Enhancing Social Capital in Latin America

Since its formation, the Latin America Research Center (LARC) has worked to enhance intellectual capital creation by working with academics as well as business leaders in the region.

Programs in this area, supported by the LARC include:

The Global Colloquium on Participant-Centered Learning (GloColl), is an HBS course for faculty at business schools in emerging economies who are trained in interactive methods of teaching and learning.

The Social Enterprise Knowledge Network (SEKN), a consortium of eleven business schools that research and develop teaching cases on social enterprise in leading Latin American business schools.

Executive Education
in Latin America

Latin America

2014

Oil, Macroeconomic Volatility and Crime in the Determination of Beliefs in Venezuela

Chapter 4 in Venezuela Before Chávez: Anatomy of an Economic Collapse

Di Tella, Rafael, Javier Donna, and Robert MacCulloch
February 2013

At the beginning of the twentieth century Venezuela had one of the poorest economies in Latin America, but by 1970 it had become the richest country in the region and one of the twenty richest countries in the world, ahead of countries such as Greece, Israel, and Spain. Between 1978 and 2001, however, Venezuela's economy went sharply in reverse, with non-oil GDP declining by almost 19% and oil GDP by an astonishing 65%. What accounts for this drastic turnabout? The editors of Venezuela Before Chávez, who each played a policymaking role in the country's economy during the past two decades, have brought together a group of economists and political scientists to systematically examine the impact of a wide range of factors affecting the economy's collapse, from the cost of labor regulation and the development of financial markets to the weakening of democratic governance and the politics of decisions about industrial policy.

Penn State University Press, 2014

2013

The Empire Trap: The Rise and Fall of U.S. Intervention to Protect American Property Overseas, 1893-2013

Maurer, Noel
December 2013

Throughout the twentieth century, the U.S. government willingly deployed power, hard and soft, to protect American investments all around the globe. Why did the United States get into the business of defending its citizens' property rights abroad? The Empire Trap looks at how modern U.S. involvement in the empire business began, how American foreign policy became increasingly tied to the sway of private financial interests, and how postwar administrations finally extricated the U.S. from economic interventionism, even though the government had the will and power to continue. Maurer examines the ways that American investors initially influenced their government to intercede to protect investments in locations such as Central America and the Caribbean. Costs were small-at least at the outset-but with each incremental step, American policy became increasingly entangled with the goals of those they were backing, making disengagement more difficult. Maurer discusses how, all the way through the 1970s, the U.S. not only failed to resist pressure to defend American investments, but also remained unsuccessful at altering internal institutions of other countries in order to make property rights secure in the absence of active American involvement. Foreign nations expropriated American investments, but in almost every case the U.S. government's employment of economic sanctions or covert action obtained market value or more in compensation-despite the growing strategic risks. The advent of institutions focusing on international arbitration finally gave the executive branch a credible political excuse not to act. Maurer cautions that these institutions are now under strain and that a collapse might open the empire trap once more. With shrewd and timely analysis, this book considers American patterns of foreign intervention and the nation's changing role as an imperial power.

Princeton University Press, 2013

Leviathan Evolving: New Varieties of State Capitalism in Brazil and Beyond

Musacchio, Aldo, and Sergio G. Lazzarini
June 2013

In this book we describe the transformation of state capitalism from a model in which governments owned and ran corporations and broadly controlled the allocation of financial resources into two new varieties of state capitalism: Leviathan as a majority and as a minority investor. In this book we study the implications of such transformation using detailed data from Brazil between 1976 and 2009. In the Leviathan as a majority investor, governments have started to list state-owned enterprises, have selected professional managers to run them, and have given them more financial autonomy. We argue that the transformation from owner and manager to majority shareholder has reduced many agency problems commonly faced by SOEs, but has not reduced the temptation governments face to intervene in the operation of large strategic enterprises. In the Leviathan as a minority shareholder mode, governments have small equity ownership in corporations and in general do not intervene in management. We find evidence that such equity investments allow firms to alleviate capital constraints and increase capital expenditures. Yet we also find instances in which governments use their minority positions to intervene in the management of firms, especially in natural resource industries.

