Published:February 21, 2007Authors:George C. Lodge and Craig Wilson

As Ban Ki-moon begins his tenure as secretary-general of the United Nations, the world's poor continue to cry out for help and hope.

One-sixth of the world's population lives in "deep poverty"—generally defined as surviving on half or less of the annual income of those at a nation's poverty line. And yet, more than a trillion dollars has been spent by bilateral and multilateral organizations since World War II to try to alleviate this problem.

The funds that were supposed to help improve people's lives have often been lost to governments that lack either the desire or the ability to reduce poverty within their borders.

Several years ago, world leaders gathered in Monterrey, Mexico, and gave poverty reduction top priority. They committed themselves to halve the number of people living on less than $1 a day by 2015. They realized that poverty is the seedbed of terrorism and the spur to migrants hammering at the gates of Europe and America.

But the goal of poverty reduction will not be reached unless the world tries something new.

It is clear from the experience of countries that have been most successful in reducing poverty—Japan, China, Singapore, South Korea, and Botswana, for instance—that the creation of profitable businesses is the key. They provide the jobs, income, and motivation for education and individual development that raise standards of living.

Small- and medium-sized domestic operations have created most of the jobs. But globalization has meant that for a local business to flourish, it must invariably be connected to world markets, credit, and technology. That's why multinational corporations must play a critical role.

If the world's large corporations really are the greatest drivers of wealth creation, there needs to be a way to bring their capabilities and resources to those countries and regions where they are now absent.

It is also essential to minimize the risk, make their investment profitable, channel it so that it has a maximum impact on poverty, and make it legitimate in the eyes of the world.

Here's where Ban and the United Nations can play a part.

To leverage the multinationals' power and reach, we propose establishing a World Development Corporation that would be formed and managed by a partnership of these corporations in cooperation with nongovernmental organizations and the United Nations.

This development corporation would be nonprofit, but its task would be to identify and design profitable projects in poor countries in which teams of multinationals would collaborate with local partners.

In its early stages, a typical project would have to be commercially oriented and driven by private funds, though public funding from development banks or foreign aid agencies would help.

The development corporation could proceed experimentally with a small staff, focusing specifically on those countries or regions that have received little or no direct foreign investment. It would bridge the gap that now exists between multinationals and other development agencies, as well as facilitate cooperation between these business and NGOs.

The case for corporate support

There are many reasons why far-sighted executives should be interested in supporting the concept of a World Development Corporation.

The idea that corporate legitimacy stems from the satisfaction of shareholders and competition to serve consumer desires is now insufficient. Fulfillment of community needs such as clean air and human rights is every bit as important.

This concept offers multinationals a mechanism to do well with minimum risk and maximum efficiency. It also provides them with a means to improve political stability in potentially volatile territories.

The prospect of Chevron Texaco's multimillion dollar investment in Kazakhstan, for example, is threatened by poverty in that country's rural areas. A World Development Corporation project to rehabilitate agriculture after the collapse of the Soviet-subsidized collectives would help build stability by raising incomes and giving people a stake in a more promising future.

Our research also shows that many multinationals find that their activities in regions struck by poverty act as powerful magnets for attracting bright young managers. Finally, these types of projects would offer businesses access to local partners and opportunities in developing nations that could benefit their future activities.

There is growing evidence that companies that have innovated to ensure effective environmental safeguards, greater eco-efficiency, better organizational health and safety, and improved cultural protections have benefited from better political support and higher profits. The same will be true of companies that play an explicit role in the alleviation of poverty.

Creating a World Development Corporation will contribute greatly to making that happen.

About the authors

George Lodge, a professor emeritus at Harvard Business School, and Craig Wilson, Executive Director, the Foundation for Development Corporation, Australia, are coauthors of A Corporate Solution to Global Poverty: How Multinationals Can Help the Poor and Invigorate Their Own Legitimacy (Princeton University Press).

Pollutant-filtering plants embedded into paving stones are set to change the skyline in the Bronx

On Monday, the country's two satellite radio services -- Sirius and XM -- announced that they had finally agreed to merge. The move raises a number of questions, not the least of which is whether they can get this deal approved by the Federal Communications Commission and the Justice Department. But regulatory issues aside, what prompted these two archrivals to embrace each other, what do they expect to get out of it, and what does a combined company mean for consumers who currently pay a subscription fee of $12.95 a month? Knowledge@Wharton asked for comments from Wharton marketing professor Peter Fader, whom we talked with first, and business and public policy professor Gerald Faulhaber.

