Digitally Doing Business | A Hypothetical

Imagine two teams of engineering students, the first in Silicon Valley and the second in Nairobi. Each of the these teams develops an equally sophisticated and useful SMS-based mobile phone software application that will allow health clinics to create automated responses to reproductive health questions submitted to them via SMS. For example, women in the developing world who send SMSs about HIV/AIDS, pregnancy or condoms would automatically receive detailed information about these requests. They often have no other source of reliable information. Each group believe this product can be profitably marketed to health clinics and aid agencies around the developing world.

It is well understood that entrepreneurs in the developing world (the Kenyans in our example) face significant legal and institutional barriers from reaping the benefits of their good ideas. Measurements such as the World Bank Doing Business Index, as well as the management, political science and economics literatures have addressed these barriers in detail. They include, but are not limited to, the ability to secure seed capital, incorporate and legally protect a business, transfer money both domestically and across borders and efficiently and flexibly find employees well-positioned to perform. In short, much of the developing world suffers from a poor institutional ecosystem for doing business.

This post marks the start of a series of blog posts that ask the question: to what extent can new digital institutions help entrepreneurs circumvent poor institutional ecosystems and privately re-design their incentives landscape? As more of the machinations of global commerce go digital, new tools are emerging that would help the Kenyans in our example lower some of these barriers. The Digitally Doing Business series will explore new opportunities ranging from digitally registering as a US company regardless of physical location to securing previously unavailable venture funds and low-cost payments from abroad to distributing work to employees via mobile phones.