Celebrating the Emerging Markets Institute on its 10th Anniversary

A Q&A with Emerging Markets Institute founding directors, Ya-Ru Chen and Andrew Karolyi, and current director, Lourdes Casanova

The Samuel Curtis Johnson Graduate School of Management established the Emerging Markets Institute in September 2010 as a vehicle to bring together preeminent practitioners and academics from around the world to develop the next generation of global business leaders and to create the premier research center on the role of emerging markets in the global economy. On Nov. 6, 2020 the institute will focus on the achievements of emerging markets over the last ten years and celebrate its 10th anniversary virtually with faculty, students, alumni, and supporters from around the world as it hosts the 2020 Emerging Markets Institute conference.

Launching the Emerging Markets Institute in 2010 was the culmination of the school’s decision to enhance global programming, curriculum, and presence as a key priority in the school’s 2008 Strategic Plan. As a first step, and with then-dean Joe Thomas at the helm, Johnson recruited two senior faculty members with exceptional international expertise in research and teaching who wanted to help shape a new international institute. In fall 2009, Andrew Karolyi and Ya-Ru Chen joined Johnson—Karolyi as professor of finance and global business and Chen as professor of management and global business. Together, after gathering input and information from Johnson students, faculty, alumni, staff, as well as 20 top business schools, they developed the proposal to create the Emerging Markets Institute, the first of its kind at any leading business school.

The new institute was launched with unanimous faculty support plus crucial support and financial backing from Nell Cady-Kruse ’84, MBA ’85, Al Suter ’57, MBA ’59, and Bob Staley ’58, MBA ’59, alumni whose careers spanned many years as senior business executives in Europe and Asia. Karolyi, now Harold Bierman Jr. Distinguished Professor of Management and Deputy Dean and Dean of Academic Affairs for the SC Johnson College of Business, and Chen, now Academic Dean for China Initiatives and Nicholas H. Noyes Professor of Management, became the founding academic co-directors of the Emerging Markets Institute (EMI).

In 2014, Lourdes Casanova, senior lecturer of management, was appointed academic director of EMI, a position later endowed by Johnson Advisory Council member Roberto Cañizares ’71, MBA ’74, as the Gail and Roberto Cañizares Director of the Emerging Markets Institute. A key EMI supporter, Cañizares has also endowed summer internships in emerging markets, EMI’s faculty development fund, and EMI fellows’ participation in international case competitions.

In the following Q&A, Karolyi, Chen, and Casanova talk about the goals laid out at the founding of EMI and the exceptional learning opportunities, research, reach, and reputation the institute has achieved in its first ten years, the outstanding learning opportunities created by the EMI Fellows program, and also how emerging markets have changed in the past 10 years.

 Q. Looking back at the Emerging Markets Institute’s work and accomplishments over the last 10 years, what stands out to each of you as the institute’s key achievements, overall?

Ya-Ru Chen: EMI has cut across all the different dimensions we planned to have an impact on when we set it up: research, teaching, programming, and outreach. It has made amazing strides in each of these areas and it has certainly gained notable standing at Cornell and elsewhere. The Emerging Markets Institute Fellows program has added so much value for many bright students over the years. And research—Lourdes has been able to gain support for research in emerging markets from all different sources. I study hierarchy and status, and it takes years to build a reputation. Holistically, EMI has gained the status I could not have imagined possible in 10 years. I feel very appreciative and honored to be part of this institute.

Andrew Karolyi: When we formed the Emerging Markets Institute, we wanted to change the mindset of our faculty to foster a greater appreciation of the importance of the global dimension of business. The stakeholders— Roberto Cañizares ’71, MBA ’74, Nell Cady-Kruse ’84, MBA ’85, and Bob Staley ’58, MBA ’59—understood the importance of what we were trying to do.

We had a blueprint with a focus on co-curricular programming for what would become the EMI student fellows program with emphasis on immersion trips, job treks, and EM-intensive joint projects for the Institute. But I never thought that it would take off and have the success that it did. There was a great response among students because there was a fundamental demand: a good number of our MBA students wanted to immerse themselves in these complex markets. We affectionately referred to them as the “Navy SEALs of emerging markets:” specially-trained future business leaders who could be put into the most difficult of business environments, always changing, uncertain, volatile— classic V.U.C.A. settings that are what EMs truly represent.