Special Report from Knowledge@Wharton

Some media reports called it a Valentine's Day gift to Wall Street. When Federal Reserve chairman Ben Bernanke appeared before Congress on February 14 and 15, he gave an upbeat view of inflation and the economy, setting off a strong rally in stocks. The Dow Jones industrial average rose 87 points to 12,741.86. Bernanke told Congress that the economy seems to be moving to a slower but more sustainable rate of growth, which suggests that the Fed will hold short-term interest rates steady at 5.25%, where they have been since last summer. Will stocks continue to perform strongly? Knowledge@Wharton talked to Wharton finance professor Jeremy Siegel, who predicted in his last podcast that the Fed was unlikely to raise interest rates anytime soon.

All companies, from major multinationals to start-ups, face a common challenge: how to keep growing. These firms find it difficult to sustain growth because they become risk averse, opting for safer incremental product and service improvements instead of more rewarding, but riskier, major initiatives, according to a study by Wharton marketing professor George S. Day. Companies, Day says, need to better understand the risks inherent in different levels of innovation and achieve a balance between BIG I innovation and small i innovation.

For months, the steady drip of news about troubles in the subprime mortgage market didn't seem too bad, and many economists started to feel reassured about the health of the general housing market. But now some experts wonder whether those feelings of reassurance came too soon. Some suggest that the growing number of borrower defaults in the "aggressive lending" market, which includes various types of risky mortgages besides subprime loans, could shock the broader housing market and economy after all.

Stephen A. Schwarzman, CEO and co-founder of The Blackstone Group, was doing sit-ups and watching CNBC when he suddenly heard his name mentioned on air. It was a signal to him that the private equity business had gone "into a weird zone of visibility." Schwarzman, David A. Brandon, chairman and CEO of Domino's Pizza, and Timothy Draper, the Silicon Valley venture capitalist, examined the recent explosion in private equity deals and discussed its impact on business and investors at the recent Wharton Private Equity and Venture Capital Conference.

It sounds like something from a futuristic TV thriller: American spies thwarting a terrorist plot through a shared online community modeled after Wikipedia, the free user-created, web-based encyclopedia. But Anthony D. Williams, co-author of the new book, Wikinomics: How Mass Collaboration Changes Everything, recently told a conference at Wharton's Mack Center for Technological Innovation that this online community of spies already exists -- along with a host of other activist-oriented web sites that are changing the rules of the global economy.

Imagine paying for your car only when it works. Or your television. Or even your high-end toaster. That might sound far-fetched, but it could be the future model for purchases requiring service over time. According to research by two Wharton professors of operations and information management, Morris Cohen and Serguei Netessine, and doctoral student Sang-Hyun Kim, this new approach to service supply chains is already reshaping customer-supplier relationships in defense and aerospace contracting under the name "Performance-based Logistics" (PBL). It could have implications for certain retail sectors as well.

ARE YOU READY TO MASTER USER EXPERIENCE?!

Sorry, I’m getting a little carried away. But I’m excited because we’re be launching our newest set of workshops, Adaptive Path’s UX Intensive. April 23-26, in Chicago.

We’ve realized there’s little valuable training for people who have been practicing user experience for a while. Most of what’s out there is directed to an entry-level audience. UX Intensive is designed for the intermediate-to-advanced practitioner who needs to elevate their skills.

And we mean “intense.” This is our longest event ever — four full days, with each day providing a deep dive on a different subject: Design Strategy, User Research, Interaction Design, and Information Architecture. And these are taught by Adaptive Pathers who lead their respective fields:

• Brandon Schauer, who has presented on design strategy at numerous events
• Todd Wilkens, who rocked About, With, and For with his iconoclastic approach to design research
• Dan Saffer, who literally wrote the book on interaction design
• Chiara Fox, who cut her teeth at famed IA consultancy Argus Associates, and whose reports on IA are Adaptive Path bestsellers

You can purchase any combination of days (though most are signing up for all four).

In order to provide an optimal environment for learning, space is limited, so sign up soon. Registrations are discounted until March 16.

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As marketers endeavor to stay ahead of the curve in a fast-changing business climate, so do executive education programs that serve them. In a new article in the Journal of Business-to-Business Marketing, HBS professor Das Narayandas explains how Exec Ed is evolving to meet new demands and expectations.

