My view on the three things outsiders are unusually well-placed to bring, roughly in order of how hard they are to substitute: 1) the ability to cultivate buyer demand in high-income markets, 2) the organizational norms required to run a firm at scale (hiring systems, quality control, non-kin trust, delegation), 3) access to patient risk capital.
The overall answer to “why don’t locals just do this” is that these binding constraints are the things hardest to acquire from inside a low-productivity equilibrium. International buyer relationships and systems-building norms are both learned by doing. Effective pioneer firms should eventually function as transfer nodes where workers and managers carry the practices outward. Bangladesh’s garment industry is the textbook case where a handful of Bangladeshis who previously worked at Korean garment company Daewoo seeded most of the early firms.
To answer your second question, local capacity development over time indeed becomes most of the focus. But in the earliest phase, when no domestic firm has yet demonstrated the model, the bottleneck is having any firm operating at international productivity standards at all. Outsiders (including diaspora, who often have the best of both sides) are over-represented at that stage because they have lower-cost access to the specific scarce inputs.
Thanks Toby.
My view on the three things outsiders are unusually well-placed to bring, roughly in order of how hard they are to substitute: 1) the ability to cultivate buyer demand in high-income markets, 2) the organizational norms required to run a firm at scale (hiring systems, quality control, non-kin trust, delegation), 3) access to patient risk capital.
The overall answer to “why don’t locals just do this” is that these binding constraints are the things hardest to acquire from inside a low-productivity equilibrium. International buyer relationships and systems-building norms are both learned by doing. Effective pioneer firms should eventually function as transfer nodes where workers and managers carry the practices outward. Bangladesh’s garment industry is the textbook case where a handful of Bangladeshis who previously worked at Korean garment company Daewoo seeded most of the early firms.
To answer your second question, local capacity development over time indeed becomes most of the focus. But in the earliest phase, when no domestic firm has yet demonstrated the model, the bottleneck is having any firm operating at international productivity standards at all. Outsiders (including diaspora, who often have the best of both sides) are over-represented at that stage because they have lower-cost access to the specific scarce inputs.