Entrepreneurship in Emerging Economies

Learning Objectives:

Upon completion of this lesson, students will . . .

 Know what an institutional void is, and feel comfortable recognizing and
classifying institutional voids.
 Begin to understand some of the key elements of successful entrepreneurship,
particularly in emerging markets.
 Begin identifying how successful companies have filled institutional voids both in
emerging and established global markets, despite the challenges that many
emerging markets present.
 Understand the three core elements of the conceptual framework for world health
and how the framework applies to the health of specific populations.
Chapter 1: Characterizing the context of Emerging Markets

Institutional Voids

What are institutional voids?

In emerging economies, the institutional infrastructure to support market-driven
economies and provide basic services often falls short.   

Institutional development is a complex process, dependent upon specific factors related

to the historical, social, and cultural forces shaping the country or region in question.  

The most important factor in a market economy is the ability of buyers and sellers to find
one another and complete transactions as seamlessly as possible.  Institutional voids
are the gaps that exist in specific markets that serve as roadblacks to the ideal
interactions and transactions of buyers and sellers.

Institutional voids come in a variety of forms: absent or unreliable sources of information

related to the market as a whole, uncertain regulatory or intellectual property regimes,
and inefficient judicial apparatus are just some possible examples.  

Although institutional voids are palpable impediments to effective transactions and the
proliferation of beneficial services (such as reliable healthcare), they are also
opportunities for entrepreneurial interventions.

(insert two videos)

The Importance of Context

In the next several examples of institutional voids and entrepreneurial attempts to
fill them, a theme that will reoccur is the importance of context. The unique institutional
context of a market determines the ways in which an entrepreneur can intervene, and to
a great extent, also determines the success or failure of a particular strategy. 

Within a given market, there may be a number of appropriate interventions and

opportunities, including: 

 Replicate or adapt an existing business model in that market.

 Collaborate with domestic partners or go it alone.
 Navigate around that market’s voids – or actively try to fill them.
 Enter the market now or look for opportunities elsewhere.
 Stay in or exit the market if current strategies are not working  . 

Ps: Please keep these various potential strategies and the importance of a precise and
nuanced understanding of market contexts in mind while working through this module,
and the remainder of the course materials as a whole.
Institutional Voids in the Context of Health

In the following videos, you will be introduced to a variety of ways in which

institutional voids can impact healthcare. Though there are many domains in emerging
economies in which an entrepreneur might focus (technology, tourism, etc.), one
domain that is particularly ripe for entrepreneurial intervention is healthcare.  This
course uses healthcare frequently as a key focus for understanding entrepreneurial
engagement.

As Professor Khanna will demonstrate, institutional voids are gaps, inefficiencies, or

dysfunctional elements within markets that prevent potential buyers and sellers from
making a transaction.  When extrapolated to the healthcare and health services
landscapes, these institutional voids can be matters of life and death. In any
marketplace, identifying institutional voids is the first step toward effective
entrepreneurial intervention. When it comes to entrepreneurship in healthcare, these
interventions can also be significant drivers toward the public good and positively alter
the health of a society.  

(Insert video)

