Ignorance about Emerging Markets ?!

In times of comprehensive global news reporting, constant accessibility of digital information and excessive utilization of social media, we assume we know quite a lot. But is this really the case? Are people’s perceptions of global development and emerging markets really accurate? Or are there considerable misperceptions and biases that influence people’s capability to assess risks and opportunities resulting from operating and investing in emerging markets?

WU-Professor Phillip C. Nell together with PhD candidates Benoit Decreton and Jan Schmitt initiated and supervised a project that addressed these questions. It was implemented by eight CEMS students at the master level and with the help of the Gapminder Foundation, whose mission is to drive a fact-based worldview. Hans Rosling, the founder of the NGO Gapminder, stated that the two of the most prevalent biases of people are the continuing belief of a firm split in a developed and developing world as well as the impression that “everything is getting worse”.

Based on his idea the team developed a survey with several questions about the world and the development level of emerging markets such as Bangladesh, Mongolia or Nigeria. In this study, over 1.000 master’s students from the three major Viennese universities of business, technology and law were tested, as those are the typical educational backgrounds in Austrian leadership positions. In that sense, the future leaders in Austria were surveyed.

Questions such as “What is the life expectancy in Bangladesh? (72y)” or “How much of Brazil’s GDP came from the service sector in 2014? (71%)” were asked. The results were astonishing: master students answered only 15% of the questions correctly as they systematically erred at the lower end of the possible answer options.

Strategic options that exist in emerging markets, both on the supply as well as on the demand side might be wrongly assessed by managers and might result in an ineffective allocation of capital and resources.

Possible explanations might be misleading news reporting on emerging countries that is driven by sensation seeking rather than a balanced view on the development in these countries. Subsequently, a collapsing knitwear factory in Bangladesh seems to be more attractive to report on than a life expectancy that is not much lagging behind the ones of Western countries.

For these reasons, we believe that it is of utmost importance to raise awareness about prevalent misconceptions on emerging markets.

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