Getting More Global, With a Fresh New Focus

Johnson’s new Emerging Markets Institute strengthens its position
as a power player among top schools of management.

By Linda Brandt Myers

And for good reasons. They offer extraordinary investment opportunities.

On August 16, 2010, Bloomberg News reported that China had overtaken Japan to become the second biggest economy in the world, with a gross domestic product (GDP) for the second quarter of the year at $1.337 trillion. The news story cited a prediction from Goldman Sachs’ chief economist that the country would actually surpass the United States by 2027.

And on September 8, 2010, Business Week cited predictions by Goldman Sachs strategists that “faster economic expansion and growing capital markets may lift emerging nations’ share of world equity capitalization from 31 percent today to 55 percent by 2030.”

“Asked which will be the most attractive region over the next three years, Ernst & Young’s panel of 809 international business leaders puts China and Central and Eastern Europe in first place,” notes Elena Iankova, lecturer in international business at Johnson. “India ranks third, followed by Russia, Western Europe, and Brazil,” she says.

And Kun Chen, MBA ’11, president of the Greater China Business Club at Johnson and a summer 2010 intern at Johnson & Johnson Pharmaceuticals in China, recalls: “The general manager there told me: ‘No one can say no to a market like China, with a GDP that grows at 8+ percent a year.’”

But that’s only part of the story.

“Our students were telling us they wanted more global exposure, and the companies who hire them were saying they wanted people with more in-depth global experience,” says Randy Allen ’68, whose responsibilities as associate dean for international and corporate relations include global strategy and initiatives. “We already had faculty with global research interests, but we wanted to strengthen that.”

Greater Global Presence

Enhanced global programming, curriculum, and presence were featured priorities in one of six major initiatives in the school’s 2008 Strategic Plan, Allen points out. The school already had done a lot, including more overseas internships, study tours, EMBA global projects, and MBA exchange programs — many in emerging-market countries. The only pieces of the puzzle that seemed to be missing were a strategy and a program that tied all those efforts together.

“We wanted to leverage our resources to create a much more powerful learning experience,” says Professor Doug Stayman, associate dean for MBA programs.

The first order of business was to recruit two senior faculty of prominence whose research and teaching interests were international and who wanted to help shape a new international institute of some kind.

Following an intensive search, Andrew Karolyi, a financial economist from Ohio State University, and Ya-Ru Chen, an organizational behavior specialist from Rutgers, accepted tenured faculty positions, arriving in fall 2009.

“Andrew and Ya-Ru are both terrific,” asserts Professor Mark Nelson, associate dean for academic affairs when Karolyi and Chen were hired. “They are great researchers and teachers, and their international expertise is exceptional. They are absolutely the right people to build our new global institute, and we were excited when they chose to come here.”

On the surface the two seem worlds apart — Karolyi studies international markets and Chen looks at how power and status vary across cultures. But they both radiate energy and enthusiasm for the task at hand, which is one reason they make a powerful team.

Chen sees their differences as a strength. “We’re a unique combination, which speaks to the kind of interdisciplinary focus and cultural value that Johnson has. A lot of business schools like to talk about that approach but they don’t really do it. Here we do it, and I think it’s fantastic.”

One commonality: they are both believers in empirical data to back up research claims. That was the approach they used with their ambitious and probing yearlong study, undertaken with Allen, on how international business is taught at Johnson and its peer institutions, and what is needed here in light of the changing global business environment.

A Surprise Advantage

“We did our due diligence,” says Karolyi. Their efforts involved “some serious brainstorming” with students, faculty, alumni, and staff, collecting stacks of relevant data, and looking critically at what 20 top business schools, including Johnson, were doing that was, and wasn’t, working.

Their most surprising discovery?

“Although there’s an increasing demand for knowledge about emerging markets, we found that no top business schools had centers devoted to the study of emerging markets in a major way,” says Chen.

“A lot of our peers were doing a lot of international things, but not in a really cohesive, coordinated way,” Karolyi comments. One reason: Many peer MBA schools had launched CIBERs [federal government-sponsored Centers for International Business Education and Research] as far back as 20 years ago. Because they then needed to meet government objectives “their role as CIBERs was forcing them to be diffused, to be all and do all, but not focus in any special way,” he explains. That awareness led Karolyi, Chen, and Allen to embrace a more focused approach, with emerging markets as the focal point. “We asked ourselves, ‘How can we take advantage of our opportunity here?’” says Karolyi.

The term “emerging market” was coined in 1981 by Antoine van Agtmael, a former World Bank executive, who was looking for a way to encourage investments in those developing countries that had low GDP but high growth — that were, in essence, on the path to becoming “economic powerhouses,” says Karolyi. Overlooked back then as investment opportunities, they are now center stage, he says.

One of a kind

“We homed in on emerging markets as our international strategy for these reasons,” says Karolyi. “They are the hottest growth enterprise on this planet right now. They are topical, timely, and distinctive – no other peer institution is studying them in a major way. There’s a great demand for knowledge about them. And we discovered that creating an institute on emerging markets fits beautifully within the Cornell tradition of outreach.” The university has had “a positive presence for decades” within many of the countries that now have emerging economies, he notes. Earlier programs have sought to improve medical care, agricultural output, nutrition, and water quality in primarily poor countries, adds Allen.

“Emerging markets made sense for us,” Allen says. “A lot of our students and alumni are interested in them, so are a lot of businesses, and a lot of our faculty are already doing research on them. Thirty percent of our students are international, and some of our alumni base from India, China, and Latin America are starting to go back to their home countries and participate in their economies.”

The concept for an emerging market institute won out over the idea for a center on a particular country, which was also considered, because: “Some specific geographic areas may fade in interest over time, but there will always be emerging markets.” Allen says.

On September 3, 2010, Johnson faculty unanimously approved the proposal presented by Karolyi and Chen to launch the Emerging Markets Institute, the first of its kind at any leading business school.

Rave Responses

“The Emerging Markets Institute and related courses will help students be much more focused and better prepared to work successfully in the changing global environment,” says Kun Chen.

Advisory council member Nell Cady- Kruse, BS ’84, MBA ’85, called the institute “the right idea at the right time.” Based in Hong Kong, Cady-Kruse has overseen Credit Suisse’s risk management function in the Asia Pacific region since 2005. She says: “One cannot overstate how dramatic the pace of change is here and how important it is to understand the implications. The institute will not only enhance teaching and research about emerging markets, but will give firms like mine unparalleled opportunities to recruit students with excellent credentials.”

Neel Lakhani, MBA ’07, MILR ’08, an associate with Booz & Company in Dubai who does strategic consulting in the Middle East and Africa, commented: “Knowledge of emerging markets is critical to doing business these days, and its importance is only likely to increase. The new institute’s plan to produce empirical research on the subject, something which has been relatively limited elsewhere so far, will make a difference not only for the school but for the way companies do business.”

And Bob Staley ’58, MBA ’59, retired chairman of Emerson Electric Asia-Pacific, and vice chairman, Emerson Electric Company, observed: “At Emerson, I learned that understanding different business cultures is a key to success. This new institute will give tomorrow’s business leaders a good exposure to, and understanding of, the global markets that their firms serve, particularly the fastest growing ones — the emerging markets.”

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