This course provides a framework for studying the role of the private sector in international development, with an emphasis on issues that are of particular importance for future managers in the developing world. We will be guided by the research and analysis on the topic that has flourished in recent years, driven in no small part by the emphasis on private-sector development within the World Bank. This will be supplemented by real examples and materials, and occasional outside experts.
The first half of the course focuses on the nonmarket factors that influence private-sector behavior in the developing world. While these factors are relevant for the behavior of firms anywhere, they loom particularly large in poor countries. Topics include rule of law (contract enforcement, intellectual property rights, investor protection), corruption and political instability. The latter half examines the role of international institutions such as the WTO and IMF, and international capital flows, in promoting private sector development. While we will spend some time discussing the work of NGOs, our primary focus will be on the private sector.
We will not completely jettison the efficient market worldview laid out in Managerial Economics. However, there are many differences in circumstance in the developing world such that market and contracting failures will play a much larger role in our analysis. In particular, we will devote a lot of time to assessing nonmarket factors such as the stability of political regimes, the impact of corruption and the risks posed by weak legal systems that limit the enforceability of contracts.
We will consider many strategic solutions to specific problems posed by these weak and/or uncertain institutional systems, where the "rules of the game" may be vague, opaque or under constant threat of change. In the process, we will also touch on deep issues in international development, and we will see that firms can have significant impacts - both positive and negative - in the places they operate. The opportunity to impact the local environment raises the possibility of ancillary social benefits on the one hand and possible ethical concerns on the other.