the-pyramid: the case of India
Aditya Gurtu, MPhil Candidate, University of Cambridge
Roughly four billion people on the planet earn less than $8 per day. These people can be classified as making up the ‘Bottom-of-the-economic-Pyramid’ (BoP). The role of private sector businesses in engaging the BoP is a topic that has come under increasing debate within academia and industry over the past several years. Proponents of ‘BoP Theory’ claim that there are substantial profits to be made by businesses in this widely untapped BoP market; with a massive potential for doing social good at the same time.
In fact, a handful of major western corporations have already begun to invest significant resources in pursuing business opportunities at the BoP (eg Microsoft, IBM, Nokia, Unilever, etc). Many of these BoP projects are implemented in India, owing to its hundreds of millions of aspiring BoP members living in slums and remote rural locations.
This dissertation examines the emerging themes of for-profit companies engaging the BoP in India. In particular, the transfer of these innovations ‘up-the-pyramid’ (from the BoP into higher income markets) is examined.
After conducting eight case studies with companies who have innovated in order to engage the Indian BoP, 17 emerging themes were identified and new theories developed. Some of the key findings relate to – disruptive innovation at the BoP, trickle-up innovation strategies, wealth creation models for the BoP, practical corporate engagement and market segmentation of those in poverty, as well as patterns found linking the ease of innovation transfer with innovation type, proportion of female BoP employees, and corporate BoP experience.
These findings have significant practical implications for the strategies of companies seeking to rapidly transfer innovations ‘up-the-pyramid’, suggesting that firms would be wise to remain cautious about rushing into such BoP engagement. Evidence found suggests a more gradual, long-term innovation transfer strategy is required for success. The findings also have significant theoretical implications – doubting the fundamental proposition of ‘BoP Theory’ that for-profit businesses can fight poverty through profits. Evidence suggests this proposition requires refinement to clarify its applicability only to the $8 to $2/day BoP segment where the real ‘fortune at the bottom-of-the-pyramid’ lies.
The application of econometric methods in microfinance and health-related topics
Thilo Klein, PhD Candidate, University of Cambridge
Why India’s Urban Poor Choose to Go Private: Health Policy Simulations in Slums of Hyderabad
It is well known that in many developing countries even the abjectly poor show marked preferences for privately provided health services compared to public offerings. This is so even though the private health sector is more expensive and generally employs less qualified professionals, who are demonstrably more responsive to patients’ perceived rather than actual medical needs.
Thilo Klein’s MPhil dissertation is based on data for maternity services which he collected in the slums of Hyderabad. The empirical analysis provides evidence that the risk of possibly having to buy drugs on the expensive private spot market, if they are not available publicly, is a significant factor. The empirically inferred higher risk aversion of the poor leads to a higher propensity to avoid this risk by buying a private package up-front. The dissertation also offers a simulation, based on empirically inferred willingness to pay, to illustrate how the public packages need to be changed to make them attractive to the poorer population.
Corporate sustainability reporting practices and their impact on Indian businesses
Dr Taran Patel, Grenoble Ecole de Management
In recent years there has been increasing pressure on companies to report their sustainability practices according to internationally recommended guidelines. Investment decisions, especially in developing countries like India, are being guided by whether companies report their CS practices and more importantly whether they do so according to internationally recommended guidelines. Taking the example of six Indian organisations, Taran Patel and Steve Rayner argue that their CS initiatives and reporting preferences are guided by their cultures, which they define as frameworks of accountability. They find that the three active types of social accountability (ie hierarchy, competitive and egalitarian) prioritise stakeholders and report their CS practices differently. Therefore, managers need an insight into different kinds of social accountability existing in their organisations in order to effectively design, implement and report their CS initiatives. This study employs a triangular model of accountability, which reveals patterns of hybridity in the motivation for and application of social accountability in some organisations.
The size of new firm start-ups across space
Dr Jagannadha Pawan Tamvada, Max Planck Institute of Economics
How do entrepreneurial start-ups differ across space? J.P. Tamvada’s recent research with David Audretsch shows that superior regions give birth to superior new firm start-ups. In the context of India, this reflects as a distinct north-south divide in the quality of new firm start-ups.
Although the role of firm-specific and industry-specific characteristic on the size of new firms has been analysed in the literature, the impact of geographic location has been largely neglected. J.P.’s research suggests that the size of new firms exhibits remarkable spatial patterns that are not explainable by firm and industry characteristics. The empirical results reveal that the districts of Uttar Pradesh, Madhya Pradesh, and Bihar, three of the poorest Indian states, form a belt with new firm start-ups that have a significantly smaller size than the size of new firm start-ups in the more developed states of Maharastra, Andhra Pradesh, Punjab and Haryana. “Aiding entrepreneurs in poorer regions is essential for development policy,” J.P. says.
Further, the results provide important first insights identifying those factors shaping firms’ start-up size in the context of a developing economy. In particular, the results suggest that new-firm start-ups by proprietary owners and female entrepreneurs have a smaller size at start-up. Firms that have technical knowledge at the start-up phase tend to have a larger size than firms that do not have any technical knowledge.
The empirical study uses geoadditive modelling techniques and a comprehensive database of new firm start-ups that started their operations during 1998-2000. Here, the size of new firm start-ups is measured using the initial value of their fixed assets.