About five years into this effort, I took a sabbatical and I wrote a book, Cracking the Emerging Markets Enigma. The first sentence on the first page of that book lays down the definition of what an emerging market is: “an underfunded growth opportunity with problems.” Emerging markets represent challenging problems that require problem-solving skills on steroids! That’s the real challenge. That’s what these special types of people relish in becoming business leaders – challenging themselves, the basic business principles they have learned, in settings that are super complex and ever changes. So, the accomplishment I’m most proud of is the EMI Fellows Program that took off much faster than we would have expected and has really been carried forward, to Lourdes’ credit. She has really run with that one.

Lourdes Casanova: Andrew wanted to focus exclusively on the top MBAs for the EMI Fellows program, but looking at other institutes, I thought that to have an impact you need volume, and I went for volume. So our EMI Fellows program is more inclusive. Now we have 60 to 62 EMI Fellows each year.

Andrew Karolyi: Lourdes is right, I always thought the fellows program should be smaller—a small, elite crew specially trained. Lourdes said being broadly inclusive was important because you could you could be more impactful, you could transform more people’s minds. It was a very good argument and I supported her.

Q. Ten years ago, when Johnson became one of the first business schools to establish an entity focused on emerging markets, the school’s goal was to enhance global programming curriculum and presence. To what degree has EMI achieved these goals?

Ya-Ru Chen: I certainly think the Johnson School has moved up in stature and become more globalized. We have EMI, the Cornell-Tsinghua Finance MBA program, a presence in India, and we helped to set up a new university in Vietnam, VinUniversity in Hanoi.  Our colleagues on the faculty have become a lot more globalized: They travel the world to conduct research, to give talks, and to teach.

Andrew Karolyi: I am convinced EMI has made a big difference in the school in the last 10 years. We knew that making a mark on one dimension would spill over to others. Early on, Ya-Ru expanded nascent non-degree programming, such as the [executive leadership certificate] program with Nanjing University, inspired by alumnus Bob Staley. Her ambition took off from there, to Peking University, Tsinghua, and others. Out of that spawned our partnership with Tsinghua University, and there is no question but that we are on the map with the Cornell-Tsinghua Finance MBA. The degree program is a galvanizing force for the collective mindset and Ya-Ru deserves a lot of credit for what she has accomplished.

Another person who deserves a lot of credit is Randy Allen [associate dean for international and corporate relations at Johnson, 2007-13], who infused us with confidence in what we were trying to do. At that time, the U.S. Department of Education was seed-funding CIBER centers—centers for international business and education research—at a bunch of universities and schools of business; the centers were all very generic. We weren’t going to go for a CIBER, because we had ambitions beyond that. Randy inspired us to go beyond.

We wanted to make a mark, do something distinctive, meaningful, and timely. This was right around the aftermath of the global financial crisis. The emerging markets were turbocharged at that time. All the institutional investor money was looking for yield and the place where they could find yield was in emerging markets. So you saw massive capital flows – foreign direct investment flows, foreign portfolio investment flows, cross-border bank flows – moving into the emerging markets. Our timing was really spot-on.

Ya-Ru Chen: That’s right. The timing was very important. All these non-degree executive programs that we were running laid the foundation for our Cornell-Tsinghua program, because our colleagues had taught in that environment and believed in our ability to operate there. When we chose to focus on China, non-degree business education was just booming, especially overseas modules. It was a culture change among our community regarding these programs.

Andrew Karolyi: These non-degree visiting executive MBA programs built confidence and provided proof of concept and proof of work for many of our faculty members that we could deliver in this kind of format.

Ya-Ru Chen: We have made a fundamental cultural change; the school has become a lot more globalized. Faculty who go to China to teach come back and point to their experience with a sense of pride, like, “look at this cool thing that I just did.” Now, we’re thinking about doing more internationally.

Q. What would you say are EMI’s key achievements in terms of faculty involvement and research, including reports and case studies?