Also new this week: a chapter about economic research on corruption; a paper on how local banks resisted pressure from national banks; and a case exploring the rise of the Indian conglomerate Tata & Sons and its pioneering spirit, J.R.D. Tata, who took the helm in 1938.

— Martha Lagace

Working Papers None this week. Cases & Course Materials Female Entrepreneurship in Developing Countries

Harvard Business School Note 807-018

Examines the extent of and challenges facing female entrepreneurs in developing countries. There are higher rates of female entrepreneurship in developing countries than developed countries, but necessity is often the main driver in lower income countries. Explores the challenges facing women arising from societal inequality, including lack of educational provision, and difficulties in securing funding.

Purchase this note:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=807018

Goodyear and the Threat of Government Tire Grading

Harvard Business School Case 707-494

In the spring of 1977, Goodyear CEO Charles J. Pilliod Jr. was looking at an internal report on government and legal events relevant to the tire industry. Two items caught his attention. First, he noticed that an industry suit to block the government's proposed system to rate tires on tread wear, traction, and temperature resistance had been rebuffed by a U.S. appeals court. Although the court found fault with the government's proposals, the ruling could mean that the tire grading system was close to becoming a reality. Second, Joan Claybrook, a former Nader consumer interest group lobbyist, had just become head of the National Highway Traffic Safety Administration, the agency within the government that was in charge of producing the rating system. Pilliod wondered if the regulatory events might affect Goodyear's ability to maintain its world leadership in the tire industry.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=707494

J.R.D. Tata

Harvard Business School Case 407-061

J.R.D Tata, Chairman of the Indian conglomerate Tata & Sons, played a significant role in building India's economic infrastructure. Under his guidance, Tata & Sons built locomotives, steel refineries, airlines, chemical plants, and technology-based enterprises. Inheriting his title as Chairman in 1938, at the outbreak of World War II, Tata was able to navigate his family-owned companies through the tumultuous political climate of India. He worked with British colonial officers, and later closely with several Indian leaders under both pro- and anti-business government regimes. Applying his family's values to the workplace, Tata & Sons helped revolutionize business practices in India. From instituting the eight-hour work day and paid leave to providing a retirement gratuity, Tata's policies created a standard to which other companies—and eventually Indian government regulators—measured themselves. Blending humane business practices with political savvy and a pioneering spirit, J.R.D Tata is remembered as one of India's most important and influential business leaders. Tata is an example of a 20th century business leader who applied contextual intelligence to a variety of businesses, dramatically changing the landscape of India's infrastructure.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=407061

Keggfarms (India)—Which Came First, the Kuroiler or the KEGG?

Harvard Business School Case 807-089

J.R.D Tata, Chairman of the Indian conglomerate Tata & Sons, played a significant role in building India's economic infrastructure. Under his guidance, Tata & Sons built locomotives, steel refineries, airlines, chemical plants, and technology-based enterprises. Inheriting his title as Chairman in 1938, at the outbreak of World War II, Tata was able to navigate his family-owned companies through the tumultuous political climate of India. He worked with British colonial officers, and later closely with several Indian leaders under both pro- and anti-business government regimes. Applying his family's values to the workplace, Tata & Sons helped revolutionize business practices in India. From instituting the eight-hour work day and paid leave to providing a retirement gratuity, Tata's policies created a standard to which other companies—and eventually Indian government regulators—measured themselves. Blending humane business practices with political savvy and a pioneering spirit, J.R.D Tata is remembered as one of India's most important and influential business leaders. Tata is an example of a 20th century business leader who applied contextual intelligence to a variety of businesses, dramatically changing the landscape of India's infrastructure.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=807089

Rwanda and the Thousand Hills Coffee Co.: Breaking New Grounds

Harvard Business School Case 807-004

Examines the strategies of a Boston-based start-up to market Rwandan coffee. Describes the history of the coffee industry, the era of cartelization and the International Coffee Agreement, and the subsequent collapse in producer prices after 1989. Also describes the various options open to coffee producers, including recartelization, diversification, fair trade, and selling to boutique markets, the strategy of the Thousand Hills Coffee Co.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=807004

Wireless Generation

Harvard Business School Case 307-049

Reflecting on an innovative joint venture that his company executed with a public school district in 2004, the CEO of Wireless Generation, a five-year-old, privately held educational technology company, is contemplating the company's product development strategy in 2006. Highlights the strengths and limitations of developing products for public sector organizations in markets created by legislation, as well as the opportunities and challenges of developing a product for mass distribution in partnership with one client. Also provides an overview of approaches to teaching literacy in grades kindergarten through third grade, as well as the assessment and accountability landscape in U.S. public education.

