Global Reach. Global Knowledge.

Enhancing Social Capital in South Asia

Since its formation, the India Research Center (IRC) has worked to enhance intellectual capital creation by working with academics and business leaders in South Asia.

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.

Executive Education
in India

Aligning Strategy and Execution — India

June 11-14, 2013 (Mumbai, India)
Position your organization for long-term success in the global marketplace by integrating the design and execution of highly effective business strategies. In this intensive program, senior executives who do business in India will explore the core components of strategy building-among them competitive environment and competitive advantage. You will learn how to align your organization in order to optimize your strategy, capitalize on opportunities, and drive growth.

Building a Global Enterprise in India

April 2014 (Mumbai, India)
This program is designed for senior leaders who seek strategies to expand within and beyond this compelling market. Offered jointly by Harvard Business School and the India Research Center in Mumbai, the program marries on-the-ground, research-based knowledge of India with the global perspective of one of the world's leading business schools-a combination unavailable in any other executive education program.

Driving Growth Through Innovation — India

August 19-22, 2013 (Mumbai, India)
Innovating new products and services in India can be complicated by an unpredictable market and unfamiliar culture. This program helps business leaders develop and market differentiated products and services by identifying and leveraging new opportunities. Participants leave with the latest tools and strategies to manage today's diverse risks and to position their companies for future success.

Improving Corporate Performance and Profitability — India

May 27-30, 2013 (Mumbai, India)
Build a strategic advantage for your company by implementing powerful performance evaluation systems that drive performance and improve profitability. This leadership program explores how local and multinational companies manage operational risk and create corporate value in India and beyond. You will emerge with a blueprint for capitalizing on growth opportunities in challenging times.

Launching New Ventures — India

June 3-6, 2013 (Mumbai, India)
Growth in India is creating opportunities for talented entrepreneurs who know how to build a successful business. In this program, you will learn how to identify the right opportunity, build your organization, attract resources, define and execute strategy, and navigate India's complex business environment to drive sustainable success for your company.

Leadership and Corporate Accountability — India

November 18-21, 2013 (Mumbai, India)
Explore the legal, ethical, and financial demands that affect managerial decision-making in today's highly complex economic environment. Designed for executives at the divisional level and above, this interdisciplinary program examines a range of leadership issues related to management and governance systems. You will emerge better prepared to make ethically responsible, financially sound decisions.

Leadership in Financial Organizations — India

April 2015 (Mumbai, India)
Investigate the critical leadership issues that confront high-level executives of financial institutions in today's challenging economy. This program, designed for managing directors and high-level leaders, explores risk management, ethical obligations, regulatory controls, and other demands placed on today's companies. You will learn to lead franchises, teams, and entire organizations more effectively.

Leading Growth Through Customer Centricity — India

January 2014 (Mumbai, India)
Learn how to create a truly customer-centric organization that can help your business innovate, compete, and grow. Designed for senior executives operating in India and the surrounding region, this new program gives decision-makers new knowledge and tools for transforming an organization that sells products and services into one that delivers differentiated customer value-and sustainable business success.

Managing and Transforming Professional Service Firms — India

January 15-18, 2014 (Mumbai, India)
This program provides firms with proven approaches for managing client expectations, developing staff, and formulating business strategies. Offered jointly by Harvard Business School and the India Research Center in Mumbai, executives will leave the program well positioned to capitalize on growth opportunities in India and beyond.

Managing Family Businesses for Generational Success — India

June 24-27, 2013 (Mumbai, India)
Position your family business for success in India by building strengths, relationships, performance, and a comprehensive succession plan. In this leadership program, family teams explore the unique communication and interpersonal needs of family-run enterprises. You will emerge better prepared to position your business for long-term success.

All Global Executive Education Programs

2013

Local Industrial Structures and Female Entrepreneurship in India

Ghani, Ejaz,William R. Kerr, and Stephen D. O'Connell
March 2013

We analyze the spatial determinants of female entrepreneurship in India in the manufacturing and services sectors. We focus on the presence of incumbent female-owned businesses and their role in promoting higher subsequent female entrepreneurship relative to male entrepreneurship. We find evidence of agglomeration economies in both sectors, where higher female ownership among incumbent businesses within a district-industry predicts a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (e.g., those sharing similar labor needs, industries related via input-output markets) predict greater relative female entry rates even after controlling for the focal district-industry's conditions. The core patterns hold when using local industrial conditions in 1994 to instrument for incumbent conditions in 2000-2005. The results highlight that the traits of business owners in incumbent industrial structures influence the types of entrepreneurs supported.

Journal of Economic Geography

E-Commerce in Asia: Challenges and Opportunities

Gupta, Sunil, and Tanya Bijlani
February 2013

Asia is becoming increasingly attractive to businesses, especially to e-commerce firms that thrive on global and scalable business models. Yet, most global e-commerce players, with a few exceptions, have failed to achieve significant success in Asia. This article describes five major challenges that e-commerce firms face in emerging Asian markets.

Asia Business Insights

Caste and Entrepreneurship in India

Iyer, Lakshmi, Tarun Khanna, and Ashutosh Varshney
January 2013

It is now widely accepted that the lower castes have risen in Indian politics. Has there been a corresponding change in the economy? Using comprehensive data on enterprise ownership from the Economic Censuses of 1990, 1998, and 2005, we document substantial caste differences in entrepreneurship across India. The Scheduled Castes and Scheduled Tribes are significantly under-represented in the ownership of enterprises and the share of the workforce employed by them. These differences are widespread across all states, have decreased very modestly between 1990 and 2005, and cannot be attributed to broad differences in access to physical or human capital.

Economic & Political Weekly

Liability Structure in Small-Scale Finance

Carpena, Fenella, Shawn Cole, Jeremy Shapiro, and Bilal Zia
January 2013

Microfinance, the provision of small individual and business loans, has experienced dramatic growth, reaching over 150 million borrowers worldwide. Much of the success of microfinance has been attributed to attempts to overcome the challenges of information asymmetries in uncollateralized lending. However, very little is known about the optimal contract structure of these loans, and there is substantial variation across lenders, even within a particular setting. This paper exploits a plausibly exogenous change in the liability structure offered by a microfinance program in India, which shifted from individual to group liability lending. We find evidence that the lending model matters: for the same borrower, the required monthly loan installments are 11 percent less likely to be missed under the group liability setting in comparison with individual liability. In addition, compulsory savings deposits are 20 percent less likely to be missed under group liability contracts.

The World Bank Economic Review

When the Crowd Fights Corruption

Healy, Paul M., and Karthik Ramanna
January 2013

No abstract available

Harvard Business Review 91, nos. 1/2 (January-February 2013): 122-129

Deregulation, Misallocation, and Size: Evidence from India

Alfaro, Laura, and Anusha Chari
January 2013

This paper examines the impact of the deregulation of compulsory industrial licensing in India on firm-size dynamics and the reallocation of resources within industries over time. Following deregulation, we find that the extent of resource misallocation declines and a considerable thickening of the left-hand tail of the firm-size distribution suggesting a significant increase in the number of small firms. However, the dominance and growth of large incumbents remains unchallenged. Quantile regressions reveal that the distributional effects of deregulation on firm size are significantly non-linear. The size distribution we observe-namely, a large number of small firms and a small number of large firms-can be characterized as the "missing middle" in Indian manufacturing and suggests that small firms may continue to face constraints in their attempts to grow.

Harvard Business School Working Paper, No. 13-056, December 2012

2012

Highway to Success: The Impact of the Golden Quadrilateral Project for the Location and Performance of Indian Manufacturing

Ghani, Ejaz, Arti Grover Goswami, and William R. Kerr
November 2012

Using rich panel data on division manager pay, we investigate whether peer effects in the form of horizontal wage comparisons affect firm policies on executive pay. We find pay co-movement (or pay-referent sensitivity, PRS) to be more pronounced in geographically concentrated firms where we expect divisional proximity to facilitate information sharing about pay and magnify peer comparisons. To separate the peer effect of PRS from other factors that may drive co-movement of firm pay, we exploit exogenous increases in access to pay information using the SEC 1992 Proxy Disclosure Rule that differentially affected firms. Based on differences-in-differences models, we find increased PRS and decreased pay-performance sensitivity (PPS) after 1992 within geographically dispersed firms relative to firms with proximate divisions. The effects are strongest in dispersed firms with relatively less pay disclosure prior to 1992, a subsample for which the ruling had a relatively larger impact. Finally, based on analysis of manager pairs within a firm, we find that mean distance in pay between different-state managers increased by less relative to same-state managers after the rule change. Taken together, our findings suggest that peer comparison decreases pay disparity within firms and that principals face a tradeoff between the incentive effects of performance-based pay and costs of peer comparison.