Harvard University Press

Venture Capital & Private Equity: A Casebook

Lerner, Josh, Felda Hardymon, and Ann Leamon
March 2013

Venture Capital & Private Equity: A Casebook, 5th edition provides an understanding of the ways in which private equity groups work. The casebook builds an understanding of the key distinctions in the industry and reviews and applies key ideas of corporate finance. The 5th edition continues to explore a wide variety of valuation approaches, from techniques widely used in practice to methods less frequently seen in practice today but likely to be increasingly important in the future years.

John Wiley & Sons, 2012

2011

Crime Distribution and Victim Behavior during a Crime Wave

Book Chapter in The Economics of Crime: Lessons for and from Latin America

Di Tella, Rafael, Sebastian Edwards, and Ernesto Schargrodsky
February 2011

The study of how crime affects different income groups faces the difficulty that crime-avoiding activities vary across these groups. Thus, a lower victimization rate in one group may not reflect a lower burden of crime, but rather a higher investment in crime avoidance. Moreover, protection activities by one group can displace crime onto another group. We take advantage of a dramatic increase in crime rates in Argentina during the late 1990s to document several interesting patterns. First, the increase in victimization experienced by the poor is larger than the increase endured by the rich. The difference appears large: low-income people have experienced increases in victimization rates that are almost 50% higher than those suffered by high-income people. Second, for home robberies, where the rich can protect themselves (by hiring private security, for example), we find significantly larger increases in victimization rates amongst the poor. In contrast, for robberies on the street, where the rich can only mimic the poor (by not using jewelry, for example), we find similar increases in victimization for both income groups. Third, we document direct evidence on pecuniary and non-pecuniary protection activities by both the rich and poor, ranging from the avoidance of dark places to the hiring of private security. Fourth, we estimate a negative correlation between changes in protection and mimicking and changes in crime victimization. Our findings are consistent with the presence of a negative externality on the poor arising from the protection expenditures of the rich.

The Economics of Crime: Lessons for and from Latin America

Di Tella, Rafael, Sebastian Edwards, and Ernesto Schargrodsky
February 2011

No abstract available

National Bureau of Economic Research and University of Chicago Press

Business Groups in Emerging Markets: Paragons or Parasites?

Book Chapter in The Oxford Handbook of Business Groups

Khanna, Tarun, and Yishay Yafeh
October 2010

No abstract available

The Historical Impact of Globalization in Argentina and Chile: Enterprises and Entrepreneurs (El Impacto Histórico de la Globalización en Argentina y Chile: Empresas y Empresarios)

Jones, Geoffrey and Andrea Lluch, eds
April 2011

This book presents new research on the historical impact of globalization on Argentina and Chile. The authors focus on the role of entrepreneurs and firms.

TEMAS-Grupo Editorial, 2011

2010

Innovations in Governance

Book Chapter in Innovation Policy and the Economy. Vol. 11
Fisman, Raymond, and Eric Werker
August 2010

In this paper we explore the innovations in governance that have promoted investment and growth. Some policymakers have tinkered with their country's institutions, some have undertaken wholesale changes, while others have attempted to influence the rules in other countries. We survey past attempts at governance innovation, from private governance in India's industrial cities to cross-border government efforts, like Singapore's Suzhou Park, outside of Shanghai, from norm-changing mimes in Bogota to rule-of-law enforcing anti-corruption authorities in Hong Kong. From these recent experiences, we try to extract a few key principles that characterize governance innovations that encourage investment and growth. These include competition, which puts pressure on policymakers to improve institutions; information, which provides necessary knowledge to citizens that can help them push for improved governance; trade in institutions, which allows effective institutions to move across borders; and shifting culture, that is, the jolting of norms to be rule compliant. Finally, we use these principles combined with historical precedent to describe the potential consequences of some recent proposals for governance innovation.

