I n s e a d p3/P5

Masters Program

Sustainable International Business Instructor: Daniel Traça ([e-mail]) Grader: TBA

Objectives

This course is intended to provide future managers, expecting to work in or with developing countries, with an understanding of their current economic reality and future prospects of these nations. The course will address several developmental challenges faced by poor nations, focusing on the role of the private sector and business managers, and stressing the implications for corporate performance. It will not cover in detail the internal operational challenges of corporations.

There are three parts to this course. Part A provides a general introduction to the problems of development, and the implications of the international economic and political order. Part B addresses the role that private business and markets can play in promoting economic growth, stressing the activities of foreign investors. Part C looks at the specificities of poverty and the role of the private sector in solving this problem.

Grades

Class Participation: Class attendance is mandatory. Active and thoughtful participation is encouraged and will be rewarded by up to 0.5 bonus point in the final grade. You are advised to read the readings before each class, so that you can participate. The reading of the case-studies for class discussion, when assigned (marked with **), is absolutely required.

Group Case-study (35%): In groups of 4, students can prepare a case-study on any topic broadly related to the course. The group, topic and a short outline must be communicated to the course grader by the end of session 6, for validation by the course instructor.

The final report is due before the last session and is limited to 12 double-spaced pages. It will be judged by its originality and innovation, the use of tools developed in the course and, above all, the quality of the analysis and recommendations.

Individual Flash essay (35%): Students will be given a choice of topics currently on the news to prepare a report in a short period, simulating the role of an advisor to a high-level personality. Students should research the topic, including through sources on the web, and prepare the report. All sources should be listed with the report.

The topic will be distributed in class on class 7. The report is due before the beginning of class 8. The report should is limited to 2 double-spaced pages.

Individual Final Exam (30%): A short final exam, lasting for one hour, covers all topics in the course. It assumes that all readings have been done and class handouts have been thoroughly scrutinized.
COURSE OUTLINE AND READING LIST

In this syllabus, you will find the key contents and the required readings for each session. For each topic, you can find many additional readings, references and www links on the course’s website.

PART A - Roots of Economic Development

Session 1 -Stylized facts of Development

• 
  What are key differences between rich and poor countries?
  
• 
  What is the historical evidence on the evolution of this gap?
  
• 
  What are the key components of economic development?
  
• 
  What are the main drivers of development: institutions, policies or geography?
  

“Institutions and Development” Shirley, Mary M. mimeo 2009

“Inequality” by Lougani, P.; Finance and Development 38(4) Sep 2003

“Institutions Matter, But Not For Everything” Sachs, J.; Finance and Development 40(2) Jun 2003

“Does Democracy Help?” Chapter 10 in Economic Growth in the 1990s: Learning from a Decade of Reform, World Bank, 2005, Washington DC

Session 2 -Aid and its Effectiveness

• 
  •What have been the effects of Aid on Economic Development?
  
• 
  •How to explain its effectiveness?
  
• 
  •How to deal with the overwhelming debt amassed by many countries?
  
  Must read before class:
  

“Aid, Debt Relief and Trade: An Agenda for Fighting World Poverty” HBS 2007

“Africa has to find its own road to prosperity” by Paul Kagame, FT.com May 7 2009

“Good governance will bolster African aid” by Mo Ibrahim, FT.com May 28 2009

“The elimination on poverty” by Martin Wolf, FT.com Feb 15, 2005

“Dead Aid” by Dambisa Moyo 2009 (read the Introduction)

“The Utopian Nightmare” William Easterly, Foreign Policy, Sept/Oct 2005

"Aid and Growth" Steven Radelet, Michael Clemens and Rikhil Bhavnani, Finance & Development, Sept 2005 42(3)

“Improving the Effectiveness of Aid” Eckhard Deutscher and Sara Fyson, Finance & Development, Sept 2008 45(3)

“Africa's Missing Ingredients” by Abdoulaye Bio-Tchané and Etienne B. Yehoue, Finance & Development 44(4) Dec 2007

Session 3 -The Washington Consensus and its aftermath

• 
  What are the key components of the Washington Consensus, and how did it emerge?
  
• 
  What is the evidence of success or failure of the Consensus?
  
• 
  What are the key reforms to kick start and sustain growth?
  
• 
  What are the implications of the current crisis
  
  Must read before class:
  

“What Happened?" Finance & Development, June 2006

"Rethinking Growth" Finance & Development, Mar 2006

"Latin America: Overcoming Reform Fatigue” G. Ortiz, Finance & Development, Sep 2003

“Overview: An Agenda for Restarting Growth and Reform” in After the Washington Consensus, Kuczynski and Williamson eds. Institute for International Economics 2003

“Economic Growth in the 1990s: Learning from a Decade of Reform; Ch. 1: Overview” The World Bank, 2005, Washington DC

PART B – Harnessing Business for Development

Session 4 -Competing for Foreign Investors

• 
  What are the key determinants of Foreign Investment at the country level?
  
• 
  How can developing countries compete for foreign investment?
  
  Must read before class:
  

“Intel’s Site Selection Decision in Latin America” Thunderbird Case Series 1999

“Enticing Investors” Calvin McDonald, Volker Treichel, and Hans Weisfeld , Finance & Development , December 2006 43 (4)

"The Truth About Foreign Direct Investment in Emerging Markets" D. Farrell, J. Remes and H. Schulz, McKinsey Quarterly, 2004 N.1

Session 5 -FDI and Economic Development

• 
  What are the benefits of foreign investment in developing countries?
  
• 
  Can FDI really be the magic bullet for development?
  
• 
  What is the potential for development strategies based on attracting FDI?
  