Andrew Karolyi: The Emerging Market Multinationals reports—very much shaped by Lourdes’ research interests and focused on rising, large companies domiciled in emerging markets—provide a great focal point. It’s wonderful that she builds the annual conference in November around that report, co-authored with Anne Miroux. Lourdes gathers students, including EMI Fellows, to be part of the report-building process, and that makes it more meaningful and more impactful.

I wrote my book [Cracking the Emerging Markets Enigma] because I wanted to define emerging markets and the challenging problems they face: market capacity constraints, operational inefficiencies, limits on legal protections, political instability, foreign accessibility restrictions, and governance problems. All of those are featured chapters in the book, and I built case studies around them that are meant to bring them alive. That wouldn’t have happened without EMI.

At Johnson, we teach the core elements of business, the basic principles of business, very, very well. Those basic principles work in normal markets, normal environments. And a lot of that normalcy is stripped away in emerging markets. That’s why it’s so fascinating to try and talk about doing deals in emerging markets—because a lot of the basic assumptions are broken, they don’t apply. That’s what makes it challenging. Studying and training business leaders for emerging markets has got to be about contextualizing the problems. And case studies are fabulous means by which to contextualize how the usual way of solving a problem may not work. You’ve got to figure out a work-around, another solution, one that is off the beaten track.

Q. EMI hosts a big, annual conference that attracts a host of stakeholders, including international business leaders, government officials, academics, students, and Cornell alumni. How has EMI’s conference helped shape EMI’s standing among key audiences?

Ya-Ru Chen: I believe the conference is a great way to consolidate EMI’s achievements. I remember Randy Allen used to say you “put a ribbon around things” you’re already doing so that people can celebrate. Internally, a great conference brings people together to celebrate; it brings a lot of pride to alumni and students. Externally, it’s a great way to engage alumni and key stakeholders, including existing supporters and new supporters.

Andrew Karolyi: When I came to Cornell, it was pretty clear that the leadership understood the importance of what we call “translational research.” Research at the highest level in the fundamental disciplines was necessary but never sufficient for what we deemed success at Cornell. Every scholar has some obligation to be able to translate their work for an external community that we care about. It’s got to mean something to people beyond, those in industry, in financial services, in government; that’s a Cornell value. What the annual EMI conference does every year in November is reinforce the Cornell value system on the importance of translating the research for its impactfulness. This conference is a manifestation of that in a beautiful way.

Attracting people to the conference was never a problem, because the topics were so salient, and so relevant, and so timely, that that there was always going to be an audience. The alumni rallied to support us, and certainly our very generous alumni like Henry Renard [’54, MBA ’55] and Roberto Cañizares [’71, MBA ’74] saw the importance of fueling it with their philanthropy. They definitely deserve a lot of credit for helping us to amplify the good things that are happening with the conference and EMI.

I would also give enormous credit to Lourdes for understanding the importance and value of external engagement; she really made it blossom. She built an annual conference that is now a mainstay event for many. We owe a lot to her for her diligence in getting the word out about EMI to a much larger audience.

Lourdes Casanova: I decided to concentrate all my efforts in one impactful EMI event each year, always held during the first week of November. Last year, we had 277 attendees; it was Johnson’s biggest event of the year. The 2020 Emerging Markets Institute conference on November 6 will be virtual this year, and will also be a celebration of our 10th anniversary.

Each year, we host the Cornell EMI Case Competition at the conference, and this year we are hosting a pitch competition in collaboration with universities in emerging markets. Participating universities will host their own competitions, then send the winners to our inaugural EMI Pitch Competition: Emerge Your Startup.

Q. How have emerging markets changed in the past 10 years?

Andrew Karolyi: As a collection of countries, the emerging markets are still, at the core, underfunded growth opportunities with problems, as I define in my book. They vary over time, some of the problems are more important than others, and for some countries more than others, and they’ve evolved.—But the commonality is that the emerging markets have institutional, structural problems. Tremendous growth opportunities lay before them: they have huge population bases and huge potential in terms of productivity of labor. But they may not be fully realized because of inadequate capital—domestic pools of capital too thin to be able to fuel that growth. And the structural problems keep external capital from finding its way in to help fuel the growth. That’s the logic.

