Western work experience to thank for Indian investment boom
29 Jan 2015
London Business School expert studies top bosses trained in the UK and US
Indian companies are investing in the UK and the US thanks in part, to the business education and work experience their CEOs have had in the West, according to a London Business School marketing expert.
New research by Rajesh Chandy, Professor of Marketing, London Business School, Sourindra Banerjee, Warwick Business School and Jaideep Prabhu, Cambridge Judge Business School, challenges the conventional wisdom that India is suffering a “brain drain”.
The authors, who compared the international growth in developed markets of 116 Indian firms with 160 UK firms, find that in fact knowledge and experience gained in the West is being taken back to India. And, as the Indian firms expand, CEOs are investing back into the countries where they studied or worked: mostly the UK and the US.
Professor Chandy explains: “Indirect learning is an important factor in explaining the international growth of emerging-market firms in developed markets. Among the bosses of top Indian companies who have been educated in the UK or the US are: Cyrus Mistry, Chairman of Tata Group who studied at London Business School and Imperial College London, Kumar Mangalam Birla, Chairman of the Aditya Birla Group, who studied at London Business School, Ratan Tata, former Chairman of the Tata Group who studied at Cornell University and Harvard Business School and Ness Wadia, MD of Bombay Dyeing, who studied at Tufts University in the US and the University of Warwick.
“Our study finds that managers of Indian companies who studied in the West are far more likely to be successful cracking the developed markets than those who did not. While here they grow their networks, their knowledge of the competition, an understanding of western customer demand, and a better appreciation of opportunities in the market.”
The paper ‘Indirect Learning: How Emerging-Market Firms Grow in Developed Markets’, published in the Journal of Marketing, has important implications for policy makers.
First, policy makers in emerging markets should be careful about obstacles that may prevent citizens from studying in developed markets. Some policy makers in emerging economies believe that allowing citizens to study and work in the West results in brain drain, and is thus to be discouraged. Exit restrictions and emigration controls have been mooted as potential policy instruments. Instead, this research suggests that emerging market leaders might even encourage their citizens to study overseas, by providing them with scholarships, increasing the availability of loans, and removing foreign exchange restrictions on spending overseas.
Second, policy makers in the West should view foreign students not just through the lens of immigration, but through the lens of investment and growth. Today’s foreign students will be some of tomorrow’s trade and investment partners – unless short sighted visa policies alienate them or keep them away.
And what of the implications for firms in the UK and the US? Well, they should keep their eyes on the competition: leaders with a developed-market education and an international network, who operate in industries with developed-market competitors and compete domestically with firms who have experience in developed markets.
“These firms”, Professor Chandy concludes, “are those most likely to pose serious threats to firms in the UK and the US”.