“Exploring the Links Between International Business and Poverty Reduction: A Case Study of Unilever in Indonesia” J. Clay, Oxfam Publishing 2005

“How Beneficial Is Foreign Direct Investment for Developing Countries?” P. Loungani and A. Razin, Finance & Development, June 2001

Session 6 -The Governance Challenge

• 
  What is the role of public governance in the effects of FDI?
  
• 
  How serious are the institutional shortcomings of poor countries?
  
• 
  How to address failures of governance?
  
• 
  How should the lack of competent governance institutions affect the strategies of multinationals investing in poor countries?
  
  Must read before class:
  

“Chad’s Billion-Barrel Oilfield: From Rags to Riches?” INSEAD, 1999

“The false Developmental Promise of Corporate Social Responsibility: Evidence from Multinational oil Companies” Frynas, J. International Affaires 81 (3) 2005

“Managing Oil Wealth” B. Eifert, A. Gelb and N. Borje Tallroth, Finance & Development, Mar 03 40(1)

“Nigeria’s Shot at Redemption” Okonjo-Iweala, N. Finance & Development, Dec 08

“Africa-China Trade” Special report, Financial Times, Jan 24, 2008

Session 7 -Privatization

• 
  What are the advantages and disadvantages of privatization in emerging countries?
  
• 
  How should privatization be undertaken?
  
• 
  What are some of the risks for the country, as well as the investors?
  
  Must read before class:
  

“Cancun, Mexico: Water System Privatization”, Kennedy School of Government, KSGG1593.0

"Privatization and Deregulation A Push Too Far" Chapter 6 in Economic Growth in the 1990s: Learning from a Decade of Reform, The World Bank, 2005, Washington DC “

SURVEY: WATER” The Economist, Jul 17, 2003

Session 8 -The World Trading System

• 
  How is the International Trading system biased against developing nations?
  
• 
  What are the implications for development?
  
• 
  Why are the negotiations in the Doha round so difficult?
  
  Must read before class
  

“Confronting EU Anti-Dumping: The Grey Cotton Case Seen from Turkey” INSEAD

“The Free-Trade Fix” Tina Rosenberg, New York Times, Aug 18, 2002

“Trade Liberalization: Why So Much Controversy?” Chapter 5 in Economic Growth in the 1990s: Learning from a Decade of Reform, The World Bank, 2005, Washington DC

“Governing Global Trade” Uri Dadush and Julia Nielson, Finance & Development, December 2007, 44(4)
“Mangling Trade” The Economist, Jun 28, 2007

“The Great Unraveling” The Economist, Jan 18, 2007

“Farm support’s Deep Roots” The Economist, Jun 22, 2005

Session 9 -Child Labor

• 
  Is development confined to economic growth?
  
• 
  Is Child Labor a cause or a consequence of poverty?
  
• 
  What are good and bad policies to address this issue?
  
• 
  What is the role of corporations?
  
  Must read before class
  

“Third-World Families at Work: Child Labor or Child Care” HBR Case Study, Jan-Feb 1993

“The end of child labour: Within reach” International Labor Office 2006

"Why Quality Matters in Education" Eric A. Hanushek, Finance and Development, June 2005, 42 (2)

“Business and Child Labour: A Management Primer” Shell International Limited (SI), 2000

“The politics of corporate responsibility and child labour in the Bangladeshi garment industry” Nielsen, M. International Affairs 81 (3) 2005

PART C – Business to Fight Poverty

Session 10 -Strategies for the BOP

• 
  Can ‘selling to the poor’ be a moneymaking strategy, as well as a socially responsible one? Can the poor be a sustainable market?
  
• 
  What role for the corporate world in fighting global poverty?
  
• 
  What is the role of information technology in development?
  
• 
  What can corporations do to address this, as an element of their social responsibility?
  
  Must read before class:
  

“Building bridges across the Digital Divide – HP’s e-Inclusion” (A) and (B), INSEAD 2004

“The Next 4 Billion: Market Size and Business Strategy at the Base of the Pyramid: Executive Summary” International Finance Corporation (WB) and World Resources Institute

“The fortune at the bottom of the pyramid” Prahalad C.K. and Hart S.; strategy + business (2002)

“Misfortune at the Bottom of the Pyramid” Karnani A; Greener Management Review, 51 (2007)

“Advancing the base of the pyramid debate” Landrum N.E; Strategic Management Review 1 (2007)

Session 11 -Micro Credit: Lending to the Poor

• 
  How does micro credit work?
  
• 
  How successful have been micro credit institutions?
  
• 
  How much have they helped in fighting poverty and promoting development?
  

“Microfinance and the Market” Cull, R., A. Demigurc-Kunt and J. Morduch, Journal of Economic Perspectives, 2008

“Microfinance; The hidden wealth of the poor” The Economist, Nov 3rd 2005

“Millions for Millions” by Connie Bruck, The New Yorker, 30 Oct 2006

Session 12 -Corporations, Social Responsibility and Development

• 
  What will ultimately be the role of Corporations on development and the fight against poverty?
  
• 
  Is there a business case for a corporate engagement in the fight against poverty make a good
  
• 
  What type of regulatory framework, if any, to increase the pro-development impact of international business
  
  
  

“Corporate Social Responsibility: reinventing the meaning of development?” Blowfield, M. International Affairs 81 (3) 2005

“Globalization, Corporate Social Responsibility and poverty” Jenkins, R. International Affairs 81 (3) 2005

“The Link between Competitive Advantage and Corporate Social Responsibility” Michael Porter and Mark Kramer, Harvard Business Review 2007

“CORPORATE SOCIAL RESPONSIBILITY: Special Report” The Economist, Jan 17, 2008