on the differences in the entrepreneurship model of the dragon and the elephant. Excerpts: What are the most striking differences in how Chinese and Indian companies operate?
Both have good models, which are adapted to their respective circumstances. In China, there is a very little market allocation of capital. The stock market does not work well in China. Therefore, companies don't have much of an incentive to disclose information.
In India, you do not see many large manufacturing companies. There are some, but not many. That is also because of their choice of doing business "" services, media and so on. These are all industries where basic infrastructure such as roads and power plants do not matter as much as they would for hard-core manufacturing. It is a societal adaptation to the kind of things on which you want to focus.
In China, businesses capitalise on the physical infrastructure of the country. All that China needs is an efficient financial market and a well-maintained intellectual property rights system. I would say both (Indian and Chinese) models are calibrated to their local environments.
Which is the more profitable one?
I think both are equally profitable. I go back to the paper I wrote three or four years ago "" Can India overtake China? "" which really is not asking the wrong question, but a less interesting question. Now, the interesting question is, "How do we capitalise on the strengths of these two countries, whether we are Chinese, Indians or from the Western world?"
How is Chinese entrepreneurship different from Indian entrepreneurship?
In India, you choose a sector where you don't need the hard-core infrastructure. Here, you want to stay away from politics as much as possible. In China, you will be forced to have a much more welcoming view of the ruling party who would want a point of view expressed on how the company should be run. I am not saying that's a bad thing: the government is trying to facilitate business.
But occasionally, it may ask you to do something you may not want to as a businessperson. In China, the government is the entrepreneur. Of course, it is also doing things that are not helping entrepreneurship to flourish "" such as not allowing financial markets to develop.
Given the Chinese government's juggernaut-like presence, why are there so few world-class indigenous private companies from mainland China?
That's an interesting observation. The reason basically is that China has, for a long time, privileged foreign investment. The best goodies go to state-owned enterprises. The next best go to foreign investors and lowest or none to people like you and I. Beyond a certain point of time, you will not be able to grow unless you affiliate yourself with someone who can help you grow.
The question arises why China has privileged foreign investors. Part of the answer goes back to the Cultural Revolution. In the early 1970s, China erased all individual enterprises "" by shutting down every single enterprise.
When the process had passed and it had to revitalise the economy, it chose the easiest way "" to invite outsiders. Now China finds itself in a situation where the institutional infrastructure to build individual enterprises is much less. However, the infrastructure to welcome foreign investors is much more robust.
How important has been the role of entrepreneurship in the growth of India and China? Considering the dearth of indigenous enterprises from mainland China, will entrepreneurship foster future growth in China?
It has played a phenomenally important role in India's case. Entrepreneurship has actually played the only role in India. The startling growth has come from people who have broken the shackles of the old way of doing things. Entrepreneurship in China is playing a huge role as well, as it is expressed through the government.
What are the implications of growing Asian entrepreneurship for global multinational corporations? Does the West feel threatened?
This is about how you perceive things "" is the glass half-full or half-empty. It will be a much happier outcome if you see this is as a glass half-full. To answer the earlier part of the question, a lot of wealth creation is happening in Asia. People who are generating wealth will spend in places like the US and Europe. On the challenging side, there are going to be many more competitors in every industry coming out of China and India.
A number of Indian companies are expanding their footprint to go global, while Chinese companies have been acquiring companies across the world. By and large, Indian acquisitions are based on tapping resources. How sound is that strategy?
By the economic sense "" value creation "" then the Indian approach is better. The old adage holds "" a baby needs to crawl before it starts walking, walk before running. Indian companies are learning the small things first. They are learning what cross-border commerce and corporate governance is all about.
The Chinese are doing the bigger things. I guess the difference is that, in India, people who are really making the mergers and acquisition decisions are the ones who are putting their own money at stake. In China, most of the money is state money. So one says, "It is a $10-million company, what is the big deal? Go ahead and strike the deal." The accountability is missing in China.
