The Conglomerate Way to Growth

Many developing countries do not have the capabilities that growth industries demand, yet developing these capabilities is impossible unless the industries that require them are present. One way to solve this problem is through vertical integration – that is, firms that can coordinate the supply and demand for any new capability.

CAMBRIDGE – Countries do not become rich by making more of the same thing. They do so by changing what they produce and how they produce it. They grow by doing things that are new to them; in short, they innovate.

Many countries have been altering their growth strategies to reflect this insight. But they are being distracted by some of the greatest – but atypical – examples of success.

We all have heard of Steve Jobs, Bill Gates, and Mark Zuckerberg – twenty-something college dropouts who built billion-dollar companies at the cutting edge of global innovation. We have heard of the many start-ups that they and others acquired for hundreds of millions of dollars - Instagram, Skype, YouTube, Tumblr, and, most recently, Waze. So why not emulate these successes?

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