Globalization or Localization?

Globalization or Localization: Two roads diverged – or did they?

Given the ongoing awareness and interest in poverty alleviation and development, why are export-oriented entrepreneurs favored in the Gender Global Entrepreneurship and Development Index (GEDI) metrics?

The GEDI undertook a major effort to collect and analyze data on gender inequality as it related to entrepreneurs in a variety of countries across the globe. The authors of the study used a definition of “high potential female entrepreneurs” that focused on the following characteristics: innovativeness, market-expanding and, finally, export-oriented.

The first question that comes to mind when I consider “export-orientation” is that the largest and fastest-growing market opportunities are in the developing world. When one considers the development outcomes when supporting female entrepreneurship, certainly, the ventures having the greatest potential are the those that provide a “need to have” solution in a large and growing marketplace. Today, the most developed economies are expected to continue to grow, but slowly. Developing economies, especially major emerging markets, in contrast, are expected to show robust growth.

It is an anachronism to discount an entrepreneur’s potential, female or male, simply because they start selling in their own backyard. By focusing on export-orientation, the GEDI researchers appear to be doing exactly that, at least for entrepreneurs who benefit by their location in large and growing markets in the developing world.

Of course, an orientation in industry toward export brings the power of competition to maximize productivity and spur growth. However, is meeting the local, domestic, or regional market need more appropriately in a large and growing developing-world market lesser potential that orienting toward exports to foreign markets?

Case in point: Yahoo!’s acquisition of Maktoob reverberated across the Arab world just before I made the move to Saudi Arabia in 2010. Maktoob started out in Jordan as an email services provider localized for the regional, Arabic-language marketplace. The company evolved into a leading internet portal and online community. To some extent it was a “clone” of similar companies in the West. It developed a PayPal-esque and eBay type of online payment and auction platform.

Despite the fact that the region lacked an “exit” (no previous tech-company IPOs), Maktoob achieved a successful acquisition. The acquisition fundamentally changed the entrepreneurial landscape in the Middle East. Regional marketplace orientation and localization as a business model are essential leaping-off points for growing innovation ecosystems. As Faisal Ghori writing in the Huffington Post rightly pointed out, Maktoob inspired a whole generation of would-be entrepreneurs through their success and put the Arab world on the tech map.

Here is another example: I worked with a Russian biopharmaceutical company, Biocad, which had a decidedly domestic and “near abroad” (the Russian term for the former Soviet republics) market orientation. The company started out repackaging and distributing pharmaceutical products in Russia from its base outside Moscow. A lot of firms were doing this (and still are) all over the world.

Although Neurok Software’s plan (as I discussed in my previous post, “Start-Ups and the Scalability Dilemma”) didn’t initially include going up the value chain and achieving exponential growth, Biocad’s did. Soon after its initial success with repackaging and distribution, Biocad moved up the value chain to import active substance and reformulate therapeutics for the local market. The firm developed expertise and a track record in regulatory affairs and licensure of pharmaceuticals.

Then, Biocad began to expand geographically, as well, moving into other Eurasian markets. It launched production of key active substances to support its increasingly successful product line. In the process, Biocad also began to innovate, filing for patent protection and seeking out-licensees for the novel production methods of its reformulated products. It also began in-licensing technology too.

Through its technical prowess and good strategic management, Biocad became the first company to attain regulatory approval for a biosimilar to Biogen Idec’s Avonex(tm), a treatment of Multiple Sclerosis, when the Biogen treatment went off-patent. More importantly, the Russian Ministry of Health could afford to treat twice as many patients with Biocad’s drug due to the cost differential.

For transition economies and emerging markets especially, entrepreneurial ventures like Biocad and Maktoob demonstrate that a business model that builds on import substitution and imitation can lead to innovation. However, starting with the local or regional marketplace can be a critical success factor. The pathways converge further along in the wood.

Works Cited
Ghori, Faisal. 02 September 2009 “Building Hope: What Yahoo!’s Acquisition of maktoob.com means.” in HuffPost The Blog. http://www.huffingtonpost.com/faisal-ghori/building-hope-what-yahoos_b_275652.html

Global Entrepreneurship and Development Institute. (2013). The Gender Global Entrepreneurship and Development Index (GEDI). Washington: GEDI.