Harvard Business School Working Paper, No. 13-040, November 2012

The Value of Advice: Evidence from Mobile Phone-Based Agricultural Extension

Cole, Shawn A., and A. Nilesh Fernando
November 2012

Attempts to explain the astonishing differences in agricultural productivity around the world typically focus on farm size, farmer risk aversion, and credit constraints, with an emphasis on how they might serve to limit technology adoption. This paper takes a different tack: can managerial practices explain this variation in productivity? A randomized evaluation of the introduction of a mobile-phone based agricultural consulting service, "Avaaj Otalo (AO)" to cotton farmers in Gujarat, India, reveals the following: demand for agricultural advice is high, with more than half of farmers calling AO in the first seven months. Farmers offered the service turn less often to other farmers and input sellers for agricultural advice. Management practices change as well: we observe an increase in the adoption of more effective pesticides and reduced expenditure on less effective and hazardous pesticides. Treated farmers also sow a significantly larger quantity of cumin, a lucrative but risky crop. Interestingly, use of the service is increasing in the level of farmer education, but education levels do not affect the size of treatment effects. Farmers appear willing to follow advice without understanding why the advice is correct: the average respondent does not demonstrate improved agricultural knowledge, though there is some evidence educated farmers learn from the service.

Harvard Business School Working Paper, No. 13-047, November 2012

Mumbai's Models of Service Excellence

Thomke, Stefan
November 2012

N/A

Harvard Business Review 90, no. 11 (November 2012): 121-126

The Microwork Solution: A New Approach to Outsourcing Can Support Economic Development-and Add to Your Bottom Line

Gino, Francesca, and Bradley R. Staats
November 2012

N/A

Harvard Business Review 90, no. 12 (December 2012): 92-96

Diasporas and Outsourcing: Evidence from oDesk and India

Ghani, Ejaz, William R. Kerr, and Christopher Stanton
October 2012

This study examines the role of the Indian diaspora in the outsourcing of work to India. Our data are taken from oDesk, the world's largest online platform for outsourced contracts, where India is the largest country in terms of contract volume. We use an ethnic name procedure to identify ethnic Indian users of oDesk in other countries around the world. We find very clear evidence that diaspora-based links matter on oDesk, with ethnic Indians in other countries 32% (9 percentage points) more likely to choose a worker in India. Yet, the size of the Indian diaspora on oDesk and the timing of its effects make clear that the Indian diaspora was not a very important factor in India becoming the leading country on oDesk for fulfilling work. In fact, multiple pieces of evidence suggest that diaspora use of oDesk increases with familiarity of the platform, rather than a scenario where diaspora connections serve to navigate uncertain environments. We further show that diaspora-based contracts mainly serve to lower costs for the company contacts outsourcing the work, as the workers in India are paid about the market wage for their work. These results and other observations lead to the conclusion that diaspora connections continue to be important even as online platforms provide many of the features that diaspora networks historically provided (e.g., information about potential workers, monitoring, and reputation foundations).

Harvard Business School Working Paper, No. 13-035, October 2012

The International Politics of IFRS Harmonization

Ramanna, Karthik
October 2012

The globalization of accounting standards as seen through the proliferation of IFRS worldwide is one of the most important developments in corporate governance over the last decade. I offer an analysis of some international political dynamics of countries' IFRS harmonization decisions. The analysis is based on field studies in three jurisdictions: Canada, China, and India. Across these jurisdictions, I first describe unique elements of domestic political economies that are shaping IFRS policies. Then, I inductively isolate two principal dimensions that can be used to characterize the jurisdictions' IFRS responses: proximity to existing political powers at the IASB and own potential political power at the IASB. Based on how countries are classified along these dimensions, I offer predictions, ceteris paribus, on countries' IFRS harmonization strategies. The analysis and framework in this paper can help broaden the understanding of accounting's globalization.

Accounting, Economics & Law

Channels of Influence

Cohen, Lauren, Umit G. Gurun, and Christopher J. Malloy
August 2012

We demonstrate that simply by using the ethnic makeup surrounding a firm's location, we can predict, on average, which trade links are valuable for firms. Using customs and port authority data on the international shipments of all U.S. publicly-traded firms, we show that firms are significantly more likely to trade with countries that have a strong resident population near their firm headquarters. We use the formation of World War II Japanese Internment Camps to isolate exogenous shocks to local ethnic populations, and identify a causal link between local networks and firm trade links. Firms that exploit their local networks (strategic traders) see significant increases in future sales growth and profitability, and outperform other importers and exporters by 5%-7% per year in risk-adjusted stock returns. In sum, our results document a surprisingly large impact of immigrants' economic role as conduits of information for firms in their new countries.

Harvard Business School Working Paper, No. 13-013, August 2012

Incentivizing Calculated Risk-Taking: Evidence from an Experiment with Commercial Bank Loan Officers

Cole, Shawn, Martin Kanz, and Leora Klapper
July 2012

This paper uses a series of experiments with commercial bank loan officers to test the effect of performance incentives on risk-assessment and lending decisions. We first show that, while high-powered incentives lead to greater screening effort and more profitable lending, their power is muted by both deferred compensation and the limited liability typically enjoyed by credit officers. Second, we present direct evidence that incentive contracts distort judgment and beliefs, even among trained professionals with many years of experience. Loans evaluated under more permissive incentive schemes are rated significantly less risky than the same loans evaluated under pay-for-performance.

Harvard Business School Working Paper, No. 13-002, July 2012

The Rich Get Richer: Enabling Conditions for Knowledge Use in Organizational Work Teams

Valentine, Melissa A., Bradley R. Staats, and Amy C. Edmondson
July 2012

Individuals on the periphery of organizational knowledge sharing networks, due to inexperience, location, or lack of social capital, may struggle to access useful knowledge at work. An electronic knowledge repository (KR) has the potential to help peripheral individuals gain access to valuable knowledge because a KR is universally and constantly available and can be used without social interaction. However, for it to serve this equalizing function, those on the periphery of the organization must actually use it, possibly overcoming barriers to doing so. In this paper, we develop a multi-level model of knowledge use in teams and show that individuals whose experience and position already provide them access to vital knowledge use a KR more frequently than individuals on the organizational periphery. We argue that this occurs because the KR-despite its appearance of equivalent accessibility to all-is actually more accessible to central than peripheral players due to their greater experience and access to colleagues. Thus, KR use is not driven primarily by the need to overcome limited access to other knowledge sources. Rather KR use is enabled when actors know how to reap value from the KR, which ironically improves with increasing access to other sources of knowledge. Implications for both team effectiveness and knowledge management research are offered. We conclude that KRs are unlikely to serve as a knowledge equalizer without intervention.

Harvard Business School Working Paper, No. 13-001, July

Is India's Manufacturing Sector Moving Away from Cities?

Ghani, Ejaz, Arti Grover Goswami, and William R. Kerr
April 2012

This paper investigates the urbanization of the Indian manufacturing sector by combining enterprise data from formal and informal sectors. We find that plants in the formal sector are moving away from urban and into rural locations, while the informal sector is moving from rural to urban locations. While the secular trend for India's manufacturing urbanization has slowed down, the localized importance of education and infrastructure have not. Our results suggest that districts with better education and infrastructure have experienced a faster pace of urbanization, although higher urban-rural cost ratios cause movement out of urban areas. This process is associated with improvements in the spatial allocation of plants across urban and rural locations. Spatial location of plants has implications for policy on investments in education, infrastructure, and the livability of cities. The high share of urbanization occurring in the informal sector suggests that urbanization policies that contain inclusionary approaches may be more successful in promoting local development and managing its strains than those focused only on the formal sector.