So how have things changed? Well, the problems are still there. The growth opportunities are still there. And they’ve been realized with much, much higher levels of sustained growth than the developed markets in the last 10 years. But their potential is still higher. One fascinating thing that’s really different now is that the flows of capital always used to be from developed to emerging and from developed to frontier in the hope of becoming emerging. What’s happened now is that pools of capital have built up within some emerging markets, in countries like China, where they have even created institutions like the Asian Infrastructure Investment Bank as a competitor for the World Bank. The whole One Belt One Road initiative is fueled by the accumulated foreign currency reserves of China over sustained years of export-led growth. And now, that new pool of capital is what other emerging and frontier markets are looking to. What’s different is that now, new pools of capital sourced out of emerging markets are finding their ways to other emerging markets, possibly even to developed markets. The tables are turning in an interesting way and it challenges our conventional wisdoms.

Ya-Ru Chen: Take China as an example: It’s not really an emerging country anymore. Certainly the U.S. is saying, especially under the current president, that China is one of the biggest economies and should not enjoy the benefits of being an emerging market anymore. China aspires to be an important country. It certainly has stepped up to fund these activities. And that creates challenges; they don’t necessarily know how to do it. Having all these funds is one thing, but how do you do it? Global credibility and legitimacy: These are two key words that continue to challenge.

 Andrew Karolyi: When I titled my book Cracking the Emerging Markets Enigma, “cracking” was intended to be an action word and to suggest that it’s an ongoing challenge to try to understand the commonality across these countries. China is, in some sense, the ultimate enigma. In my mind, it is the ultimate emerging market because it is not like the others; it’s almost like the exception that proves the rules that apply to all the others.

What has really changed in the last 10 years is not China, per se. It’s that we wondered whether emerging markets would be the target of investment opportunities for a developed market base, and we don’t do that anymore. Things have changed and there are alternatives. The hierarchy has shifted. China proven itself to be unlike the others.

Lourdes Casanova: There is a deep divide between China and the rest of the emerging markets and the difference is very important. China has become such a big leader, we have to ask: Is it an emerging market or not? That has become a major and politically charged question.

In the EMI report, we rank our E20 markets based on three variables: average GDP growth, Human Development Index, and mobile phone penetration. All the biggest emerging markets that we classify in the E20 have done well in the last 10 years except for Brazil, Argentina, and Russia. Asia has grown a lot—definitely China, but also India and Bangladesh. That surprised us; Bangladesh was not in the E20 before last year. Turkey has also grown a lot.

Andrew Karolyi: Lourdes, your first instinct was to emphasize the upwards growth of emerging market countries, then add that Brazil and Argentina are not doing well. And for me, studying the very examples of Argentina and Brazil is the most fascinating thing. That’s where you want to send in a “Navy Seals” team of EMI student fellows and understand it, because the problems define what’s happening in those countries.

Lourdes Casanova: Yes. Exactly. One of the weakest things about emerging markets is their currency: They are unable to control the value of their currency. Look at Argentina: In 2002, its currency devalued 400 percent in six months after they unpegged the peso with the dollar.

Andrew Karolyi:  What’s definitely different from 10 years ago is the rise of cooperative arrangements between central banks in many countries around the world. They’ve opened up swap lines to enable countries to access stable foreign currencies, like U.S. dollars, to help them sterilize the pressures on their own currencies. Certainly, the Fed in the U.S. and the ECB [European Central Bank], along with the Bank for International Settlements have been big proponents of this integration. These multilateral arrangements among central banks have solidified in the last 10 years. They help countries like Egypt to sustain a stable currency when, by all rights, they should not be able to because they’ve got depleted foreign currency reserves. And maybe, because Argentina doesn’t have such a successful relationship in such a multilateral arrangement, they suffer. That shows the importance of multilateralism and collaboration among central monetary authorities.

 Q. Lourdes, when you were appointed academic director of EMI in 2014, what inspired you to take on that role? What was your vision for EMI?

Lourdes Casanova: I’ve always worked on emerging markets. In my previous job [as a professor at INSEAD] I worked on emerging markets with a focus on Latin America. Because 30 years ago, when I started my academic career teaching about cross-cultural issues as a visiting faculty member at Haas [Haas School of Business, UC Berkeley], the emerging markets were, mainly, in Latin America. They said, “We have all these classes on business in Japan. Why don’t you teach a class on doing business in Latin America?” So for me, that was the beginning.

