CDT Bookshelf: “Billions of Entrepreneurs: How China and India Are Reshaping Their Futures and Yours” by Tarun Khanna

Harvard Business School Professor Tarun Khanna’s new book “Billions of Entrepreneurs: How China and India Are Reshaping Their Futures and Yours ” is a comparative book on the different business landscapes of the two countries. Khanna states that China and , the two most populous Asian nations, have woken up and will catch the world’s eye.

The book was published on February 1, 2008 by Harvard Business School Press. Below is an interview with Khanna in which he explains the main concepts of the book, via HBS:

Q: What’s different about entrepreneurship in both countries?

A: The extent and type of government involvement and the nature of openness are 2 dimensions in which the countries are different. These dimensions pervade all aspects of societal existence, whether that means raising capital to start a new business, the nature of markets, copyrights, the media, movies, and religion, as well as the ways in which both countries themselves project their power, the way they deal with each other, and the way the village economy works.

In China, the government is often the entrepreneur. It is in many instances a very efficient entrepreneur. Of course there are bankrupt state-owned enterprises, but there are equally dynamic companies starting out in villages, small towns, and major cities, often with a sizable amount of investment or involvement by local government authorities. It is hard to find any reasonably sized Chinese company in which government authorities do not have input.

In India, some islands of excellence notwithstanding, the government remains inefficient for the most part, and most pockets of entrepreneurship—interesting, vibrant new ways of doing things—are in the private sector or civil society, staying far away from government intervention. So here the private sector leads many significant initiatives; in China, the lead is often provided in a top-down manner….

Here is an excerpt from Khanna’s book, also via HBS:

Finding reliable, useful financial information is a real problem that anyone wanting to go to work at, sell to, buy from, or invest in a Chinese or Indian company must face. I am often asked for guidance in solving this problem and have found that answers are different for the two countries.

In China, can I believe the financial information in a company’s annual report?

Not really, I say. The annual report does not serve the purpose it does in market economies, that is, to communicate reliable information. Several of the companies with which one might interact may not even be legal entities in their own rights: almost surely they will have a blurred responsibility to traditional business constituents and to government.

What about analysts’ reports on Chinese companies?

Two issues are at stake. First, most of the domestic assets of Chinese companies are not publicly listed. Those that are listed locally are not necessarily the companies’ best assets but are the results of the government’s attempt to leverage domestic savings toward salvaging bankrupt state-owned enterprises. Assets listed overseas—and on which reliable foreign analyses presumably exist—are not all the assets of the corporations in question. For example, the Bank of China’s overseas operations are listed in Hong Kong but represent only a small part of the bank’s operations on the mainland. Second, Chinese financial analysts are not independent but state owned or state controlled, as are the companies on which they issue reports.

– In an interview with Asia Society, professor Tarun Khanna “discusses the importance of in the growth of these two booming Asian economies.” Click here to listen.
– Listen also to the interview with Khanna by HBS here.

See also a review of the book, from The Economist:

With his new book Mr Khanna has returned to the topic of entrepreneurship in Asia’s emerging giants. But he has dropped the idea of India outpacing China and replaced it with thoughts about the potential for co-operation between the two countries. Their social and economic systems are vastly different, as he shows in admirably detailed but chatty studies of companies and cities in both places. But they have strengths that could be complementary, he thinks, and he argues that foreign multinationals need to start thinking about the countries together rather than separately.

And a review from Boston.com:

Khanna contrasts the two countries in areas as diverse as technology, healthcare, movie-making, oil, banking, and agriculture, but rarely, if ever, pronouncing one to be better than the other.

He chides such black-and-white thinking: “The pundit’s favorite issue, of ‘who wins,’ China or India, misses the point.”

See also reviews from China Elections & Governance and India Today.

February 12, 2008 10:07 PM
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Categories: CDT Bookshelf, Economy