Harvard Business School Working Paper, No. 12-090, April 2012

Breaking Them In or Revealing Their Best? Reframing Socialization around Newcomer Self-Expression

Cable, Dan, Francesca Gino, and Brad Staats
February 2012

Socialization theory has focused on enculturating new employees such that they develop pride in their new organization and internalize its values. Drawing on authenticity research, we propose that socialization leads to more effective employment relationships when it starts with newcomers expressing their personal identities. In a field experiment carried out in a large business process outsourcing company, we found that socialization focused on personal identity (emphasizing newcomers' unique perspectives and strengths) led to significantly greater customer satisfaction and greater employee retention after six months, compared to (a) socialization that focused on organizational identity (emphasizing pride from organizational affiliation) and (b) the organization's traditional approach, which focused primarily on skills training. To confirm causation and explore the mechanisms underlying the effects, we replicated the results in a laboratory experiment. We found that individuals working temporarily as part of a research team were more engaged and satisfied with their work, performed their tasks more effectively, and were also more likely to return to work when initial socialization focused on personal rather than organizational identity. In addition, authentic self-expression mediated these relationships. We call for a new direction in socialization theory examining how both organizations and employees benefit by encouraging authentic self-expression.

Harvard Business School Working Paper, No. 12-067, February 2012

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China

Chaudhary, Latika, Aldo Musacchio, Steven Nafziger, and Se Yan
February 2012

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India, and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.

Explorations in Economic History

The Power of Political Voice: Women's Political Representation and Crime in India

Iyer, Lakshmi, Anandi Mani, Prachi Mishra, and Petia Topalova
February 2012

Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: large-scale membership of women in local councils affects crime against them more than their presence in higher level leadership positions.

American Economic Journal: Applied Economics

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China.

Chaudhary, Latika, Aldo Musacchio, Steven Nafziger, and Se Yan
February 2012

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910: Brazil, Russia, India and China (BRIC). These four countries encompassed more than 50% of the world's population in 1910, but remarkably few of their citizens attended any school by the early 20th century. We present new, comparable data on school inputs and outputs for BRIC drawn from contemporary surveys and government documents. Recent studies emphasize the importance of political decentralization and relatively broad political voice for the early spread of public primary education in developed economies. We identify the former and the lack of the latter to be important in the context of BRIC, but we also outline how other factors such as factor endowments, colonialism, serfdom, and, especially, the characteristics of the political and economic elite help explain the low achievement levels of these four countries and the incredible amount of heterogeneity within each of them.

NBER Working Paper Working Paper Series, No. 17852, February 2012

Management Practices across Firms and Countries

Bloom, Nicholas, Christos Genakos, Raffaella Sadun, and John Van Reenen
February 2012

For the last decade we have been using double-blind survey techniques and randomized sampling to construct management data on over 10,000 organizations across 20 countries. On average, we find that in manufacturing American, Japanese, and German firms are the best managed. Firms in developing countries, such as Brazil, China, and India tend to be poorly managed. American retail firms and hospitals are also well managed by international standards, although American schools are more poorly managed than those in several other developed countries. We also find substantial variation in management practices across organizations in every country and every sector, mirroring the heterogeneity in the spread of performance in these sectors. One factor linked to this variation is ownership. Government, family, and founder owned firms are usually poorly managed, while multinational, dispersed shareholder, and private-equity owned firms are typically well managed. Stronger product market competition and higher worker skills are associated with better management practices. Less regulated labor markets are associated with improvements in incentive management practices such as performance-based promotion.

Academy of Management Perspectives 26, no. 1 (February 2012)

Exemplary Contribution: Transforming Mental Models on Emerging Markets.

Dhanaraj, Charles, and Khanna, Tarun
January 2012

Economic growth in the Western world increasingly depends on meaningful engagement with emerging markets such as Brazil, China, India, South Africa, and Turkey. Business schools are responding with increased attention to these markets in their research and curricula. However, in order to understand and leverage these opportunities for teaching and learning, it is apparent that students and executives may require a major transformation of their mental models, not just incremental adjustments or extensions. Institutional economics can help prospective and established managers recognize the role of formal and informal institutions and enable them to work around the "institutional voids" in emerging markets (Khanna & Palepu, 2010). We draw on this framework to identify critical shifts in mental models required for managing effectively in emerging markets and suggest core elements of the management learning process required to accomplish such a change.

Journal of Organizational Behavior

Marketing Complex Financial Products in Emerging Markets: Evidence from Rainfall Insurance in India

Gaurav, Sarthak, Shawn A. Cole,, and Jeremy Tobacman
January 2012

Recent financial liberalization in emerging economies has led to the rapid introduction of new financial products. Lack of experience with financial products, low levels of education, and low financial literacy may slow adoption of these products. This article reports on a field experiment that offered an innovative new financial product, rainfall insurance, to 600 small-scale farmers in India. A customized financial literacy and insurance education module communicating the need for personal financial management and the usefulness of formal hedging of agricultural production risks was offered to randomly selected farmers in Gujarat, India. The authors evaluate the effect of the financial literacy training and three marketing treatments using a randomized controlled trial. Financial education has a positive and significant effect on rainfall insurance adoption, increasing take-up from 8% to 16%. Only one marketing intervention, the money-back guarantee, has a consistent and large effect on farmers' purchase decisions. This guarantee, comparable to a price reduction of approximately 40%, increases demand by seven percentage points.

Journal of Marketing Research 48 (October 2011): S150-S162

Understanding the Incentives of Commissions Motivated Agents: Theory and Evidence from the Indian Life Insurance Market

Anagol, Santosh, Shawn Cole, and Shayak Sarkar
January 2012

We conduct a series of field experiments to evaluate two competing views of the role of financial service intermediaries in providing product recommendations to potentially uninformed consumers. One view argues intermediaries provide valuable product education, and guide consumers towards suitable products. Consumers understand how commissions affect agents' incentives, and make optimal product choices. The second view argues that intermediaries recommend and sell products that maximize the agents' well-being, with little or no regard for the customer. Audit studies in the Indian life insurance market find evidence supporting the second view: in 60-80% of visits, agents recommend unsuitable (strictly dominated) products that provide high commissions to the agents. Customers who specifically express interest in a suitable product are more likely to receive an appropriate recommendation, though most still receive bad advice. Agents cater to the beliefs of uninformed consumers, even when those beliefs are wrong.

We then test how regulation and market structure affect advice. A natural experiment that required agents to describe commissions for a specific product caused agents to shift recommendations to an alternative product, which had even higher commissions but no disclosure requirement. We do find some scope for market discipline to generate debiasing: when auditors express inconsistent beliefs about the product suitable from them, and mention they have received advice from another seller of insurance, they are more likely to receive suitable advice. Agents provide better advice to more sophisticated consumers.

Finally, we describe a model in which dominated products survive in equilibrium, even with competition.

Harvard Business School Working Paper, No. 12-041, December 2011

2011

The Role of Finance and Private Investment in Developing Sustainable Cities

Macomber, John D.
November 2011

Three trends will drive urban investment, development, and entrepreneurship in the next two decades. This article provides tools to identify the situations and circumstances that will be most favorable for private sector involvement in consideration of these trends. The first trend is urbanization. Over the next twenty years, the number of people living in cities will double, with three billion additional urban dwellers. Second, shared resources like clean water, clean air, energy, and places to put solid waste are already scarce and constrained. Urbanization will only exacerbate these pressures. Third, almost no local or national government can mobilize both the capital and the political consensus to make investments in the infrastructure that will lead to more effective use of these resources. There is a largely unrecognized opportunity for the private sector to engage in selective investments that consider these trends. Investors and entrepreneurs can make money by extending these "common good" kinds of items, which use resources more productively. In the winning situations, this makes these cities more economically competitive at the same time. This article further argues for investments grounded in the basics of smart physical configuration. Examples are the compact arrangement of buildings, efficient use of water and power, and deployment of transit that reduces congestion. Investment and urban planning in three Asian cities are profiled as illustrations. Two sample proformas featuring multiple classes of securities illustrate the concepts.

Local Industrial Structures and Female Entrepreneurship in India

Ghani, Ejaz, William R. Kerr, and Stephen O'Connell
November 2011

We analyze the spatial determinants of female entrepreneurship in India in the manufacturing and services sectors. We focus on the presence of incumbent female-owned businesses and their role in promoting higher subsequent female entrepreneurship relative to male entrepreneurship. We find evidence of agglomeration economies in both sectors, where higher female ownership among incumbent businesses within a district-industry predicts that a greater share of subsequent entrepreneurs will be female. Moreover, higher female ownership of local businesses in related industries (e.g., those sharing similar labor needs, industries related via input-output markets) predict greater relative female entry rates even after controlling for the focal district-industry's conditions. The core patterns hold when using local industrial conditions in 1994 to instrument for incumbent conditions in 2000-2005. The results highlight that the traits of business owners in incumbent industrial structures influence the types of entrepreneurs supported.