Video Transcript: The problems don't stop there. There are many institutional voids that
complicate the appropriate delivery of health care. I'm going to stick with the imagery of
my needing to find a doctor to treat me for some condition that I've just found that I had.
Let's say that I even found the doctor. Once I go to see her, how do I know that the
facilities within which she's operating are basically kept clean? How do I know that the
sterilization that should be there in the environment in which I'm seeing the doctor is
appropriate-- something as basic as that? Of course, you'll find people running around.
Labor is cheap in many developing countries. You'll find people running around cleaning
things. But the most basic things-- maybe their hands won't be sterilized themselves. I
don't have any ability to ensure that the facility in which I'm being treated is adequately
maintained. And there's no reassurance that that's the case. A version of that would be
how do I know that the materials that are being used, the equipment that's being used,
the consumables that are being used, the medicines, the drugs are appropriate? How
do I know that they're not pirated? How do I know that they haven't been adulterated?
You can easily imagine that a variety of health care providers could make a fair amount
of money by adulterating the medicinesor by delivering fake medicines. And we know
from global intellectual property estimates, policing estimates, that the problem of piracy
and drugs is rampant. Now, I would hasten to say that I'm not implying for a second that
doctors are unethical or nurses or unethical in developing countries-- far from it. I think
they are heroes of our time. But it is the case that as a patient, I am going to be
sceptical and I am going to come in with a view to saying, how do I know that what you
are using to treat me is appropriate, that the facilities in which you've treated me,
particularly if it's an operating room type of setting for a minor or even, God forbid, a
major surgery, how do I know that it's been maintained in the right way? Now, again, in
my backyard here in Boston, I would have complete reassurance. The penalties for
somebody adulterating drugs or misrepresenting the chemical composition of something
that they're about to put into my body are so severe and the adjudication mechanisms
available to me if I have a dispute or something, god forbid, goes wrong with me are so
well established, that I think even somebody who was inclined to behave ethically would
think twice, thrice, 10 times over before he or she did something like that. So there are
mechanisms here that protect the patient, reassure the patient, and therefore make it
much more likely that their health transaction will occur. Those mechanisms are missing
in most developing countries or are inadequately developed. Even if there are rules on
the books, they're not adequately enforced and maintained and updated and so on.
There isn't a machinery that exists to do all that. And that, again, is an institutional void.
Remember, I spoke about information being missing that prevents the doctors and
patients from finding each other? You also have this basic problem of ensuring the
sanctity of that health transaction. That when that transaction occurs, when I go and pay
for services or receive services, receive medication, I need to be reassured that that
transaction is happening the way it's supposed to be happening. I need to be reassured
that the drugs that I'm taking are doing what they're represented to be doing. And I also
need to be sure that if something goes wrong, that I have a redress mechanism, an
adjudication mechanism, someone that I can go to, a regulator, an ombudsman, a
patient's advocate,

something like that. These are all things that exist in my backyard here in Boston. But
they don't exist in other parts of the world. And that, again, is a collection of institutional
voids that complicate this transaction.

Recognizing Institutional Voids

  Institutional voids are impediments to a thriving market economy and cannot
simply be mandated away. It takes a substantial amount of work, expertise, and time for
gaps in infrastructure and intermediaries to be recognized and addressed.

Spotting institutional voids thus provides a crucial jumping off point for assessing
business opportunities, market conditions, and risk. But how does one begin to
recognize institutional voids?

Activity in any economy is driven by three primary markets: product, labor, and capital.

Institutional voids can be found in any or all of these markets in developing countries.

As Professor Khanna will continue to elucidate in subsequent videos, the key to

identifying an institutional void, and thus an opportunity for entrepreneurial intervention,
is to find out which market institutions or structures are missing and which are
dysfunctional or inefficient.

The Challenge of Training

 Institutional voids are a site for entrepreneurial opportunity in emerging

economies. Once entrepreneurs have identified a particular institutional void, what can
they do to address it? How do entrepreneurs begin to bring buyers and sellers together?
The following videos discuss these questions.

(Insert two videos) re: training part 1 and 2

People and Concepts mentioned in the video

Dilip Harel Mitra Chenoy (1958- ) is the Managing Director & CEO of the National Skill
Development Corporation (NSDC). Prior to NSDC, he was associated with
Confederation of Indian Industry (CII) for 19 years and served as the Regional Director
for Southern Region.

National Skill Development Corporation (NSDC) is a public-private partnership to fulfill a

growing need in India for skilled workers across sectors. It provides funding to build
scalable, for-profit vocational training initiatives and support systems such as quality
assurance, information systems and training academies. A goal of the organization is to
improve skills and provide continuing education for 500 million Indian people by 2022.
Aspiring Minds is a for-profit social enterprise, which uses scientific and credible
approaches for measuring talent and then matching skillsets with workforce or
educational opportunities.

Assignment: What is the difference between NSDC and Aspiring Minds? What are the
benefits and drawbacks of each approach? Which solution do you think addresses the
institutional void most adequately? Can you think of another way of addressing the
healthcare certification institutional void? Or, can you think of a way that you could
augment or expand the NSDC or Aspiring Minds, such that they became more effective
and filling the healthcare certification institutional void?

Combating Corruption
Combating corruption is an important example of how entrepreneurial solutions
can tackle systemic institutional inadequacies. Corruption is one of the main issues
faced by emerging economies. 

The reason to focus on corruption is not just because of its ambient importance, but
because it highlights two aspects of the course that we should attend to throughout all
the sessions.

1)  One needs to understand the institutional structure of the economy to understand
how to solve its problems. Corruption is a response to specific institutional factors.
Entrepreneurs must be responsive to corruption from an informed institutional context.

