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 / Fourth Quarter 2002 / Issue 29(originally published by Booz & Company)


Recent Studies

Thousands of European and American responses to this simple question about personal well-being were correlated by the trio with measured levels of inequality. In all, 128,106 responses were analyzed from two well-established surveys. U.S. data came from the United States General Social Survey (1972 to 1997), and European data came from the Euro-Barometer Survey Series (1975 to 1992). Happiness levels over time were then correlated with the prevailing level of inequality (using inequality measures for whole countries in Europe and individual states in the U.S.).

The use of happiness data for rigorous statistical investigation raises some academic eyebrows. But a body of literature in psychology and economics supports this approach. Further, the results of this study are intriguing and could help explain differences in attitudes toward big government on the two continents.

Not only did the study find Europeans to be significantly more sensitive to social inequality than Americans, but it also found clear differences between ideological and income groups in each region. In Europe, people on the political left are more affected by inequality than those on the right. In the U.S., by contrast, the impact of inequality has no clear ideological divide. More interesting still are the variances in attitudes among the rich and poor. In Europe, feelings of inequality affect poorer people’s happiness much more than rich people’s. In the U.S., this pattern is reversed: It is the happiness of the rich that suffers as a result of inequality, while the U.S. poor seem indifferent to it.

The authors pose two potential explanations for their findings. One, Europeans prefer feeling that they live in a more equal society; or two, social mobility is (or is perceived to be) higher in the U.S. The researchers conclude that the latter explanation is the more plausible. Because Americans believe that their society is more mobile, the poor believe they can move up. However, the rich worry they may fall back.

Europeans, on the other hand, perceive themselves to be less mobile. Inequality has a negative impact on the happiness of Europe’s poor because they believe they are stuck. (Other research has found that 71 percent of Americans believe the poor have a chance of escaping from poverty, compared to just 40 percent of Europeans.)

Asia’s Competitive Hurdles
Bala Chakravarthy ([email protected]), Peter Lorange ([email protected]), and Hee-Jae Cho, “The Growth Imperative for Asian Firms,” Nanyang Business Review, January–June 2002.

Healthy rates of growth are the expectation of large corporations. But their capacity to disappoint is larger than you may imagine.

Bala Chakravarthy, Peter Lorange, and Hee-Jae Cho, three academics at the Swiss business school IMD, examined the performance of 3,000 public companies throughout the world with annual revenues of more than $500 million between 1993 and 1999. A mere 24 percent recorded year-over-year growth and positive operating income throughout this period.

These global figures appear worrying enough, but for Asia (905 of the companies were Asian), the news is even worse. Only 2 percent of Asian companies in the survey demonstrated consistent profitable growth during this period. The companies that recorded sustained growth were largely (and predictably) drawn from the technology sector.

Although the performance of the Asian companies can, to a greater or lesser extent, be attributed to the region’s economic travails in the 1990s, reasons for the more generally poor performance are less easily identified. Professors Chakravarthy, Lorange, and Cho (respectively, professor of strategy and international management, IMD president and Nestlé Professor of Strategy, and research associate) point out that commentators have a standard litany of reasons for disappointing growth. These are managerial complacency, lack of appetite for renewal and change, overly rigid strategy-making processes, and an emphasis on profits rather than growth that is deeply built into management cultures and systems.

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