Purchase this case:
http://www.hbsp.harvard.edu/b01/en/common/item_detail.jhtml?id=307049

Publications Commentaries and Cases on the Law of Business Organization Authors:William T. Allen, Reinier Kraakman, and Guhan Subramanian Publication:2nd ed. Aspen Publishers, Inc., 2007 Abstract

In Commentary and Cases on the Law of Business Organization, this outstanding author team brings clarity and insight to the field of business organization, using economic analysis as a tool for understanding business structures and transactions.

A Discussion of "Letting the 'Tail Wag the Dog'": The Debate over GAAP versus Street Earnings Revisited Authors:Mark T. Bradshaw and Mark Soliman Periodical:Contemporary Accounting Research (forthcoming) Abstract

Abarbanell and Lehavy (2006) examine the effect of distributional properties of earnings and forecast data used by researchers who investigate 'Street' earnings. They perform a large number of analyses, and emphasize that care must be taken in using these data to draw inferences about the incentives and behaviors of managers, analysts, and investors. The authors highlight three features of the distributional properties of Street earnings data, which are that (i) differences between Street and GAAP earnings are large with asymmetric tails, (ii) a shift in the distribution of Street earnings occurred around 1991, and (iii) a large number of firm-quarter observations exhibit zero differences between GAAP and Street earnings. We first view the paper as a methodological paper, and discuss how the analysis contributes to similarly focused papers that address other streams of research. From this perspective, the cautionary message conveyed is very important. Second, we examine how the paper fits into the Street earnings literature. We arrive at less alarming conclusions than the authors about the degree to which prior research has not appreciated the limitations of empirical methods in permitting strong conclusions. Finally, we offer several observations on the implications of certain analyses in the paper. Overall, the authors are to be applauded for their efforts to maintain a high standard in empirical accounting research.

Corruption and the Demand for Regulating Capitalists Authors:Rafael Di Tella and Robert MacCulloch Publication:Chap. 12 in International Handbook on the Economics of Corruption, edited by Susan Rose-Ackerman, 352-80. Edward Elgar Publishing, 2006 Abstract

Economic research on corruption aims both to isolate the economic effects of quid pro quo deals between agents and third parties, and to suggest how legal and institutional reforms might curb harms and enhance benefits. In this comprehensive Handbook, top scholars in the field provide specially commissioned essays, both theoretical and empirical, exploring both types of research.

Learning and Equilibrium as Useful Approximations: Accuracy of Prediction on Randomly Selected Constant Sum Games Authors:Ido Erev, Alvin E. Roth, R. Slonim, and Greg Barron Periodical:Economic Theory (forthcoming). Special issue on Behavioral Game Theory Symposium. Abstract

There is a good deal of miscommunication among experimenters and theorists about how to evaluate a theory that can be rejected by sufficient data, but may nevertheless be a useful approximation. A standard experimental design reports whether a general theory can be rejected on an informative test case. This paper, in contrast, reports an experiment designed to meaningfully pose the question: "how good an approximation does a theory provide on average." It focuses on a class of randomly selected games, and estimates how many pairs of experimental subjects would have to be observed playing a previously unexamined game before the mean of the experimental observations would provide a better prediction than the theory about the behavior of a new pair of subjects playing this game. We call this quantity the model's Equivalent Number of Observations (ENO), and explore its properties.

Vive La Resistance: Consolidation and the Institutional Contingency of Professional Counter-Mobilization in US Banking Authors:Christopher Marquis and Michael Lounsbury Periodical:Academy of Management Journal (forthcoming) Abstract

In this paper, we investigate how competing logics facilitate resistance to institutional change. In particular, we examine how banking professionals resisted efforts of larger banks to expand their domains by acquiring smaller banks within individual communities. Drawing on a detailed community-level dataset of U.S. commercial banks, we show that in some communities, this resistance took the form of new community bank creation by local bank professionals. Our results show that acquisitions in communities lead to new bank foundings, and that this pattern is particularly pronounced when the acquisitions are by out-of-town banks and when there is a larger population of bank professionals. Drawing on historical evidence of tension between community and national banking interests, we argue that it was the effort of national banks to introduce a national logic of banking, emphasizing the efficiencies of geographic diversification, that triggered new forms of professional entrepreneurialism to preserve a community logic of banking and maintain local control banking infrastructures. We discuss how our study contributes to the emerging synthesis of ecological and institutional perspectives, entrepreneurship, and our understanding of resistance to institutional change.