Spatial Determinants of Entrepreneurship in India

Ghani, Ejaz, William R. Kerr, and Stephen O'Connell
October 2011

We analyze the spatial determinants of entrepreneurship in India in the manufacturing and services sectors. Among general district traits, quality of physical infrastructure and workforce education are the strongest predictors of entry, with labor laws and household banking quality also playing important roles. Looking at the district-industry level, we find extensive evidence of agglomeration economies among manufacturing industries. In particular, supportive incumbent industrial structures for input and output markets are strongly linked to higher establishment entry rates. We also find substantial evidence for the Chinitz effect where small local incumbent suppliers encourage entry. The importance of agglomeration economies for entry hold when considering changes in India's incumbent industry structures from 1989, determined before large-scale deregulation began, to 2005.

Harvard Business School Working Paper, No. 12-027, October 2011

Caste and Entrepreneurship in India

Iyer, Lakshmi, Tarun Khanna, and Ashutosh Varshney
October 2011

It is now widely accepted that the lower castes have risen in Indian politics. Has there been a corresponding change in the economy? Using comprehensive data on enterprise ownership from the Economic Censuses of 1990, 1998, and 2005, we document substantial caste differences in entrepreneurship across India. The Scheduled Castes and Scheduled Tribes are significantly under-represented in the ownership of enterprises and the share of the workforce employed by them. These differences are widespread across all states, have decreased very modestly between 1990 and 2005, and cannot be attributed to broad differences in access to physical or human capital.

Harvard Business School Working Paper, No. 12-028, October 2011

The International Politics of IFRS Harmonization

Ramanna, Karthik
July 2011

The globalization of accounting standards as seen through the proliferation of IFRS worldwide is one of the most important developments in corporate governance over the last decade. I offer an analysis of the international political dynamics of countries' IFRS harmonization decisions. The analysis is based on a field study of three jurisdictions in particular: Canada, China, and India. Across these jurisdictions, I first describe unique elements of domestic political economies that are shaping IFRS policies. Then, I inductively isolate two principal dimensions that can be used to characterize these jurisdictions' IFRS responses: proximity to existing political powers at the IASB; and own potential political power at the IASB. Based on how countries are classified along these dimensions, I offer predictions, ceteris paribus, on countries' IFRS harmonization strategies. The analysis and framework in this paper can help broaden the understanding of accounting's globalization.

Harvard Business School Working Paper, No. 11-132, June 2011

Segmenting the Base of the Pyramid

Rangan, V. Kasturi, Michael Chu, and Djorjiji Petkoski
June 2011

The bottom of the economic pyramid is a risky place for business, but decent profits can be made there if companies link their financial success with their constituencies' well-being. To do that effectively, you must understand the nuances of people's daily lives, say Rangan and Chu of Harvard Business School and Petkoski of the World Bank. Start by dividing the base of the pyramid into three segments according to people's earnings and related personal needs: 1) Low income: 1.4 billion people, $3 to $5 a day; 2) Subsistence: 1.6 billion people, $1 to $3 a day; and 3) Extreme poverty: 1 billion people, less than $1 a day. Next, consider the roles of various groups in the value-creation relationship: consumers, coproducers, and clients. Specific strategies work best with people in certain roles and at particular income levels. Success requires appreciating the diversity at the base of the pyramid and the importance of scale in undertaking ventures there. Witness Manila Water's success in the Philippines and Hindustan Unilever's in South Asia. Failure to appreciate those elements can foil base-of-the-pyramid ventures, as Microsoft and Procter & Gamble each discovered.

Harvard Business Review 89, no. 6 (June 2011).

Do Voters Demand Responsive Governments? Evidence from Indian Disaster Relief

Cole, Shawn, Andrew Healy, and Eric Werker
May 2011

Using rainfall, public relief, and election data from India, we examine how governments respond to adverse shocks and how voters react to these responses. The data show that voters punish the incumbent party for weather events beyond its control. However, fewer voters punish the ruling party when its government responds vigorously to the crisis, indicating that voters reward the government for responding to disasters. We also find evidence suggesting that voters only respond to rainfall and government relief efforts during the year immediately preceding the election. In accordance with these electoral incentives, governments appear to be more generous with disaster relief in election years. These results describe how failures in electoral accountability can lead to suboptimal policy outcomes.

Journal of Development Economics (forthcoming)

Historical Trajectories and Corporate Competences in Wind Energy

Jones, Geoffrey, and Loubna Bouamane
May 2011

This working paper surveys the business history of the global wind energy turbine industry between the late nineteenth century and the present day. It examines the long-term prominence of firms headquartered in Denmark, the more fluctuating role of U.S.-based firms, and the more recent growth of German, Spanish, Indian, and Chinese firms. While natural resource endowment in wind has not been very significant in explaining the country of origin of leading firms, the existence of rural areas not supplied by grid electricity was an important motivation for early movers in both the U.S. and Denmark. Public policy was the problem rather than the opportunity for wind entrepreneurs before 1980, but beginning with feed-in tariffs and other policy measures taken in California, policy mattered a great deal. However, Danish firms, building on inherited technological capabilities and benefitting from a small-scale and decentralized industrial structure, benefitted more from Californian public policies. The more recent growth of German, Spanish, and Chinese firms reflected both home country subsidies for wind energy and strong local content policies, while successful firms pursued successful strategies to acquire technologies and develop their own capabilities.

Harvard Business School Working Paper, No. 11-112, May 2011

The Power of Political Voice: Women's Political Representation and Crime in India

Iyer, Lakshmi, Anandi Mani, Prachi Mishra, and Petia Topalova
March 2011

Using state-level variation in the timing of political reforms, we find that an increase in female representation in local government induces a large and significant rise in documented crimes against women in India. Our evidence suggests that this increase is good news, as it is driven primarily by greater reporting rather than greater incidence of such crimes. In contrast, we find no increase in crimes against men or gender-neutral crimes. We also examine the effectiveness of alternative forms of political representation: large-scale membership of women in local councils affects crime against them more than their presence in higher-level leadership positions.

Harvard Business School Working Paper, No. 11-092, March 2011

Strategies and Tactics in NGO-Government Relations: Insights from Slum Housing in Mumbai

Ramanath, Ramya, and
February 2011

Relationships between nongovernmental organizations (NGOs) and government agencies have been variously described in the nonprofit literature as cooperative, complementary, adversarial, confrontational, or even co-optive. But how do NGO-government relationships emerge in practice, and is it possible for NGOs to manage multiple strategies of interaction at once? This article examines the experience of three leading NGOs in Mumbai, India involved in slum and squatter housing. We investigate how they began relating with government agencies during their formative years and the factors that shaped their interactions. We find that NGOs with similar goals end up using very different strategies and tactics to advance their housing agendas. More significantly, we observe that NGOs are likely to employ multiple strategies and tactics in their interactions with government. Finally, we find that an analysis of strategies and tactics can be a helpful vehicle for clarifying an organization's theory of change.

Nonprofit Management and Leadership

Big BRICs, Weak Foundations: The Beginning of Public Elementary Education in Brazil, Russia, India, and China, 1880-1930

Chaudhary, Latika, Aldo Musacchio, Steven Nafziger, and Se Yan
February 2011

Our paper provides a comparative perspective on the development of public primary education in four of the largest developing economies circa 1910, BRIC-Brazil, Russia, India, and China. These four countries encompassed almost 50% of the world's population in 1910, but remarkably few of their citizens attended any school in the early 20th century. We present new, comparable data on school inputs and outputs for BRIC that are drawn from a variety of archival and published sources. Similar to recent studies that emphasize the importance of income, political decentralization, and the level of political voice to the spread of primary education in developed economies, we also find these factors to be important in the context of BRIC. We also outline other factors such as local ethnic and religious heterogeneity, the institutional legacies of colonialism and serfdom, and, especially, the characteristics of the political and economic elite that help explain the low achievement levels of these countries and the incredible amount of heterogeneity within each BRIC.

