HOW WE THINK Dr. Connelly,
International Business Decision-Making One of the most essential ingredients of our international business education for Executive MBAs is their visit to two countries and a number of companies in each country. We intentionally seek out a diversity of industries and also connect with the local consulate to learn key background information about the country’s culture and institutions. Going forward, we envision taking these visits a step further so that, following a visit, students assimilate information in teams and prepare a solution to a business problem that the company is facing.
Institutional Memory We intentionally rotate our Executive MBA trips to different regions each year. This is because we believe there is an extent to which the body of Executive MBA alumni have a collective knowledge about the world. For instance, the cases and examples build on each other through the years and alumni share their experiences with current students via social gatherings, reunions, and classroom exercises. By moving our trips from, for example, Europe one year to Latin America the next and Asia the next, we provide the student body as a whole with a shared understanding of a diverse range of international markets.
Thank you so much for the trip. It was one of the best experiences I have had in my academic and professional career. I learned so much on this trip.
Perfect Competition Isn’t Without Compromise
Thanks again, Alan
Reflection We also provide structured exercises where students gather more personal thoughts about how the international experience has affected them. Some of our Executive MBA students are million-mile frequent flyers and others have never been outside of the United States. We therefore give them opportunities to consider what they have learned in view of their own experiences and how it applies to their workplace. This is where individual personalities and preferences change the nature of the learning process. Some people might feel an affinity for the high-stakes world of international acquisitions, while others from a more manufacturing-oriented background may prefer what we learn about offshoring, and still others may even be considering cross-border entrepreneurial endeavors.
Holistic Approach A company’s decision about when, where, and why to expand globally is not purely an economic decision. We discuss the economics behind this decision at considerable length, but we also consider the decision in view of other less-tangible factors. This includes the effects of formal institutions, such a country’s laws and regulatory bodies, and informal institutions, such as their culture, ethical priorities, and norms of behavior. A large part of our classroom and overseas experience revolves around learning how to integrate the economics of international business decision making with the soft skills of cross cultural management.
Economists usually begin with a story of a magical world of perfect competition. In this realm, consumers rationally seek to maximize their satisfaction within an income constraint, and producers rationally seek to maximize their profits within production and cost constraints. Here no single consumer and no single producer have more information or more power than any other consumer and producer. Any new information is immediately reflected in the market, and as such, no one consumer or producer realizes long-term benefits from that information. In today’s technologically-driven economy, though, there are greater and greater inequities of information access, manipulation and use—inequities that often produce inequities in the factors of production. In other words, the gap between those that have access to information and those that don’t increasingly translates to a gap between the haves and have-nots.
In considering this question, I did what many academics would do and turned to the writings of my fellow economists. In 1759, Adam Smith wrote: Every individual is continually exerting himself to find out the most advantageous employment for whatever capital he can command. It is his own advantage, indeed, and not that of the society, which he has in view. . . . He intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. More recently, Andrei Sheifer commented in 2004: The very same market forces that might encourage unethical conduct also motivate firms to innovate and create new products, leading to economic growth. As societies grow richer, their willingness to pay for ethical behavior, through both government enforcement and private choice, increases as well. As a consequence, both moral and regulatory sanctions work better in the richer countries, leading to more ethical behavior. . . . As societies grow richer the ethics of cooperation are much more likely to coincide with objective notions of efficiency. For both of these reasons, the increased willingness to pay for ethical behavior and the improving match between ethics and efficiency, competition is likely to promote ethical behavior in the long run.
Competition, ever the driver, leads to new technologies, new efficiencies, new speeds and new wealth. Today, information has become the tool of choice to improve efficiency and expand revenue opportunities. Some interesting questions emerge: how does one balance efficiency—the optimal use and allocation of the factors of production—and equity—how those resources are distributed throughout society? Economists have debated the balance between efficiency and equity for years. On the one hand, efficiency and expanded revenue opportunities are necessary for profits and reinvestment into growth. On the other hand, for a nation to become wealthier, it must save its equity—it must preserve “fairness.” However, the imposition of fairness may hurt the development of more efficient production in the future. This consideration takes us to a deeper question: when does the drive to be more competitive, more efficient, overwhelm ethical decision making?
As you may note, economists have weighed these issues for decades. And as you may surmise, there is no single, “right” answer. I guess you could say, “it depends…”
Joy Clark
Associate Provost of Undergraduate Studies Professor, Department of Economics, Auburn Montgomery
Dr. Connelly, I would like to start by expressing how fruitful and wonderful an experience the trip was to me and how it broadened my horizon in understanding of how businesses are conducted in the global environment. GiGi
Joy teaches microeconomic and macroeconomic principles and the MBA core course Economics of Decision-making. Though her PhD is from Texas A&M, she’ll be cheering for Auburn come November 8th.
EFFICIENCY EQUITY
14 HarbertMagazine, Fall 2014
HarbertMagazine, Fall 2014 15