I am also a firm believer that you need a strong, innovative, private sector in every country. I’ve seen it in my own, in Spain. Spain could not be where we are right now without strong companies. That’s why my focus is on companies. So when I became director of EMI, I continued my research on emerging multinationals. At that time, my friend and colleague Anne Miroux directed the World Investment Report at UNCTAD [United Nations Conference on Trade and Development], where she specialized in developing country debt, foreign direct investment and transnational corporations, and innovation and technology. So, we both had expertise in emerging markets and multinationals. Anne and I thought that if we have a yearly report, we can give a voice and a brand to the institute.

When we published our first report in 2016, we encountered resistance from some traditional experts who said, “These are not multinationals; Chinese companies are local.” But Chinese companies moved internationally very fast in the seven to nine years after the global financial crisis: The global financial crisis was the springboard to grow overseas. So we faced a criticism at first from those who said “you cannot call these companies international,” but actually, they were. We were right. Using data from Fortune Global 500, Bloomberg, fdiMarkets, ORBIS, UNCTAD, the WB/IMF and Capital IQ, all excellent databases, and we spotted this tremendous growth. It came as a surprise to us.

Through the report we have built an emerging multinationals research network. Contributors this year include the OECD Development Centre and the International Finance Corporation. I always wanted to include perspectives from a Chinese University, and two years ago Wenzhou University was a contributor. Both this year and last year Wuhan University contributed to the report. Making these connections takes time and it’s working.

Andrew Karolyi: Lourdes has also made very important inroads in connecting us with Universidad de los Andes in Colombia. A steady stream of students come here as visiting students and get involved in the report writing. An important dimension of EMI is inclusivity, a welcoming spirit, involving others.

Q. Lourdes, you will be presenting EMI’s new strategic plan at this year’s conference on Nov. 6. Can you offer some highlights from the new strategic plan?

Lourdes Casanova: Forty members of the EMI’s advisory council, alumni, EMI fellows and faculty colleagues worked during the summer to reflect on EMI’s past 10 years and prepare the new directions. One of the most important things we are doing is reconsidering EMI’s role and motto—“building bridges and encouraging dialogue”—in today’s more confrontational world.

In our reports, we will probably move to a ranking of emerging multinationals next year, in terms of revenues, profit, social impact/ESG [environmental, social, and corporate governance], and diversity. It’s a very complex thing to do and we are presenting the idea to different experts, to EMI’s faculty advisory board, to the World Economic Forum, and to some companies for feedback. We are reaching out to other Cornell faculty to co-author the report. And we are looking at publishing case studies as well.

In terms of education, we are considering developing a new course open to undergraduates and focused on research tools, including using databases in research. And we are looking at other new ways to connect with interested undergraduates in the Dyson School and the School of Hotel Administration.

Whatever EMI does would not be possible without the EMI Fellows, student workers, EMI Advisory and Faculty Councils and our tremendous team of volunteers. This year we have an excellent, very professional social media manager, Mumuksha Khicha. Also, EMI Fellows have helped with our “Looking Back and Looking Forward” video interview series. We have posted interviews with the alumni who were EMI’s earliest champions, Nell Cady-Kruse, Bob Staley, and Roberto Cañizares. These will be followed by video interviews with [EMI Advisory Group members] Henry Renard ’54 MBA ’55, Sam Sotoodeh, MBA ’87, and the Cunningham Fund, an EMI Fellows donor. Anne and I would not be able to publish the report without the collaboration of EMI’s excellent researchers led by Daniel dos Anjos, Eudes Lopes ’16 (A&S), Jennifer Wholey Lehman ’10 (CALS), and Vineetha Pachava ’22 (A&S). And the interns last summer were a great help.

We have challenges. For the future, as we move EMI to its next phase, we will need a full-time program coordinator in order to create a more stable team for moving forward. And of course, that means more serious funding. But when I took over EMI, it was my dream. So I’ll be forever grateful to Cornell for this opportunity to continue the leadership of Andrew and Ya-Ru and to have an impact in both education and research on emerging markets.

With thanks to Sarah Magnus-Sharpe for contributing to this article.