2)  The example of corruption emphasizes how entrepreneurs, or other individuals, can
make progress combatting even the most severe problems in a society. Transformation
is possible even for an issue as big, difficult, and complex as corruption.

(insert video)

The Economic Cost of Corruption

Corruption can be extremely costly in terms of money and morale.

The following are examples of 4 infamous corruption scandals in India, and what they
cost its economy:

1.   2012 National Rural Health Mission Scam ~ $2 billion

2.   2012 Karnataka Wakf Board Land Scam ~ $36 billion

3.   2012 Coal Mining Scam – “Coalgate” ~ $33 - $190 billion

4.   2010 2G Spectrum Scam ~ $30 billion

These scandals illustrate the vast financial scope of the problem!

Since financial corruption is by nature underground, unregulated, and evasive of

detection, accounting the true extent of the problem is difficult. Here is one estimate
from the Indian Finance Ministers 2012 White Paper on Black Money: 20% of India’s
GDP from the 1970s-1980s was part of a shadow economy. A World Bank Study of 162
Economies estimates that untaxed, illicit, shadow economies traded in the equivalent
of 30% of GDP from 1997-2006.  
What can one person do to challenge corruption?: The Aam Aadmi Movement

The Aam Aadmi movement is one example of an entrepreneurial intervention into

the widespread and costly problem of corruption. Aam Aadmi means “the common
man.” What can an individual do to address the problem or corruption? The
entrepreneurial work of Anna Hazare provides one compelling example.

Anna Hazare is a man from a small town in the state of Gujarat in western India. He
came to prominence after occupying the main thoroughfares of the capital city of New
Delhi, and he mobilized tens of thousands of people to come out and protest against
corruption. He organized a series of fasts and acts of non-violent resistance. A team of
supporters gravitated to his cause, motivated in part by the Gandhian resonances of his
public persona. The media branded Hazare's supporters “Team Anna.”

The chief goal of these protests was to compel India's parliament to adopt new anti-
corruption legislation. Although Hazare served as the figurehead, this outburst of public
support was merely the latest in a long line of entrepreneurial interventions seeking to
combat corruption.

Another Man's Approach to Fighting Corruption in Africa: The Mo Ibrahim Prize

for Achievement in African Leadership

Mo Ibrahim, an African
communications billionaire, created the Mo Ibrahim Foundation to encourage better
governance in Africa. In 2007, he initiated the Mo Ibrahim Prize for Achievement in
African Leadership, to award a prize of $5 million and an annual sum of $200,000 (for
life) to African leaders who prioritize the security, health, education, and economic
development of their people and who democratically relinquish power to their
successors. To date, he has given only 3 prizes, in 2007 (Joaquim Chissano of
Mozambique), 2008 (Festus Mogae of Botswana), and 2011 (Pedro Pires of Cape
Verde). What accounts for the inability to find worthy prize winners the other years? It is
possible that this seemingly large sum of prize money is small in comparison to the
money to be gained through corrupt practices and methods.

ADDITIONAL RESOURCES

These additional resources provide more details regarding the state and scope of
corruption in India:

India's Black Market Organ Scandal Time (2008)

Corruption: An Epidemic of Epic Scale by Siddharth Chatterjee, Huffington Post (2014)

Janaagraha: Curbing Corruption Through Citizen Empowerment Courtesy of The

Wharton School (2014)

Global resource for citizens to report bribes: www.ipaidabribe.com

Entrepreneurial Interventions

Transportation and Innovation

In the video below, Professor Khanna addresses another example of how an

institutional void is identified and addressed. Note how the entrepreneur of Dial 1298 for
Ambulance, Shaffi Mather, recognized this void as an opportunity for entrepreneurial
engagement, and how he created a solution to fill this void. After watching the video, try
to identify the factors that made Shaffi successful. What did he do differently (from state
ambulatory services) that allowed him to thrive?  

(insert video)

Dial 1298 for Ambulance

Launched on May 21, 2005, with technical and managerial assistance from the London
Ambulance Service and New York Presbyterian EMS, Dial 1298 for Ambulance is an
entrepreneurial healthcare venture aiming to provide fully equipped life support
ambulances to all of India. In order to make the service available to all, Dial 1298 for
Ambulance offers a multi-level differential pricing strategy; private hospital patients are
charged while government/municipal hospital patients are subsidized. Free service is
provided to victims of road accidents and mass casualty incidents in both Mumbai and
in Kerala.