Trends in Executive Education in Business Marketing Author:Das Narayandas Periodical:Journal of Business-to-Business Marketing 14, no. 1 (2007) Abstract

Business marketers in the 21st century are grappling with the harsh, tough demands of a consolidated customer base, rapid product and service commoditization, complex channel structures, and hyper-competition in a rapidly evolving, information-intensive global economy. Across the globe, firms concerned with developing managerial talent to respond to these trends are demanding and expecting changes in the executive education programs offered by business schools. We consider in this paper a number of recent trends and changes in customer expectations, program format, content development and delivery, and program marketing that we have observed in executive education in the field of business marketing.

MarketWatch has reported that Whole Foods has purchased rival natural-foods grocer, Wild Oats, for $565 million. Whole Foods has struggled in recent months, reporting a decline in fiscal first-quarter profit, largely due to increased competition from larger grocery store chains...

A fortnight after Viacom flooded YouTube with 100,000 Digital Millennium Copyright Act (DMCA) notices its problems continue unabated. In the past two weeks Viacom has chosen to hitch a ride with Joost. Copyrighted content from the Viacom stable of shows...

What will the music business look like in a decade? How can a recording artist use the Web to connect with and build a fan base? Do viral marketing campaigns work as well for established recording artists as they do...

By Will Waugh

Pete Blackshaw over at cgm has compiled a list of clickZ articles he authored in to Ten Columns Every CMO Should Read. This post is not to be confused with my Top Ten CMO List from a little while back. Pete is a smart guy who spent lots of time on the client side and has insight on what high level marketers should be looking at, particularly in the consumer generated space. The Pocket-Guide to Consumer Generated Media provides a perfect overview while The Third Moment of Truth breaks down A.G. Lafley's much publicized speech at our Annual Conference and what it means for marketers.

Technorati tags: consumer generated media marketing CMO

Some of the recent activity at our internal 37signals Campfire chat room:

Nice modals Jeremy K. check out the demo at http://okonet.ru/projects/modalbox/ Jeremy K. pretty nice modals built with prototype + scriptaculous Ryan S. that modal demo is cool Ryan S. i like how it slides down from the top, OS X-style Jeremy K. yeah, feels more like an interstitial Jeremy K. but maybe that’s just the mac culture burned into me :)

Web apps game changer? Jason F. Firefox3: Web Apps Game changer Sam S. JF: that basically amounts to cookies that can store more data Sam S. I really don’t think it’ll be a “game changer” Sam S. but we’ll see ;) Ryan S. BUT THE WEB IS THE NEW PLATFORM Ryan S. Mark I. If you want to give up Rails and write all your apps in Javascript maybe. Mark I. I don’t like Javascript that much. :) Jamis B. just need a new framework Jamis B. “Javascript on Jails” :) Sam S. jails is right Sam S. that’s what writing a web app in js would feel like Ryan S. aren’t google apps written in JS? Ryan S. do they generate the JS with magic or something? Sam S. from what I understand, the client-side stuff is written in a Java framework that generates JS code Jamis B. guh, that’s even worse Sam S. at least for gmail

Popular Science Mark I. Mark I. I was flipping through the February 2007 Popular Science when I saw the Backpack Calendar in the corner of the page. Ryan S. oh how cool Jason F. Woah on the BP Cal! Ryan S. Mark I. I enjoy Popular Science and Popular Mechanics. Jason F. MI agree—great pubs

Squid Gates Ryan S. wow really bizarre marketing from microsoft in asia Ryan S. http://whatswrongwithu.com/ Ryan S. also gates is looking more and more like a squid monster Ryan S.
Jason F. LOLOL

American Venture TV-- American Venture's broadcast is your source of news on the biggest deals in venture capital-- who scored and how much. Today's broadcast features a San Francisco elementary school where kids are learning...

SAN DIEGO, Calif.-- Soapbox Mobile, the full-service mobile marketing agency, is pleased to announce the addition of two key new members to its executive management team. Vladimir Edelman, CEO of Soapbox Mobile stated, "We are...

San Diego-- Brickfish, The Digital Engagement Company, announced today that it closed $11.2 million in Series A financing led by DCM, and that Dixon Doll, the Silicon Valley venture capital firm's co-founder and general partner, will join the...