Harvard Business School Working Paper, No. 11-083, February 2011

Why You Aren't Buying Venezuelan Chocolate

Deshpandé, Rohit
January 2011

The article discusses the "provenance paradox," wherein consumers are unwilling to buy high-quality products from regions not commonly associated with excellence in certain product categories. Venezuelan chocolate maker Chocolates El Rey does little international business because consumers associate premium chocolate more with Belgium or Switzerland than with Venezuela. Companies in this position have difficulty charging prices sufficient to fuel international expansion. The author presents advice on overcoming the paradox but warns it can be a lengthy process.

Harvard Business Review 88, no. 12 (December 2010).

2010

Traveling Agents: Political Change and Bureaucratic Turnover in India

Iyer, Lakshmi, and Anandi Mani
November 2010

We develop a framework to empirically examine how politicians with electoral pressures control bureaucrats with career concerns as well as the consequences for bureaucrats' career investments. Unique micro-level data on Indian bureaucrats support our key predictions. Politicians use frequent reassignments (transfers) across posts of varying importance to control bureaucrats. High-skilled bureaucrats face less frequent political transfers and lower variability in the importance of their posts. We find evidence of two alternative paths to career success: officers of higher initial ability are more likely to invest in skill, but caste affinity to the politician's party base also helps secure important positions.

Conflict and Development: Lessons from South Asia

Ghani, Ejaz, and Lakshmi Iyer,
October 2010

No abstract available

Economic Premise

Prosocial Spending and Well-Being: Cross-Cultural Evidence for a Psychological Universal

Aknin, Lara B., Christopher P. Barrington-Leigh, Elizabeth W. Dunn, John F. Helliwell, Robert Biswas-Diener, Imelda Kemeza, Paul Nyende, Claire Ashton-James, Michael I. Norton
October 2010

This research provides the first support for a possible psychological universal: human beings around the world derive emotional benefits from using their financial resources to help others (prosocial spending). Analyzing survey data from 136 countries, we show that prosocial spending is consistently associated with greater happiness. To test for causality, we conduct experiments within two very different countries (Canada and Uganda) and show that spending money on others has a consistent, causal impact on happiness. In contrast to traditional economic thought-which places self-interest as the guiding principle of human motivation-our findings suggest that the reward experienced from helping others may be deeply ingrained in human nature, emerging in diverse cultural and economic contexts.

Harvard Business School Working Paper, No. 11-038, September 2010

Prices or Knowledge? What Drives Demand for Financial Services in Emerging Markets?

Cole, Shawn A., Thomas Sampson, and Bilal Zia
October 2010

Financial development is critical for growth, but its micro-determinants are not well understood. We test leading theories of low demand for financial services in emerging markets, combining novel survey evidence from Indonesia and India with a field experiment. We find a strong correlation between financial literacy and behavior. However, a financial education program has modest effects, increasing demand for bank accounts only for those with low levels of education or financial literacy. In contrast, small subsidies greatly increase demand. A follow-up survey confirms these findings, demonstrating that the newly opened accounts remain open and in use two years after the intervention.

Journal of Finance (forthcoming).

Law and Finance c. 1900

Musacchio, Aldo
September 2010

How persistent are the effects of legal institutions adopted or inherited in the distant past? A substantial literature argues that legal origins have persistent effects that explain clear differences in investor protections and financial development around the world today (La Porta et al., 1998, 1999 and passim). This paper examines the persistence of the effects of legal origins by examining new estimates of different indicators of financial development in more than 20 countries in 1900 and 1913. The evidence presented does not yield robust results that can sustain the hypothesis of persistence effects of legal origin, but it is not powerful enough to reject it either. Then the paper examines whether there were systematic differences in the extent of investor protections across countries, since that is the main channel through which legal origin affects financial development, and shows that all the evidence supports the idea of relative convergence in corporate governance practices across legal families circa 1900. The paper concludes that, if the evidence presented is representative, the variation observed in financial development around the world today is likely a product of events of the twentieth century rather than a consequence of long-term (and persistent) differences occasioned by legal traditions.

NBER Working Paper Series, No. 16216, July 2010

Recent Advances in the Empirics of Organizational Economics

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen
September 2010

We present a survey of recent contributions in empirical organizational economics, focusing on management practices and decentralization. Productivity dispersion between firms and countries has motivated the improved measurement of firm organization across industries and countries. There appears to be substantial variation in management practices and decentralization not only between countries, but also especially within countries. Much of the poorer average management quality in countries like Brazil and India seems to result from a long tail of poorly managed firms, which barely exist in the United States. Some stylized facts include the following: (1) competition seems to foster improved management and decentralization; (2) larger firms, skill-intensive plants, and foreign multinationals appear better managed and are more decentralized; (3) firms that are both family owned and managed appear to have worse management and are more centralized; and (4) firms facing an environment of lighter labor market regulations and more human capital specialize relatively more in people management. There is evidence for complementarities between information and communication technology, decentralization, and management, but the relationship is complex, and identification of the productivity effects of organizational practices remains a challenge for future research.

Annual Review of Economics Vol. 2 (2010)

Changing Landscapes: The Construction of Meaning and Value in a New Market Category-Modern Indian Art

Khaire, Mukti, and R. Daniel Wadhwani
March 2010

Stable category meanings act as institutions that facilitate market exchange by providing bases for comparison and valuation. Yet little is known about meaning construction in new categories or how meaning translates into valuation criteria. We address this gap in a descriptive study of these processes in an emerging category-modern Indian art. Discourse analysis revealed how market actors shaped the construction of meaning in the new category by reinterpreting historical constructs in ways that enhanced commensurability and enabled aesthetic comparisons and valuation. Analysis of auction transactions revealed greater inter-subjective agreement about valuation over time, as the new category institutionalized.

Academy of Management Journal (forthcoming).

Assess, Don't Assume, Part II: Negotiating Implications of Cross-Border Differences in Decision Making, Governance, and Political Economy

Sebenius, James K.
January 2010

When facing a negotiation that crosses national borders and/or cultures, the standard preparatory assessments-of the parties, their interests, their no-deal options, opportunities for and barriers to creating and claiming value, the most promising sequence and process design, etc.-should be informed and modified by potentially relevant factors. Drawing on considerable literature in cross-border and cross-cultural negotiation, a two-paper series develops a four-level prescriptive framework for effectively carrying out such assessments. The first paper in this series ("Etiquette and National Culture in Negotiation") described 1) common expectations for surface behavior, and 2) some implications of deeper cultural characteristics for the negotiation process itself, as well as cross-border caveats such as stereotyping and overemphasizing national culture to the exclusion of other factors. The current paper carries this analysis further by systematically analyzing a third and fourth class of factors that often prove critical in cross-border dealmaking: 3. The decision-making and governance processes that are the targets of influence efforts. While negotiations take place with individuals, those individuals are typically enmeshed in organizational processes and cultures. Thus, a key assessment focuses on the organization's decision-making and governance processes. Several questions guide this analysis: Who has what decision rights? Is it a one-person authoritarian process? A simple consensus? A multi-stage consensus process? A key subgroup? How does the formal decision-making and governance process differ from the informal one? 4. The broader economic and political context for negotiation as well as salient "comparable" deals. Several questions guide this analysis: Is there a formal or informal government policy toward the kind of arrangements under negotiation such as the requirement that the majority of a joint venture be owned by a local partner? Are high-tech deals particularly sought after by the state? What recent deals by others, successful or not, will be salient in the minds of your local hosts and authorities when they contemplate yours? Does the political ethos favor state control or privatization? Does a wrenching political transition foster managerial uncertainty and decision paralysis? And so on.
Harvard Business School Working Paper, No. 10-050, December 2009

Does Product Market Competition Lead Firms to Decentralize?

Bloom, Nicholas, Raffaella Sadun, and John Van Reenen
January 2010

There is a widespread sense that over the last two decades firms have been decentralizing decisions to employees further down the managerial hierarchy. Economists have developed a range of theories to account for delegation, but there is less empirical evidence, especially across countries. This has limited the ability to understand the phenomenon of decentralization. To address the empirical lacuna we have developed a research program to measure the internal organization of firms-including their decentralization decisions-across a large range of industries and countries. In this paper we investigate whether greater product market competition increases decentralization. For example, tougher competition may make local manager's information more valuable, as delays to decisions become more costly. Since globalization and liberalization have increased the competitiveness of product markets, one explanation for the trend towards decentralization could be increased competition. Of course there are a range of other factors that may also be at play, including human capital, information and communication technology, culture, and industrial composition. To tackle these issues we collected detailed information on the internal organization of firms across nations. The few datasets that exist are either from a single industry or (at best) across many firms in a single country. We analyze data on almost 4,000 firms across 12 countries in Europe, North America, and Asia. We find that competition does indeed seem to foster greater decentralization.
Harvard Business School Working Paper, No. 10-052, January 2010.

