Author and Professor Tarun Khanna on Entrepreneurship in Emerging Economies

For more than two decades, Tarun Khanna, a professor at Harvard Business School, has closely studied entrepreneurship as a means of social and economic development in emerging markets.

Between 2015 and 2019, he worked closely with the Indian government on various national commissions to frame policies for entrepreneurship in India. Tarun is also associated with many for-profit and non-profit organizations and has written several books and essays on entrepreneurship.

In an episode of the Prime Venture Partners podcast, Tarun discussed the various facets of entrepreneurship and its evolution in India. He says,

“And we have this image in India of the state that is in some ways the antithesis of private enterprise. At least for your generation and mine, that’s how we used to think of it. But I think that needs a review, particularly with the success so big like Aadhaar, UPI, and so on.”

Developed vs. Developing Countries: The Entrepreneurship Landscape

Entrepreneurship is never easy, whether you’re building a company in Boston or Bangalore. However, startup founders in developed countries like the US have access to strong ancillary support institutions.

From litigation and arbitration to adjudication, entrepreneurs have access to experts for every subtask, giving them more time to grow their business, develop new products, and reach more customers.

But the same does not happen with developing countries like India, which creates an institutional vacuum and leaves the creation of the conditions to create in the hands of entrepreneurs.

“That’s why I say it’s more difficult, more rewarding and more exciting. I think ‘the highs are higher and the lows are lower’ is a way of comparing the ventures I’ve done in Bangalore with the ventures in, say, Boston,” says Tarun.

The Chinese exception

Although India and China became independent in 1947 and 1949, respectively, the countries’ startup ecosystems are polar opposites. China’s fast-growing business culture can be attributed to the government’s active involvement and investment in scientific research and development.

Tarun believes that in China, the R&D/GDP ratio is significantly higher than that of India. The Indian government has yet to realize the impact of scientific research on economic and social development, he says.

“I fear the gap in environmental scientific knowledge, which is needed to incorporate science into the process of economic development and create cutting-edge companies. However, such environmental awareness is not encouraged in India,” he adds.

Trust issues in entrepreneurship

For entrepreneurs to be successful, they must seek to partner with a diverse set of people. But in low-trust societies, founders often end up working with people similar to themselves.

They look for proximity, be it geographical, religious or linguistic, before choosing to work with a person, limiting their access to human resources and creating another institutional vacuum.

“All innovation at the end of the day is mix and match. That is all. So if you can mix and match with people from everywhere, you’re much better off than just a few partners combined,” he says.

Word of wisdom

When asked if he would like to share any advice for young and aspiring entrepreneurs, Tarun had one thing to say: “Find an environment where there are a bunch of smart people doing interesting work and dive in and get your hands dirty. And you will inevitably learn something about human beings, and that’s all it takes.”

You can listen to the full episode here.

Grades:

01:00: Create the conditions to create

07:00: State of Entrepreneurship: India vs China

15:00: The value of trust in entrepreneurship

27:00: Working with the government on entrepreneurship

34:30: The best way to learn how to build a startup

(This story has been updated with corrections made to some quotes.)

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