(watch video) Shaffi Mather: A new way to fight corruption

Assignment: How did Shaffi's "Dial 1298 for Ambulance" differ from the government or state's
ambulatory services? Why was he successful?  Evaluate Shaffi's unique pricing structure. What
are the pros and cons to his pricing strategy? Do you consider this to be a successful business
model? Why or why not? What would you change about it? 

Alibaba and Taobao Villages

Introduction to Taobao Villages

China is in the midst of an economic revolution. In the past decade the economy
has begun transitioning away from manufacturing, construction, and heavy industry and
towards information technologies, services, and green energy. China is becoming
connected. More people now are networked by trains, planes, and cellphones than ever
before. China is also coming online. In 2011, 420 million Chinese had internet access.

In the following videos, Adam Frost, a doctoral student in History and East Asian
Languages at Harvard University, discusses the emergence of Taobao villages in rural
China. As you watch these videos, please think about the way in which the institutional
voids framework introduced in the previous sections can help us to understand the
emergence of these innovative connections between rural economies and the global
digital marketplace.

(insert video)

Alibaba and Taobao Villages

Taobao.com is a consumer-to-consumer marketplace that allows individuals and

businesses to buy and sell goods through a central online platform (similar to Amazon
or Ebay). It is run by the Alibaba Group, a retailer specializing in e-commerce in
Chinese-speaking areas of the world.
 The Rise of Taobao

(insert video)

Assignment: For an in-depth study of the battle between Taobao and eBay for
supremacy in China, please this free-of-charge case study from the Stanford Graduate
School of Business, "Taobao vs. Ebay China," by William Barnett, Mi Feng, and Xiaoqu
Luo.

Watch: Jack Ma with Charlie Rose at the 2015 Davos World Forum

Taobao Villages

What is a Taobao Village?

As defined by AliResearch, Alibaba Group’s research arm, a Taobao Village is a cluster

of rural e-tailers within an administrative village where:

1. Residents got started in e-commerce with the use of Taobao Marketplace;

2. Total e-commerce transaction volume is at least RMB10 million per year ($1.6
million);

3. At least 10% of village households actively engage in e-commerce or at least 100

active online shops have been opened by villagers.

As of the end of 2015, the number of Taobao Villages identified in China grew 268%
year-on-year to 780, compared with 212 as of the end of 2014 and 20 as of the end of
2013. Those 780 villages, where there are more than 200,000 active online shops, span
17 provinces and municipalities. The coastal provinces of Zhejiang, Guangdong and
Jiangsu accounted for the biggest number of Taobao Villages. Meanwhile, seven
provinces and municipalities made the list of Taobao Villages for the first time in 2015.

The Future of Rural E-Commerce

(insert video)

Assignment: Do you see analogs to the emergence of Taobao villages in your own
region? What forms of local and global entrepreneurship have arisen in the wake of
increased internet connectivity?

Conclusion to Lesson 1

In Lesson 1, we introduced you to the concept of institutional voids in emerging

economies. We likewise emphasized that institutional voids can either be seen as
barriers to entrepreneurial activity or catalysts for entrepreneurial innovation.

For instance, in the example of Dial 1290 for Ambulance, we saw how a former obstacle
(patients, i.e., the "buyer" could not connect with doctors, i.e., the "seller" due to lack of
transportation). However, this obstacle was transformed through a novel entrepreneurial
solution that connected these parties and promoted a social good. We saw, too, how
challenges in standardizing training (via Aspiring Minds), in battling corruption
(via Janaagraha), and providing access to goods in remote geographies (via Taobao
villages) were surmounted by savvy individuals who possessed both an awareness of
cultural context and a lot of ingenuity.
The purpose of this lesson was to introduce you to series of cases that posed seemingly
insurmountable obstacles to entrepreneurship (corruption, lack of standardization,
restricted access to goods), but to introduce you to effective solutions that used
these purported "obstacles" as entrepreneurial opportunity.

