The Venturesome Economy: How Innovation Sustains Prosperity in a More Connected World (Kauffman Foundation Series on Innovation and Entrepreneurship)

521 Pages·2008·2.01 MB·English

by  Amar Bhide

The Venturesome Economy

Amar Bhidé
The Venturesome
Economy
How Innovation
Sustains Prosperity
in a More
Connected World
PRINCETON UNIVERSITY PRESS
Princeton and Oxford
Copyright © 2008 by Princeton University Press
Requests for permission to reproduce material from this work should be sent to Permissions,
Princeton University Press
Published by Princeton University Press, 41 William Street, Princeton, New Jersey 08540
In the United Kingdom: Princeton University Press, 6 Oxford Street, Woodstock,
Oxfordshire OX20 1TW
All Rights Reserved
Library of Congress Control Number: 2008933009
isbn-13: 978-0-691-13517-5
British Library Cataloging-in-Publication Data is available
This book has been composed in Minion and Myriad
Printed on acid-free paper. ∞
press.princeton.edu
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
To the memory of my parents,
who long ago
ventured to lands afar
and brought the world home to us.

Contents
Preface ix
Introduction 1
Book 1 Cautious VoyagersWhy VC-Backed Businesses Still Favor Home 31
1 VCs in New Ventureland 41
2 Advancing the Frontier:The Nature of Mid-level Innovation 59
3 Marketing:Edging into International Arenas 101
4 Offshoring:The Ins and Outs 152
5 Founders and Staff:Global at Home 206
6 On Methods and Models 239
Book 2 Embrace or Resist? 251
7 Alarmist Arguments 257
8 The Reassuring Realities of Modern Cross-Border Flows 272
9 Valuable Differences 287
viii Contents
10 Serving the Service Economy 296
11 Venturesome Consumption 308
12 Winning by Using 324
13 Nondestructive Creation 341
14 Immigrants:Uppers or Downers? 356
15 The Elusive Underpinnings 380
16 First Do No Harm 411
Acknowledgments 439
Appendix:Tables 443
Notes 461
References 483
Index 499
Preface
The growing integration of the world’s economy in general, and the in-
creased participation of China and India in international trade in particu-
lar, raise important questions: Will competition from more than a billion
Chinese and Indians reduce wages and imperil the prosperity of the West?
What, if anything, is to be done?
Classical economic theories of the eighteenth and nineteenth centuries
provide limited guidance. These theories assume that trade takes place be-
tween countries with comparative advantages based in immutable natural ad-
vantages: It behooves Britain, where it rains a lot, to focus on rearing sheep
and shearing wool and to let sunny Portugal grow grapes and make port. Be-
cause geographic conditions are fixed, in classical economic theory the wool-
for-port trade continues forever.1 But today the comparative advantage of
poor countries derives from their historical failure to use the technological in-
novations that made the West rich. The impetus for trade between rich and
poor countries arises from the differences in their accumulated technological
capabilities rather than in their geographic endowments. As Edmund Phelps
and I have noted, trade based on differences in technological capabilities can
eventually extinguish itself: Openness to trade helps China become more
technologically advanced and prosperous; increased prosperity causes wage
differentials with the United States to shrink, ultimately making it unprof-
itable to import cotton from the United States and send back shirts and skirts.2
ix