**3. Results**

### *Finding Some Unconventional Wisdom to Derive Strategic Insights*

In this section, we aim to find new strategic insights by reviewing the five assumptions based on the above chronology.

### **Assumption 1.** *In an increasingly protectionist world, a domestic mindset is the way to go.*

Based on decades of research, the IMF re-affirmed in 2001, the year that China joined the WTO, that:

"Policies that make an economy open to trade and investment with the rest of the world are needed for sustained economic growth. The evidence on this is clear. No country in recent decades has achieved economic success, in terms of substantial increases in living standards for its people, without being open to the rest of the world."<sup>15</sup>

Between 2001 and 2016, even with globalization suffering an identity crisis, the world remained more global-minded than protectionist and a global mindset was proven to be a predictor of success in global leadership positions (Javidan and Teagarden 2011; Beechler and Javidan 2007; Lane et al. 2009).

A research update as to whether tariffs are protecting American jobs also confirms that this is not the case since Ford prepared mass layoffs at the end of 2018 in order to off-set some \$1 billion lost due to tariffs imposed by China in retaliation to US tariffs.<sup>16</sup> Other industries and more than 200 companies were also suffering from the tariffs in the US, cutting costs through layoffs and fore-going expansion.<sup>17</sup>

With the Smoot-Haley Tariff Act of 1930 in the US (Kennedy 2003) and the Imports Duties Act of 1932 in the UK, history has also shown that protectionism can be destructive rather than protective. In 2010, Oxford University Press published a grea<sup>t</sup> analysis which explained that "Hoover refused to listen to the pleas of 1,038 American economists who, in 1930, urged him to veto the Smoot–Hawley tariff bill. When it became law, this legislation raised US import duties and ultimately led to retaliatory action throughout the world. Not surprisingly, US foreign trade declined once the depression began to bite" (Crafts and Fearon 2010).

Clearly, this assumption is invalidated. It is a myth based on fear (Kennedy 2003). By definition, the 21st global economy cannot function based on a protectionist mindset. Globalization may be changing. However, the world remains inter-dependent and semi-globalized, where global trade represents at least 30% of the global economy (Ghemawat 2018).

**Assumption 2.** *Developed countries will always lead the global economy, others should follow their best practices.*

<sup>15</sup> https://www.imf.org/external/np/exr/ib/2001/110801.htm.

<sup>16</sup> http://fortune.com/2018/10/09/ford-stock-today-layoffs-trump-trade-tariffs/.

<sup>17</sup> https://www.cato.org/publications/commentary/here-are-202-companies-hurt-trumps-tariffs.

This assumption is based on the current context, a view that suffers from myopia. When taking a much broader look at business and economic history, we should remember that China and India were dominant countries during previous centuries and that Russia was a mighty empire led by strategic tsars.

By focusing on China alone, it must be noted that the Han Dynasty established as a major power more than 2000 years ago.<sup>18</sup>

In all fairness, China's current economic development, growing faster than developed nations (e.g., Japan) for decades since the 1980s (Kang 2007) but still considered "developing" due to institutional voids (Khanna and Palepu 2010, 2005), cannot be the only period used to assess this 5000 year old civilization that goes back much farther in history than most developed countries. For example, it must be noted that China developed fast when Europe was experiencing turmoil during the Middle-Ages after the fall of the Roman Empire. According to a highly-cited book, published by the OECD, an important development was the "Chinese settlement of the relatively empty and swampy lands south of the Yangtse, and introduction of new quick–ripening strains of rice from Vietnam suitable for multicropping" between the eighth and thirteenth centuries (Maddison 2007, p. 18). During these five centuries, "population growth accelerated, per capita income rose by a third, and the distribution of population and economic activity were transformed. In the eighth century only a quarter of the Chinese population lived south of the Yangtse; in the thirteenth, more than three quarters. The new technology involved higher labour inputs, so productivity rose less than per capita income" (Maddison 2007). Today, China and other countries are considered developing countries or emerging economies whereas they once dominated, similarly to the Roman Empire. Dominance is not permanent. No developed country can aspire to always lead the global economy. Last but not least, adopting policies from the West or the "developed" nations, also referred as the "Washington Consensus," with the premise that they would be successful elsewhere, can result in economic disaster in developing nations (Chang 2002). Therefore, this assumption is also invalidated.

### **Assumption 3.** *Developed countries have better institutions. Therefore, people who lead them know better.*

Institutions, such as universities and business schools, can create and hire scholars who can come from any country in the world and many have come from the BRICS. Scholars can also be born out of institutions, even if it remains an exception rather than the norm. Indeed, one of the foremost mathematicians who was born in India, Srinivasa Ramanujan, solved very complex problems and advanced theories through a series of breakthroughs in his youth without having much formal education (Singh 2017). Other scholars from Russia include many Nobel Laureates in several disciplines, especially physics (Dardo 2004). For all these reasons, the assumption on the "superiority" of institutions in developed countries and of the knowledge accumulated by the people who lead them is invalidated.

### **Assumption 4.** *Emerging markets cannot produce world-class companies.*

This assumption is also based on the perception that emerging markets are "not there yet" (Khanna and Palepu 2000; Khanna and Palepu 2010) and therefore cannot compete with industrialized countries' giants, such as IBM, Boeing, Ford, Apple, etc. The reality is much different: Lenovo, once a regional player has become the largest PC vendor in the world after acquiring the PC division of IBM. Embraer (Brazil) is another success story, and so is Tata Motors which acquired Jaguar and Land Rover from Ford in 2008, or even Huawei overtaking Apple in global smartphones sales in 2018.<sup>19</sup> These are just a few examples among many. A closer look at the largest companies in the world, measured by

<sup>18</sup> https://www.bbc.com/news/world-asia-pacific-13017882.

<sup>19</sup> https://qz.com/1345496/apple-was-just-overtaken-by-huawei-in-global-smartphone-sales/.

revenues, also indicates that 3 out of the first 5 largest are Chinese.<sup>20</sup> This assumption is a myth that is easily busted once researched.

### **Assumption 5.** *Among institutions, universities and their business schools do not play a major role in society since business has been criticizing and ignoring business schools for decades.*

This assumption is often based on the misunderstanding associated with the value and contributions of education to society. According to a 2017 UNESCO report, the total number of higher-education students has doubled between 2000 and 2014<sup>21</sup> and represents a healthy 5% increase on an annual basis. Business education is the most popular choice among all disciplines; it attracts about a quarter of all university students. This assumption is often based on a quantitative analysis which does not account for qualitative contributions, such as launching new businesses, finding solutions to societal problems, etc. Business education has even transformed an emerging market like China by going from Marx to a hybrid capitalistic model (Tsinghua)<sup>22</sup> or profoundly boosting the country's competitiveness: India (Indian Institutes of Management), FGV (Brazil, and Skolkovo (Russia). Therefore, this assumption is also invalidated.

Many of the higher education students earn an MBA, the passport to managemen<sup>t</sup> and especially to careers in Finance or Consulting. Business actually touches all disciplines and vice versa (e.g., medicine). To better assess the role of business schools in society, we must wonder how the world economy would perform without them and without business education in general. Clearly, if the BRICS have made so much economic progress, a large part of that can be attributed to education, the social elevator, and one of the best ways to help a country navigate the global economy competitively. Education provides the tools to make better decisions, solve problems, and redistribute wealth. In both emerging and developed countries, what is needed is not less education but more. We will discuss this in greater details below.