In Lesson 2, we will provide you with a larger case study and go into greater detail
about an institutional void that was addressed in the healthcare sector in India.
Professor Khanna will describe a vexing problem in Indian society, and detail how one
of his friends and colleagues, Dr. Devi Shetty, created a novel entrepreneurial solution
to address this problem.
Lession 2: Achieving the Impact of Entrepreneurship

Achieving Impact at Scale through Entrepreneurship: 

Tertiary and Primary Healthcare in India and Mexico

Background: The world is facing a rise in chronic disease (cardiovascular, diabetes,

cancer, mental health), risk factors (e.g., smoking, obesity) and injuries (e.g.,
unintentional, such as road traffic accidents, and intentional, such as suicide and
conflict). In the vast majority of the countries of South Asia, this rising burden of chronic
disease compounds other difficult factors such as persistent infectious diseases and
malnutrition, creating a "double burden." Other emerging markets are also experiencing
new problems related to the global transfer of health risks across national borders,
ranging from trade of tobacco, alcohol, and illegal drugs, to the spread of unhealthy
lifestyles, such as smoking and fast food consumption. Given many of the common
features of chronic diseases (long latency, shared risk factors, opportunities for
prevention, chronicity requiring ongoing care, etc.), there is a range of opportunity for
entrepreneurial contribution.

In advanced economies, there is typically a seamless exchange between buyers and

sellers. In other words, advanced economies do not experience institutional voids in the
same way developing economies do. For example, if a patient needed to find doctor to
do a surgery, the patient would go to his primary care practitioner to give him a referral
to a specialist. Alternatively, if the patient knew what services he needed (for instance,
he knew he needed a root canal), he could look up specialists (such as an endodontist)
in his area on the Internet and try to find someone to treat him. Moreover, in advanced
economies, a patient can easily transition between primary care (i.e., care given by the
patient's general practitioner, or PCP) and secondary or tertiary care (i.e., care given by
a specialist, to whom the patient is typically referred).

In an emerging economy, however, the infrastructure that links the patient in need to a
specialist is absent. A patient may not have a reliable or consistent PCP who can
address the patient's concerns, and who could diagnose and refer patients to a
specialist, if need be. Alternatively, even if the patient has a PCP and who can diagnose
or refer a patient to a specialist, these specialty services might not be offered in the
patient's area, or the service could be unaffordable. These institutional voids make the
transaction between patient (buyer) and doctor (seller) challenging. However, and as
you will learn in this course, every challenge is also an opportunity for entrepreneurs to
create solutions for these gaps.

Overview and Structure of the Lesson: This lesson will familiarize you with novel

approaches to providing healthcare in remote and underserved areas using two
examples: the Narayana Heart Hospital in India and Farmacias SImilares in Mexico. In
the first part of this module, Professor Khanna introduces you to the enterprising work of
Dr. Devi Shetty and the Narayana Heart Hospital. You will learn how a new approach to
surgery successfully filled a number of institutional voids related to tertiary care in India,
namely one that aims to combat a particularly important cluster of chronic diseases. In
the second part of the lesson, Professor Michael Chu will introduce you to Farmacias
Similares, a business created to address rising healthcare needs for the population of
Mexico. By combining process innovation and the power of operating at scale, both
examples model how large challenges can be surmounted in the healthcare sector. 

Opportunities for Reflection: We introduced a series of small case studies in Lesson

1. The purpose of this lesson was to introduce you briefly to particular institutional voids
that were identified and tackled. We wanted to illustrate that, while institutional voids
can be considered challenges to a thriving economy, they can still be seen as
opportunities to build a more robust market. In Lesson 2, we introduce you to two very
detailed examples of this process. In the case studies that follow, try to identify the
 institutional voids that existed prior to the entrepreneurial interventions we detail. How
did Dr. Shetty and Farmacias Similares address these problems? Moreover, think about
whether these solutions are context-specific. Could these models be implemented in
different countries at the same scale? 

Note: In addition to watching the videos below, it is recommended that you read the
Narayana Heart Hospital Case Study before answering the discussion questions at the
end of this lesson.

READINGS FOR THIS LESSON

Gawande, Atul. "Big Med" from the New Yorker (2012)

Capps, Robert. "The Good Enough Revolution" from Wired (2009)

Berman, Peter. "More Money, More Health? An Indian Tale" in Health and South

Asia, pgs. 7-11 (Harvard South Asia Institute, 2013)

Mor, Nachiket. "Healthcare Financing in India" in Health and South Asia, pgs. 35-

39 (Harvard South Asia Institute, 2013)

Learning Objectives

Upon completion of this lesson, students will . . .

 Distinguish between the scale effects and the learning effects of expansion.

 Recognize the costs and benefits associated with vertical and horizontal
expansion.

 Understand the specific challenges posed by different funding models.

 Gain additional practice in recognizing the institutional voids that need to be filled
in emerging markets.

 Describe different ways to tackle chronic diseases, from both within and outside
the health sector.