The Big Ditch: How America Took, Built, Ran, and Ultimately Gave Away the Panama Canal

Maurer, Noel, and Carlos Yu
March 2010

On August 15, 1914, the Panama Canal was officially opened for business, thus changing the face of both world trade and military power and playing a pivotal role in the rise of the United States on the world stage. Today we view the creation of the Panama Canal as a story of U.S. triumphalism; but the true story is a bit murkier. The first study of the Panama Canal to make use of both conventional historical methods and the tools of quantitative analysis, The Big Ditch examines the impact of the Panama Canal on the Republic of Panama, the United States, and the world. Noel Maurer and Carlos Yu deftly chronicle the economic history of the Canal, from the very earliest proposals made by Spain in 1529, through an abortive French attempt in the 19th century, to the construction, opening, and operation of the Canal by the U.S., and finally the turning over of the Canal to Panama, which was promised by the Carter administration in 1977 and made effective December 31, 1999. The true story of the Canal upends the more conventional tale of U.S. triumphalism and its shepherding of one of the largest infrastructure works ever built. First, the Canal produced great economic dividends for the first quarter-century following its opening, despite massive cost overruns and delays. Second, the United States captured most of these economic benefits, partially because of its geographical situation and partially because it could leverage its military might to obtain a better agreement than would have otherwise been reached. Finally, the U.S. agreement to give ownership of the Canal back to Panama in the 1970s was not a gesture of magnanimity, but because the strategic and economic value of ownership had since disappeared. In a surprise to those who argued that it was impossible for a fledgling Latin American nation plagued by corruption to manage the Canal better than its powerful patron to the north, the story of the Canal since its handover has been that the Panamanians have ultimately proved better at running it. Under the distant governance of a large country not particularly vested in the Canal's operation, the Panama Canal was run as a public utility. The Panamanian government, in contrast, has run the Canal as a for-profit corporation, increasing safety and decreasing costs along the way. Maurer and Yu's nuanced analysis of the contribution of the United States to state-building, economic development, and democratization of Central America does more than just advance our understanding of the national and global consequences of the Panama Canal and the imperialist motives and influences of the United States. In an age where everyone is looking for new models to capture the benefits of private enterprise under conditions of state ownership, the tale told by The Big Ditch serves as a vital and object lesson for those who question the ability of governments to run companies effectively.

Princeton University Press, forthcoming.

One Report: Integrated Reporting for a Sustainable Strategy

Eccles, Robert G., and Michael Krzus
March 2010


New York: John Wiley and Sons, Inc., forthcoming.

2009

Of Gods and Small Things: Closing the Gap in Corporate Entrepreneurship

Book Chapter in India 2010

Chakravorti, Bhaskar
December 2009

Entrepreneurship is frequently associated with a "small thing"-a venture that challenges the status quo and relentlessly pursues opportunity. The large established firms, the "gods," have forever coveted these small things-through incubation, financial support, or acquisition-in their quest for the Next Big Thing. The problem with corporate entrepreneurship, of course, has been that the entrepreneur must deal with the challenges of securing resources and support within an organization focused on operations that are "at scale." Entrepreneurs with miniscule, and often negative, financial contributions compete with mature businesses that are the primary revenue generators for the firm. Revenue is power, and for senior management taking their eyes off the mature businesses can be extremely costly. As a result, corporate entrepreneurship languishes despite its importance to the company's future. I argue that there may be a geographic solution to this dilemma. In such a solution, a fast-growing emerging market plays a central role in orchestrating a complete strategy for corporate entrepreneurship. I also argue that it is time to go beyond the traditional framing of an emerging market. The prescription of this chapter is to think about a more ambitious role for such markets: establish a strategic business unit, designated as a "disruptive innovation hub," that is charged with first penetrating the emerging market with products tailored to local needs and conditions and then leveraging that experience to develop disruptive innovations targeted at a global market. Scale and entrepreneurship-god and small things-can, indeed, cohabit and thrive in the developing world. This combination can become one of its major contributions to the global economy.

