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TaussigMarkus Taussig
Harvard Business School, Strategy Unit
Private equity at the frontier: A model approach to incomplete institutions?

Markus Taussig is a doctoral candidate with the Strategy Unit at Harvard Business School. His dissertation looks at how institutions shape strategy and entrepreneurship in emerging markets, including research on both the performance of private equity investments and small business formation in emerging markets. Markus has published in the Journal of Law, Economics and Organization and the Journal of East Asian Studies.
Previous to beginning at HBS, Markus spent a decade in Vietnam working primarily as an independent research consultant for a range of international development organizations including the World Bank, International Finance Corporation, and The Asia Foundation. His areas of expertise included: a.) enterprise survey design and implementation; and b.) auditing of state-owned enterprises. He also helped launch an international rubber trading company and started up and managed a tourism company for three years.
Markus holds a Masters in Southeast Asian Studies and International Economics from Johns Hopkins University's Paul H. Nitze School for Advanced International Studies. He has also been a recipient of the Fulbright, NSEP Boren, and Blakemore Fellowships. Personal interests include sports, politics, travel (especially in warm climates), and spending time with his wife, Hanh, and now one-year-old son, Kien.

Private equity at the frontier: A model approach to incomplete institutions?

An extensive economics literature indicates that more complete institutions positively affect firm-level growth by enhancing efficient market allocation of financial and other external resources. Management scholars have complicated this picture by highlighting evidence that elite local firms can actually benefit from weaker institutions. This paper suggests that private equity (PE) are able to substitute for institutions and tap into the competitive advantages of well-positioned firms in emerging markets. Consistent with this proposition, evidence from a novel dataset covering investments in 51 emerging markets indicates that PE firms perform better when country institutions are weaker. Further findings provide insight into the process, with the negative relationship strongest for PE firms with local experience, in more competitive industries, and for PE firms with local experience in competitive industries. Firms with foreign experience, in contrast, appear less able to substitute for weak institutions.



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