Centre for Emerging Market Business
The GSB is developing its academic excellence in the trans-disciplinary theme of Emerging Market Business. In December 2009 the School established the Centre for Emerging Market Business to house its research in this area. There are five systemic research themes within the Centre. These are:
If emerging market countries in Africa are to attract increased business investment, good governance structures need to be established and maintained to lower the risks and transaction costs of doing business.
There is an enormous quantity of literature on the issue of “the state” and “governance” – today’s buzzword – though the topic of ‘governance’ has taken a central role in several disciplines ranging from political science to sociology and institutional economics.
Oliver Williamson, an institutional economist and political scientist, maintains that "good governance" is the desire to lower transaction costs for individuals in their exchange relations with others. The key to success for Williamson is to structure institutions in such a way that they constrain, limit and otherwise restrain undesirable human behaviours that undermine the attainment of low transaction costs and the attainment of public goods.
A well-functioning state (a set of institutions and organisations that reduce transaction costs and limit moral hazard) is therefore an indispensable part of creating an environment in which businesses can function and flourish. The less capable the state is of providing for such good governance, the less attractive the environment is for business to take root and survive. This does not mean that businesses will never establish themselves in such environments, but the risks associated with operating in such spaces are considered far greater than in environments where the state has lowered transaction costs and limited moral hazard.
The Governance in Emerging Markets stream of research at the UCT GSB seeks to explore and understand successful models of cooperation within states that have led to better governance and identify the factors that lead to enhanced economic growth in these contexts. The premise is that emerging market economies, such as South Africa, should invest in good governance practices not only for political reasons, as they foster democratic participation, but for economic ones as well.
South African business schools are uniquely positioned to develop leaders who can drive sustainable success in emerging market contexts.
Operating within and understanding an emerging market paradigm offers them the ideal context for exploring how new ways of doing things could lead to more innovative – and sustainable - ways of doing business.
In these circumstances, it is the ability to think analytically and holistically and to find novel solutions, rather than simply the acquisition of knowledge and of technique, that lies at the core of the successful leader. Being able to see problems in a holistic and systemic way enables decisions that really make an impact to solve problems and make the most of opportunities.
Business schools need to respond with pedagogical models that empower managers and leaders to deal with these challenges. What is required from business schools is design thinking. Design thinking, or a design attitude, is about identifying opportunities, asking good questions and finding better answers.
The GSB has long been engaged in developing a pedagogical approach which incorporates systems thinking and action learning (SYSTAL) as a means to develop managers to deal with increasing levels of complexity more successfully.
The development, innovation and technology stream of research at the GSB will continue to research both inside and outside of the classroom, what works and what does not in helping to develop managers and leaders in an emerging market context to rise to the challenge of complexity thinking and reasoning. It will also investigate the impact that graduates who have been exposed to this style of learning are having back in the workplace.
In addition, this stream of research is investigating how technology can be used as a source of innovation in management development. As technology becomes more and more dominant in the world, it becomes imperative for business schools and universities to respond by creating more blended learning opportunities. The School is also seeking to understand how operating within such an information-rich society may impact on traditional learning approaches in the not too distant future.
Issues of access and affordability of technology in an emerging market context will also be explored along with how to bring appropriate technology to the poor, how to establish public-private partnerships and stimulate social enterprise in the area of ICT. Mobile technology will be given a special focus. The use of mobile as a device – both to enhance learning and also as a means to engage with markets – is critical, and understanding this dimension is now a crucial skill for managers and leaders.
The importance of entrepreneurship for South Africa is clear – it is critical for job creation, decreasing poverty, enhancing innovation and development, and promoting GDP growth.
According to the 2008 Global Entrepreneurship Monitor (GEM) study, conducted annually by the UCT Centre for Innovation and Entrepreneurship at the UCT GSB, much still needs to be done – particularly when it comes to skills development - to boost entrepreneurship in SA.
GEM is South Africa’s largest survey of entrepreneurship and it forms part of a global body of GEM research which in 2008 included 43 countries – South Africa ranked 23rd out of 43 countries with a Total Early-stage Entrepreneurship Activity (TEA) rate of 7.8%. This is still significantly below the average for all middle to low income countries (13.2%) – TEA is measured by the percentage of people aged 18 - 64 who are involved in starting or running a business.
The GEM 2008 study has also highlighted that entrepreneurs in South Africa have poor business and management skills, and an inadequate enabling environment. Expert input that formed part of the GEM 2008 research pointed out the quality of school-level and post-school entrepreneurship training as being poor.
The traditional way to look at the triangle of needs for entrepreneurs places funding at the top of the pyramid and education and ICT skills at the base. This stream of research at the GSB seeks to interrogate this and investigate alternative ways of boosting and supporting entrepreneurship by foregrounding education and ICT skills.
The challenge for business schools here is to, through research and training, inform policy and develop new models of programmes that can work in emerging market contexts, taking into account the constraints that exist such as a shortage of faculty, and making use of new technologies (like mobile phones) which are widely used in South Africa and in other emerging market countries. Our challenge is to develop new models for delivering high quality entrepreneurship education on a mass scale at a low cost.
South African firms are questioning the logic that high income economies and market segments offer the best chances for sustainable growth and profitability. Instead, many astute organisations are examining impressive opportunities in emerging economies and segments, where some of the world’s highest spending power increases can be found.
Emerging markets are bursting with potential – but in order to be successful, business must know the context they are operating in.
While emerging economies are fertile for expansion, especially in Africa, grappling with their complex and dynamic operating contexts often presents teething problems. Usually, these are due to failing to understand and respond to higher socioeconomic and cultural diversity in emerging market segments.
There is a particular need for an empathetic understanding of within-country diversity in emerging markets. Organisation-wide empathy is most likely when firms respond to diversity with sensitivity, curiosity and openness. In practice, this often requires collaboration with local stakeholders to help adapt business models, and even products and services.
This stream of research at the GSB is working to clarify how understanding and responsiveness to socioeconomic, cultural and regulative contexts affects the performance of commercial, not-for-profit and governmental organisations in emerging markets.
Other research in this area is showing that change and diversity are higher in emerging economies than elsewhere. No matter how experienced, firms need to continually question the logic of business models and marketing strategies through research. Complacency threatens survival.
Success in South Africa, as in other emerging market contexts, requires organisations to embrace the internal and external diversity of rapidly changing and high potential market segments. Failing to do so will cause firms to miss important opportunities for profits and growth.
This stream of research at the GSB builds on existing strength at the School in this area under the auspices of the Management Programme in Infrastructure Reform & Regulation run by Professor Anton Eberhard.
Traditionally, infrastructure and network industries (such as electricity, gas, telecommunications, water and transport) have played a major role in social and economic development, although in recent times the performance of utilities has been increasingly questioned. Around the world, they face revolutionary changes. New technology, new financing requirements and the need for improved investment and operating performance are encouraging the break-up of the old vertically-integrated public utilities and also the introduction of competition (where appropriate), private participation and new regulatory regimes. Reformed infrastructure also needs to provide expanded and affordable services for poor people.
Enhancing understanding of and building capacity to manage reform and regulation of infrastructure sectors, in support of sustainable development, is an area of key importance in emerging economies. The GSB is currently engaged in research, education and training, and public advocacy oriented towards improved management of the reform and regulation of infrastructure industries in support of sustainable development in South Africa and on the wider Continent.