2009

Geography, Poverty and Conflict in Nepal

Do, Quy-Toan, and Lakshmi Iyer
September 2009

This paper conducts an empirical analysis of the geographic, economic, and social factors that contributed to the spread of civil war in Nepal over the period 1996-2006. This within-country analysis complements existing cross-country studies on the same subject. Using a detailed dataset to track civil war casualties across space and over time, several patterns are documented. Conflict-related deaths are significantly higher in poorer districts and in geographical locations that favor insurgents, such as mountains and forests; a 10-percentage point increase in poverty is associated with 25-27 additional conflict-related deaths. This result is similar to that documented in cross-country studies. In addition, the relationship with poverty and geography is similar for deaths caused by the insurgents and deaths caused by the state. Furthermore, poorer districts are likely to be drawn into the insurgency earlier, consistent with the theory that a lower cost of recruiting rebels is an important factor in starting conflict. On the other hand, geographic factors are not significantly associated with such onset, suggesting that they instead contribute to the intensity of violence once conflict has started. Finally, in contrast with some cross-country analyses, ethnic and caste polarization, land inequality, and political participation are not significantly associated with violence.

Journal of Peace Research (forthcoming)

State Owned Entity Reform in the Absence of Privatization: Reforming Indian National Laboratories and Role of Leadership (pdf)

Choudhury, Prithwiraj, and Tarun Khanna
August 2009

The literature on state-owned entity (SOE) reform has been focused on privatization. We, however, show that even in the absence of property rights, SOEs may significantly improve performance, and document 42 Indian state-owned laboratories over 1993-2006-starting from a base of negligible U.S. patents-being granted more patents than all domestic private firms combined. Patent licensing revenue increases from 3% to 15% as a fraction of government budget without negatively affecting publication quality and quantity. This follows incentive policy change and leadership change at labs, an event whose timing is plausibly exogenous being dictated by government employment rules.

Harvard Business School Working Paper, No. 10-006, July 2009

India's Pockets of Prosperity? Special Economic Zones Are Attractive on Paper, but They Pose Thorny Political Problems

Lyer, Lakshmi, Laura Alfaro, and Semil Shah
August 2009

The Christian Science Monitor, July 31, 2009

Direct versus Indirect Colonial Rule in India: Long-term Consequences

Iyer, Lakshmi
April 2009

This paper compares economic outcomes across areas in India which were under direct British colonial rule with areas which were under indirect colonial rule. Controlling for selective annexation using a specific policy rule, I find that areas which experienced direct rule have significantly lower levels of access to schools, health centers, and roads in the post-colonial period. I find evidence that the quality of governance in the colonial period has a significant persistent effect on post-colonial outcomes.

Putting Patients First: Social Marketing Strategies for Treating HIV in Developing Nations

Chance, Zoe, and Rohit Deshpandé
April 2009

It is more than mere coincidence that the highest rates of HIV occur in the world's poorest countries. Of the over 40 million people currently living with HIV, 95 percent are in the developing world. The first part of this paper explores the economics of HIV and treatment from a social marketing perspective. The second part of the paper uses three specific case histories of successful social marketing organizations in Africa, Asia, and South America to inductively generate a consumer (patient)-centric marketing model. The focal organizations are unique in that they all identify patient needs first, then work backwards to develop economically viable solutions. These solutions are not without flaws, and the future of these programs remains uncertain, but we hope that illuminating these particular cases within the consumer-centric marketing paradigm will shed light on ways in which other organizations may be able to serve the poor profitably.

Natural Experiments in History, edited by Jared Diamond and James Robinson. Harvard University Press, forthcoming

Colonial Land Tenure, Electoral Competition, and Public Goods in India

Banerjee, Abhijit, and Lakshmi Iyer
April 2009

Harvard Business School Working Paper, No. 09-114, April 2009

Barriers to Household Risk Management: Evidence from India

Cole, Shawn, Xavier Giné, Jeremy Tobacman, Petia Topalova, Robert Townsend, and James Vickery
April 2009

Financial engineering offers the potential to significantly reduce consumption fluctuations faced by individuals, households, and firms. Yet much of this promise remains unrealized. In this paper, we study the adoption of an innovative rainfall insurance product designed to compensate low-income Indian farmers in case of deficient rainfall during the primary monsoon season. We first document relatively low levels of adoption of this new risk management technology: only 5%-10% of households purchase insurance, even though rainfall variability is overwhelmingly cited by households as the most important risk they face. We then conduct a series of randomized field experiments to test theoretical predictions of why adoption may be low. Insurance purchase is sensitive to price, with an estimated extensive price elasticity of demand between -0.66 and -0.88. Credit constraints, identified through the provision of random liquidity shocks, are a key barrier to participation, a result also consistent with household self-reports. Several experiments find an important role for trust in insurance participation. We find mixed evidence that subtle psychological manipulations affect purchase and no evidence that modest amounts of financial education changes participation decisions. Based on our experimental results, we suggest preliminary lessons for improving the design of household risk management contracts.

Harvard Business School Working Paper, No. 09-117, April 2009.

Financial Literacy, Financial Decisions, and the Demand for Financial Services: Evidence from India and Indonesia

Cole, Shawn, Thomas Sampson, and Bilal Zia
April 2009

Why is demand for formal financial services low in emerging markets? One view argues that limited cognitive ability and financial literacy stifle demand. A second view argues that demand is rationally low, because formal financial services are expensive and of relatively low value to the poor. This paper uses original surveys and a field experiment to distinguish between two competing answers to this question. Using original survey data from India and Indonesia, we first show that financial literacy is a powerful predictor of demand for financial services. To test the relative importance of literacy and price, we implement a field experiment, offering randomly selected unbanked households financial literacy education, crossed with small incentive (ranging from U.S. $3 to $14) to open a bank savings account. We find that the financial literacy program has no effect on the likelihood of opening a bank savings account in the full sample but do find modest effects for uneducated and financially illiterate households. In contrast, small subsidy payments have a large effect on the likelihood of opening a savings account. These payments are more than two times more cost-effective than the financial literacy training, though this calculation does not take into account any ancillary benefits of financial education.

The Review of Economics and Statistics (forthcoming)

Diasporas and Domestic Entrepreneurs: Evidence from the Indian Software Industry

Nanda, Ramana and Tarun Khanna
April 2009

This study explores the importance of cross-border social networks for entrepreneurs in developing countries by examining ties between the Indian expatriate community and local entrepreneurs in India's software industry. We find that local entrepreneurs who have previously lived outside India rely significantly more on diaspora networks for business leads and financing. This is especially true for entrepreneurs who are based outside software hubs-where getting leads to new businesses and accessing finance is more difficult. Our results provide micro-evidence consistent with a view that cross-border social networks play an important role in helping entrepreneurs to circumvent the barriers arising from imperfect domestic institutions in developing countries.

Journal of Economics and Management Strategy (forthcoming)

When Dreaming Is Believing: The (Motivated) Interpretation of Dreams

Morewedge, Carey K., and Michael I. Norton
February 2009

This research investigated laypeople's interpretation of their dreams. Participants from both Eastern and Western cultures believed that dreams contain hidden truths (Study 1) and considered dreams to provide more meaningful information about the world than similar waking thoughts (Studies 2 and 3). The meaningfulness attributed to specific dreams, however, was moderated by the extent to which the content of those dreams accorded with participants' preexisting beliefs-from the theories they endorsed to attitudes toward acquaintances, relationships with friends, and faith in God (Studies 3-6). Finally, dream content influenced judgment: Participants reported greater affection for a friend after considering a dream in which a friend protected rather than betrayed them (Study 5) and were equally reluctant to fly after dreaming or learning of a plane crash (Studies 2 and 3). Together, these results suggest that people engage in motivated interpretation of their dreams and that these interpretations impact their everyday lives.

