This chapter contextualises the drivers of corruption in Turkish business through comparisons with Japan in the late nineteenth century, and India. It identifies the developmental state as a common driver of corruption. Catching-up by using extensive state intervention had the major downside that it has served to facilitate corruption.The operation of the developmental state may have been constrained by factors beyond the control of the state, such as shortage of funds or external pressures. Yet it is apparent that the individual measures that made up the overall strategy of the developmental state are not only vulnerable to exploitation by those who are involved in their implementation, but can positively encourage such manipulation. The example of nineteenth century Meiji Japan suggests the building of inclusive political and economic institutions, and consequent trust levels, can help address the problem, but it also suggests that old habits die hard, and that respect for the state and its institutions is something that cannot be taken for granted. The fact that some places, such as Singapore and Hong Kong, were able in recent decades to roll back corrupt practices is less comforting for Turkey. Turkey like India, has not yet taken the necessary steps needed to disrupt corrupt practices. However the chapter also explores the many uncertainties around the issue of corruption. The very term corruption is ambiguous, because there are many grey areas that result from variations in cultural norms. The existence of corruption also appears to not stop development. It did not stop Japan’s economic growth over the long-term. It has not stopped India’s rapid growth in recent decades, which appears, if anything, as correlated with growing corruption rates since the 1970s. It would appear, though, that the more extractive the institutions of a society, and the fewer the countervailing forces of productive business enterprise, the more potential there is for negative outcomes. In the case of Turkey, corruption has not prevented significant economic growth, but it also had negative consequences, such as poor quality building construction, and distortions, such as helping one sector of the business community grow at the expense of others. Its prevalence maybe part of the explanation why Turkey has struggled to build innovative businesses able to drive forward the development of the country and break out of the middle-income trap.
In April 2019, Manoj Badale and Charles Mindenhall, co-founders of Blenheim Chalcot, were contemplating how they might go about developing their portfolio. Since founding the company as an internet consultancy called netdecisions in 1998, Badale and Mindenhall had transformed Blenheim Chalcot into the United Kingdom’s “leading digital venture builder,” having successfully built, and, in 15 instances, exited, 42 businesses across a number of sectors, including technology, financial services, sport, media, property, and education. In 2018, Blenheim Chalcot had portfolio sales of over £350 million and employed over 3,000 people. Unlike a traditional venture capital firm, Blenheim Chalcot was a “venture builder,” often developing its own ideas then bringing in and supporting entrepreneurs with a range of services and support, and funding them in return for a majority equity stake (typically 80-90%). The idea was to increase the probability of success by allowing the entrepreneurs and their teams to spend less time fundraising and dealing with time consuming tasks, such as property, recruitment, legal set up, and gaining access to a client network. This enabled the entrepreneur to focus more on product and customers. The downside of this approach was that the growth of the group was somewhat constrained by the founders’ own capital and their access to co-investment funds. As Badale and Mindenhall contemplated the future, they were asking themselves how they could best develop their ecosystem for building innovative businesses. In October 2018, they had opened an office in New York. They were also partnering with Imperial College London to open a 200,000 square-foot tech and innovation campus in early 2020. Should they continue on their current track? Or, should they be bolder, perhaps going public, adding new sectors, more businesses, bigger opportunities, and expanding into new geographic markets? How could they achieve these growth goals while maintaining sufficient control over the businesses? How could they achieve growth and maintain the quality of the businesses – and not spread themselves too thinly?
In 2012, Nalin Jain, then head of GE aviation for South Asia, was given the added responsibility for GE’s transportation business in India, including bidding for a $2.5 billion contract to manufacture, service and maintain 1,000 diesel locomotives for state owned Indian Railways (IR). The deal, which would have been “the largest deal on the planet” for the transportation business, had been under discussion for six years, and many within GE had given up hope that it would materialize, but Jain persisted. In February 2015, when IR requested companies to submit a financial bid in six months, Jain quickly built an autonomous team, sequestered from the rest of GE, with people from multiple businesses and functions. His team overcame internal resistance from people at headquarters and stiff competition to help GE win the deal by a narrow margin. Jain was then tasked with executing the deal. As many of his earlier team members had moved on, Jain hired new people and built a new diverse yet integrated team for execution, with members able to put aside their many differences, look beyond their functional silos, and focus on the project deliverables. However, 2017 brought a series of challenges. GE changed India’s organization structure, making India business leaders report only to their respective global business leaders instead of reporting to both their business leaders and the India country leader. Jain’s mandate was expanded to include the entire international operations of GE’s transportation business. And, sub-optimal company performance forced GE to announce cost cuts of $2 billion. In the face of this turmoil, Jain wonders, “Have I created an agile team that can succeed in GE’s matrix environment and deal with the internal challenges? Do the team members have the maturity and motivation required for the project to succeed?”
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Anjali Raina is the Executive Director of the Harvard Business School India Research Centre. In her leadership role at the IRC, Anjali focuses on building and maintaining relationships with senior business leaders in the region to facilitate the work of the center in research, educational programs, community building and faculty development.
Under Anjali’s leadership, the HBS IRC has facilitated the writing of over 168 case studies on Indian Business Practice and supported half a dozen research projects. Anjali has co-authored several case studies such as Aadhaar: India’s ‘Unique Identification’ System, TeamLease: Putting India to Work (II) Legally; Pratham – Every Child in School and Learning Well; Naina Lal Kidwai: Investing in Her Country; Tech Mahindra and the Acquisition of Satyam Computers (A); HN Agri Serve : Growing Prosperity as well as an HBR Article on The Ordinary Heroes of the Taj.
Anjali wears several additional hats. She is a Director on the Board of Harvard Business Publishing, India, the Regional President (Western Region) of NHRDN, an Advisor to The Akanksha Foundation, Trustee to LIFE Trust, an Advisory Member on the Board of HBS Club of India, and on the Advisory Board of the Indian Business School.
Prior to joining HBS IRC Anjali spent 15 years with Citigroup India, most recently as Country Director, before which she worked for more than a decade with ANZ Grindlays Bank PLC. Anjali holds an MBA from the Indian Institute of Management, Calcutta, a bachelor's degree (Eng. Hons) from Loreto College and is an alumnus of HBS having completed the Advanced Management Program.