Business Standard Books, 2009

Global Capital and National Institutions: Crisis and Choice in the International Financial Architecture

Alfaro, Laura
October 2009

All managers face a business environment in which international and macroeconomic phenomena matter. International capital flows can significantly affect countries' development efforts and provide clear investment opportunities for businesses. During the 1990s and early 2000s, the world witnessed an explosion in capital flows at the global level. Gross foreign assets and liabilities stood at two or three times GDP for many countries, as compared to just two decades ago. This explosive growth, especially in emerging markets, has been fueled both by changes in world politics (e.g., the end of the Cold War, collapse of the Soviet Union, shifting political climate in China, and political changes in Latin America and Asia) and advances in technology. Private capital flows-debt finance, equity capital, and foreign direct investment (FDI)-became larger than current and past official capital flows. This new era of foreign capital mobility has also been characterized by low interest rates in industrial countries, growing external imbalances in the U.S. economy, and the rise of China, all of which posed new challenges to policy management. In 2009, the global economy remained mired in a deep crisis following the subprime meltdown in the U.S. The situation was also a true testimony of how intertwined individual economies had become over the years. The effect of policies to deal with the ongoing global crisis and new policy choices remain to be seen. Understanding these phenomena-the determinants of capital flows, the effects of foreign capital on host countries, the impact of exchange-rate movements, and the genesis of financial and currency crises-is a crucial aspect to making informed managerial decisions. The cases in this book have been designed to give students an appreciation of the critical role of institutions and policies in affecting patterns of international capital flows and the abilities of government to manage them effectively. The case studies are tied together by two broad themes: (1) the determinants and effects of international capital, and (2) policy-makers' management of these flows. The cases approach these themes by exploring institutional detail in deep local context. The cases expose students to recent key events that have shaped the way economists think about these subjects. The events covered have a clear global perspective as the cases are set in Africa, Asia, Europe, and Latin America, as well as the United States. The cases also cover events that occurred during the last three decades as not only do they affect the business environment that managers face today but they also hold important lessons. An important feature the cases reveal is the cyclical nature of international capital flows. Global Capital and National Institutions: Crisis and Choice in the International Financial Architecture is composed of three intellectual segments: (1) Determinants and Effects of International Capital Flows, (2) Policies and Strategies for Harnessing the Benefits of Financial Globalization, and (3) Challenges and Policies of Large Economies. Chapter I presents a detailed overview of the cases and readings in the module and relates the cases included to the main patterns of international capital flows in the last thirty years. Finally, the chapter also presents the key insights from the field of international economics covered in the cases as well as the current state of debate among policy-makers.

2008

Urgency and Betrayal: Three Attempts to Foster Private Investment in Argentina's Oil Industry

Wells, Louis T.
January 2008

No summary available.

Populism and Natural Resources edited by William Hogan and Federico Sturzenegger. Cambridge, Mass. (MIT Press, forthcoming)

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2007

Microfinance: Business, Profitability, and the Creation of Social Value

Book chapter in Business Solutions for the Global Poor: Creating Social and Economic Value, edited by V. Kasturi Rangan, John A. Quelch, Gustavo Herrero, and Brooke Barton

Chu, Michael
September 2007

After thirty years of development, commercial microfinance in the developing world-the provision of financial services to low-income populations on a financially-sustainable basis-is an example with many lessons applicable to the study of business and the global poor. In recent years, there has been ample evidence, both in the literature and in capital markets, of the ability of leading microfinance institutions, particularly in Latin America and Asia, to generate superior economic returns. The issue is less clear in terms of the contribution successful microfinance makes to the reduction of global poverty. This paper seeks to address aspects of the creation of economic value and social value in microfinance, which the author believes contains insights applicable to all endeavors that seek to address the needs of the poor on a commercial basis.

John Wiley & Sons, Inc, 2007

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2006

Rural Credit: Historical Discussions and Legislation in Argentina (El crédito rural: proyectos legislativos y discusiones contemporáneas 1899-1933)

Lluch, Andrea M.
August 2006

Book chapter in El Agro en cuestión. Discursos, políticas y corporaciones en la Argentina, 1870-2000

Buenos Aires: Prometeo, 2006

Legal Origin vs. the Politics of Creditor Rights: Bond Markets in Brazil, 1850-2002

Musacchio, Aldo
August 2006

Book chapter in The Politics of Financial Development, edited by Stephen Haber, Douglass C. North and Barry Weingast

Stanford, Calif.: Stanford University Press, forthcoming

Reflections on Leadership

Austin, James E.
March 2006

Book chapter in Liderazgo, Lideranca, Leadership

Testimonios personales, 71. Costa Rica: Publicado Por Viva, 2005

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