Journal of Personality and Social Psychology

The Bloody Millennium: Internal Conflict in South Asia

Iyer, Lakhsmi
February 2009

This paper documents the short-term and long-term trends in internal conflict in South Asian countries, using multiple data sources. I find that incidents of terrorism have been rising across South Asia over the past decade, and this increase has been concentrated in economically lagging regions in the post-2001 period. This is in contrast to both the historical patterns of conflict and the evolution of other types of violence. Analyzing the role of economic, geographic, and demographic factors, I find that poorer areas have significantly higher levels of conflict intensity. The paper reviews the various approaches taken by governments to deal with conflict, contrasting security-based approaches with political accommodation and economic approaches. Finally, the paper reviews the potential role of regional cooperation in mitigating conflict.

Harvard Business School Working Paper, No. 09-086, January 2009

The Credit Crisis of 2008: Causes, Consequences and Implications for India

Narayanan, V.G., and Lisa Brem
January 2009

This article gives a brief overview of the causes and consequences of the current global credit crisis. The article then discusses the benefits and potential drawbacks of real estate loan securitization in India, and what India can do to realize those benefits while avoiding some of the pitfalls.

The Chartered Accountant 57, no. 6 (December 2008)

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2008

The Supply Side of Innovation: H-1B Visa Reforms and U.S. Ethnic Invention

Kerr, William R., and William F. Lincoln
December 2008

This study evaluates the impact of high-skilled immigrants on U.S. technology formation. Specifically, we use reduced-form specifications that exploit large changes in the H-1B visa program. Fluctuations in H-1B admissions levels significantly influence the rate of Indian and Chinese patenting in cities and firms dependent upon the program relative to their peers. Most specifications find weak crowding-in effects or no effect at all for native patenting. Total invention increases with higher admission levels primarily through the direct contributions of ethnic inventors.

Harvard Business School Working Paper, No. 09-005, December 2008

The Agglomeration of U.S. Ethnic Inventors

Kerr, William R.,
July 2008

The ethnic composition of U.S. inventors is undergoing a significant transformation-with deep impacts for the overall agglomeration of U.S. innovation. This study applies an ethnic-name database to individual U.S. patent records to explore these trends with greater detail. The contributions of Chinese and Indian scientists and engineers to U.S. technology formation increase dramatically in the 1990s. At the same time, these ethnic inventors became more spatially concentrated across U.S. cities. The combination of these two factors helps stop and reverse long-term declines in overall inventor agglomeration evident in the 1970s and 1980s. The heightened ethnic agglomeration is particularly evident in industry patents for high-tech sectors, and similar trends are not found in institutions constrained from agglomerating (e.g., universities, government).

Harvard Business School Working Paper, No. 09-003, July 2008

Traveling Agents: Political Change and Bureaucratic Turnover in India (pdf)

Iyer, Lakshmi, and Anandi Mani
July 2008

We develop a framework to examine how politicians with short-term electoral pressures control bureaucrats with long-term career concerns. Empirical analysis using a unique data set on the career histories of Indian bureaucrats supports the key predictions of our framework. We find that politicians use frequent reassignments (transfers) across posts of varying importance as a means of control. High-skilled bureaucrats face less frequent transfers and a lower variability in the importance of their posts. There are alternative routes to career success: officers of higher initial ability are more likely to invest in developing expertise, but officers who belong to the same caste as the politician are also able to obtain important posts. Bureaucrats are less likely to be transferred if politicians have alternative means of control through subordinate politicians. Districts with higher rates of politically induced bureaucrat transfers are somewhat less successful in poverty reduction over the long run.

Harvard Business School Working Paper, No. 09-006, July 2008.

Fixing Market Failures or Fixing Elections? Agricultural Credit in India

Cole, Shawn A.
July 2008

This paper integrates theories of political budget cycles with theories of tactical electoral redistribution to test for political capture in a novel way. Studying banks in India, I find that government-owned bank lending tracks the electoral cycle, with agricultural credit increasing by 5-10 percentage points in an election year. There is significant cross-sectional targeting, with large increases in districts in which the election is particularly close. This targeting does not occur in non-election years, or in private bank lending. I show capture is costly: elections affect loan repayment, and election year credit booms do not measurably affect agricultural output.

Harvard Business School Working Paper, No. 09-001, July 2008.

Financial Development, Bank Ownership, and Growth. Or, Does Quantity Imply Quality? (pdf)

Cole, Shawn A.
July 2008

In 1980, India nationalized its large private banks. This induced different bank ownership patterns across different towns, allowing credible identification of the effects of bank ownership on financial development, lending rates, and the quality of intermediation, as well as employment and investment. Credit markets with nationalized banks experienced faster credit growth during a period of financial repression. Nationalization led to lower-interest rates and lower-quality intermediation and may have slowed employment gains in trade and services. Development lending goals were met, but these had no impact on the real economy.

Harvard Business School Working Paper, No. 09-002, July 2008

An Indian FOPSE: Innovations Case Discussion on Keggfarms

Isenberg, Daniel J.
June 2008

I first met Vinod Kapur in the summer of 2006 when I was conducting research in India on a case for my Harvard Business School class on international entrepreneurship. A friend of mine had invited me to attend the ceremony for the first Innovations for India Awards in Mumbai. Several Indian businesspeople received the award, but I was particularly struck by a dignified silver-haired gentleman who took the stage to receive the award for social innovation. He then proceeded to eloquently describe the development of a business concept centered on the rural poor of India, which was based on a specially bred "superchicken" that was twice as big and five times as productive as the typical backyard chicken. The incongruity of Vinod Kapur's elegant appearance and his subject matter struck me as fascinating, but the most intriguing element of the presentation was how he arranged an entire system of distribution to deliver the hatched chicks to these remote villagers and did so in a way that enabled everyone to profit in concrete financial terms, from Keggfarms itself to the rural villagers. Almost a million households are today affected by Keggfarms, and the numbers are constantly rising.

Innovations: Technology, Governance, Globalization 3, no. 1 (winter 2008)

America the Difficult

Desai, Mihir
June 2008

The American (May - June 2008)

Testing Limits to Policy Reversal: Evidence from Indian Privatizations

Dastidar, Siddhartha G., Raymond Fisman, and Tarun Khanna
April 2008

We examine the effect of regime change on privatization using the 2004 election surprise in India. The pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for definite privatization by the BJP dropped by 3.5 percent relative to private firms. Surprisingly, government-controlled companies that were only under study for possible privatization fell by 7.5 percent relative to private firms. We interpret this as evidence of investor belief of policy irreversibility, where reforms may reach a stage beyond which future regimes have difficulty reversing those policies. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to the government's privatization agenda.

Journal of Financial Economics (forthcoming)

Learning to Live with Governments: Unilever in India and Turkey, 1950-1980

Jones, Geoffrey G.
March 2008

A noteworthy characteristic of the contemporary global economy is the uneven distribution of world foreign direct investment (FDI). In 2007 three-quarters of world FDI was located in developed countries. The residual was concentrated in a small number of emerging countries. Large countries with little inward FDI included India and Turkey. This is puzzling, given that both countries have greatly liberalized their regulations on inward FDI. After 1945 many developing governments pursued policies which restricted foreign-owned firms. India and Turkey were among the countries with particularly difficult policy environments. This paper explores why Unilever, the Anglo-Dutch consumer products company, was able to sustain large businesses in developing countries such as India and Turkey. The paper argues that the explanation is multi-causal. Unilever held first-mover advantages, but was also prepared to accept low dividend remittances for years. It pursued flexible business strategies beyond its "core" business, even distributing condoms. It maintained a high standard of corporate ethics. It was effective at building contacts with local business and government elites, primarily through localization of management.

Entreprises et Histoire 49 (December 2007)

The Fiscal Impact of the Brain Drain: Indian Emigration to the U.S.

Desai, Mihir , D. Kapur, and J. McHale
February 2008

Easing immigration restrictions for the highly skilled in developed countries portend a future of increased human capital outflows from developing countries. The myriad consequences of these developments for developing countries include the direct loss of the fiscal contributions of these highly skilled individuals. This paper analyzes the fiscal impact of this loss of talent for a developing country by examining human capital flows from India to the U.S. The escalation of the emigration of highly skilled professionals from India to the U.S is examined by surveying evidence on the changing nature of the Indian-born in the U.S. during the 1990s. The loss of talent to India during the 1990s was dramatic and highly concentrated amongst the prime-age work force, the highly educated and high earners. In order to estimate the fiscal losses associated with these emigrants, this paper first estimates what these emigrants would have earned in India, and then integrates the resulting counterfactual distributions with details of the Indian fiscal system to estimate fiscal impacts. Two distinct methods to estimate the counterfactual earnings distributions are implemented: a translation of actual U.S. incomes in purchasing power parity terms and an income simulation based on a jointly estimated model of Indian earnings and participation in the workforce. The PPP methods indicate that the foregone income tax revenues associated with the Indian-born residents of the U.S. comprise one-third of current Indian individual income tax receipts. Depending on the method for estimating expenditures saved by the absence of these emigrants, the net fiscal loss associated with the U.S. Indian-born resident population ranges from 0.24% to 0.58% of Indian GDP in 2001.

Journal of Development Economics (forthcoming)

Colonial Land Tenure, Electoral: Competition and Public Goods in India (pdf)

Banerjee, Abhijit and Lakshmi Iyer
February 2008

Harvard Business School Working Paper, No. 08-062, February 2008

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2007

China + India: The Power of Two

Khanna, Tarun
December 2007

China and India are burying the hatchet after four-plus decades of hostility. A few companies from both nations have been quick to gain competitive advantages by viewing the two as symbiotic. If Western corporations fail to do the same, they will lose their competitive edge-and not just in China and India but globally. The trouble is, most companies and consultants refuse to believe that the planet's most populous nations can mend fences. Not only do the neighbors annoy each other with their foreign policies, but they're also vying to dominate Asia. Moreover, the world's fastest-growing economies are archrivals for raw materials, technologies, capital, and overseas markets. Still, China and India are learning to cooperate, for three reasons. First, these ancient civilizations may have been at odds since 1962, but for 2,000 years before that, they enjoyed close economic, cultural, and religious ties. Second, neighbors trade more than non-neighbors do, research suggests. Third, China and India have evolved in very different ways since their economies opened up, reducing the competitiveness between them and enhancing the complementarities. Some companies have already developed strategies that make use of both countries' capabilities. India's Mahindra & Mahindra developed a tractor domestically but manufactures it in China. China's Huawei has recruited 1,500 engineers in India to develop software for its telecommunications products. Even the countries' state-owned oil companies, including Sinopec and ONGC, have teamed up to hunt for oil together. Multinational companies usually find that tapping synergies across countries is difficult. At least two American corporations, GE and Microsoft, have effectively combined their China and India strategies, allowing them to stay ahead of global rivals.

Harvard Business Review 85, no. 12 (December 2007)

Financial Development, Bank Ownership, and Growth. Or, Does Quantity Imply Quality

Cole, Shawn
November 2007

In 1980, India nationalized its large private banks. This induced different bank ownership patterns across different towns, allowing credible identification of the effects of bank ownership on financial development, lending rates, and the quality of intermediation, as well as employment and investment. Credit markets with nationalized banks experienced faster credit growth during a period of financial repression. Nationalization led to lower interest rates and lower quality intermediation and may have slowed employment gains in trade and services. Development lending goals were met, but these had no real impact. Finally, competition with private banks provided some discipline to nationalized banks.

Review of Economics and Statistics (forthcoming).

Testing Limits to Policy Reversal: Evidence from Indian Privatizations

Dastidar, Siddhartha G., Raymond Fisman, and Tarun Khanna
October 2007

We examine the effect of regime change on privatization using the 2004 election surprise in India. The pro-reform BJP was unexpectedly defeated by a less reformist coalition. Stock prices of government-controlled companies that had been slated for definite privatization by the BJP dropped by 3.5 percent relative to private firms. Surprisingly, government-controlled companies that were only under study for possible privatization fell by 7.5 percent relative to private firms. We interpret this as evidence of investor belief of policy irreversibility, where reforms may reach a stage beyond which future regimes have difficulty reversing those policies. Further analysis suggests that layoffs, combined with the privatization announcement, served as a credible commitment to the government's privatization agenda.

NBER Working Paper Series, No. 13427, September 2007.

Team Familiarity, Role Experience, and Performance: Evidence from Indian Software Services (pdf)

Huckman, Robert S., Bradley R. Staats, and David M. Upton
September 2007

Much of the literature on learning views experience as a unidimensional concept captured by the cumulative production volume or number of projects completed by a team. Implicit in this approach is the assumption that teams are stable in their membership and internal organization. In practice, however, such stability is rare, as the composition and structure of teams often changes over time or between projects. In this paper, we use detailed data from an Indian software services firm to examine how such changes may affect the accumulation of experience within, and the performance of, teams. We find that the level of team familiarity (i.e., the average number of times that each team member has worked with every other member of the team) has a significant and positive effect on performance but that conventional measures of the experience of individual team members (e.g., years at the firm) do not impact performance. We do find, however, that the role experience of individuals in a team (i.e., years in a given role within a team) is associated with better team performance. We examine the impact of role experience separately for team managers and team members. We find that a manager's role experience is positively related to outcome measures that are easily observable in process but is not related to outcomes that are difficult to monitor in process. In comparison, a member's role experience is positively related to both types of outcomes. Our results offer an approach for capturing the experience held by fluid teams and highlight the need to study context-specific measures of experience, including role experience, in addition to offering further insight into how the interactions of team members may contribute to the development of broader firm capabilities.

Harvard Business School Working Paper, No. 08-019, September 2007

Remedying Education: Evidence from Two Randomized Experiments in India

Banerjee, A., Shawn A. Cole, E. Duflo, and L. Linden
August 2007

This paper presents the results of two randomized experiments conducted in schools in urban India. A remedial education program hired young women to teach students lagging behind in basic literacy and numeracy skills. It increased average test scores of all children in treatment schools by 0.28 standard deviation, mostly due to large gains experienced by children at the bottom of the test-score distribution. A computer-assisted learning program focusing on math increased math scores by 0.47 standard deviation. One year after the programs were over initial gains remained significant for targeted children, but they faded to about 0.10 standard deviation.

Quarterly Journal of Economics 122, no. 3 (August 2007): 1235-1264

Diasporas and Domestic Entrepreneurs: Evidence from the Indian Software Industry (pdf)

Nanda, Ramana, and Tarun Khanna
July 2007

This study explores the importance of cross-border social networks for entrepreneurship in developing countries by examining ties between the Indian expatriate community and local entrepreneurs in India's software industry. We find that entrepreneurs located outside software hubs-in cities where monitoring and information flow on prospective clients is harder-rely significantly more on diaspora networks for business leads and financing. Relying on these networks is also related to better firm performance, particularly for entrepreneurs located in weaker institutional environments. Our results provide micro-evidence consistent with a view that cross-border social networks serve an important role in helping entrepreneurs to circumvent the barriers arising from imperfect local institutions in developing countries.

Harvard Business School Working Paper 08-003, July 2007

Explicating Lean Principles by Examining Indian Software Services

Staats, Bradley R., and David M. Upton
July 2007

This paper examines the implementation of a lean operating system at an Indian software services firm. By studying the introduction and impact of lean management techniques in a nontraditional setting we are able to move beyond the artifacts and gain insight into the principles that may lead to improved performance in certain settings. In particular we find that the impact of the changes on problem solving, standardization of work, and coordination improve the way that the firm learns and its productivity. Using a detailed case study we document the internal firm processes that the lean principles influence and empirically show that firm operational performance has improved. Finally, we suggest that the lean initiative studied possesses qualities of a Trojan Horse change initiative-its outward manifestation accomplishes the short-term goal (entering the city gates / productivity) while its inner core leads to much more radical change (sacking of Troy / innovation).

Harvard Business School Working Paper 08-001, July 2007

Poverty, Social Divisions and Conflict in Nepal (pdf)

Quy-Toan Do, and Iyer, Lakshmi
April 2007

We conduct an econometric analysis of the economic and social factors which contributed to the spread of violent conflict in Nepal. We find that conflict intensity is significantly higher in places with greater poverty and lower levels of economic development. Violence is higher in locations that favor insurgents, such as mountains and forests. We find weaker evidence that caste divisions in society are correlated with the intensity of civil conflict, while linguistic diversity has little impact.

Harvard Business School Working Paper 07-065, April 2007

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2005

Accounting Standards and the Globalization of Indian Businesses

Miller, Gregory S., and V.G. Narayanan
November 2005

The Chartered Accountant (July 2005): 50-52

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