Emerging challenges and emerging markets
November 14, 2025
Fifteen short-long years ago, I was a new transplant at Cornell, on the faculty at the Samuel Curtis Johnson Graduate School of Management. I had chosen Cornell after a warmly fulfilling career at Ohio State University (Anne and I raised our sons there), drawn to Ithaca by a number of wonderful opportunities, not least of which was the chance to help the Johnson School expand its global perspectives in education and research. There seemed to be a hunger from the leadership and the senior alumni voices to do more around the world for the students.
Together with Professor Yaru Chen, who was hired with me at the same time and with the same mandate, we brainstormed possible good next steps and with a lot of feedback within and without, we co-founded an institute dedicated to the study and support of investing and doing business in emerging markets (EMs). It was affectionately named the Emerging Markets Institute in 2010, focusing on “underfunded growth opportunities with problems” (a turn of phrase that became a working definition for EMs in Chapter 1 of my 2015 book, Cracking the Emerging Markets Enigma, Oxford University Press). (The metaphor — to “crack the code” á la Alan Turing and WWII’s “Enigma” team — expressed my humble goal to uncover a way to liberate the potential in emerging markets.)
My philosophy then – as discussed in the book – is that there was too much “euphoria” about what EMs are and this focus on the upside is misplaced. Indeed, it’s not the high rates of actual economic growth that fundamentally characterize emerging markets but the “even higher rates of potential economic growth that are hampered by the underdeveloped capital markets needed to finance them.” Not every scholar accepted my view, as they can be seen as too focused on the role of capital markets as the fuel for growth. But, as I see it, economic value is not measured only via the potential but also in the risk inherent in failing to realize it. The challenges facing emerging markets at that point in time (barely past 2008) were myriad, and investors were still reeling from the global financial crisis. The big priorities then were to focus on the attributes that really define EMs: market capacity constraints (depth, breadth, vibrancy) relative to economic growth potential, the operational efficiency of those markets however small they were, the foreign investment restrictions that precluded foreign capital to supplement inadequate local capital market, corporate opacity, limits on legal protections for investors, and, of course, political instability.
Ultimately, what EMI sought to do – along with the book that laid the conceptual foundations for its activities – was to raise the game in business circles about what EMs really are, not what JP Morgan, Goldman Sachs, the World Bank/IMF or others judged them to be. Surely, we could conceptualize them in a multi-dimensional way. And surely we could be honest about the problems.
New leadership takes EMI to the next level
Five years in, Lourdes Casanova, who became the next director of EMI after I took on other leadership duties, and her oft-coauthor Anne Miroux (from the UNCTAD and OECD) took EMI to new heights. They began issuing the invaluable annual Emerging Market Multinationals Report. They expanded massively the profile of the fledgling annual Emerging Markets Conference we started in 2011 (with about 35 people on the 4th floor of the Cornell Club in NYC, thank you to those who accepted my invitation to come). Dr. Casanova began to involve many more MBA students – later Executive MBAs, Professional Master’s students, and undergraduates – in the activities of the EMI. She expanded the board of directors. Her energy was unbounded.
Fast-forward to last week, when we honored 15 years of the Emerging Markets Institute and ten years of the annual Report at EMI Conference 2025. It was a mindful and energetic celebration of new thinking and approaches. Our primary focus was on Latin America. Rich with biodiversity awareness, wealth, conflict, knowledge, and power in all its forms, it would be difficult to point to a region more at the present crossroads of financial impacts and potentials, more in need of innovative attention. This year’s guiding theme, New Rules, New Opportunities, explored how businesses, investors, and policymakers can approach their goals in this vital and changing landscape. The EMI community is active in analyzing the strategies needed to thrive amid shifting regulatory frameworks, supply chains, and global partnerships. I am still reflecting on the many learnings from the experts gathered.
My book illuminated the more conventional markets, appropriately for the time. In 2015, necessary capital flows to emerging markets were “stunted in turn by operational inefficiencies, restrictions on foreign participation, problems of poor governance and transparency rules, weak legal protections for investors, and political instability.” Global finance responded, and the partnerships of the past decade and a half have brought tremendous productivity to investors, along with significant damage to nature and climate. Consequently, the risk structures requiring our attention most urgently are the ones hampering biodiversity finance and entrepreneurship.
So vital to reflect on these new challenges as COP30 in Bélem, Brazil moves fully into gear.
The new challenges we see emerging
Four years ago, the Paulson Institute, The Nature Conservancy, and Cornell’s Atkinson Center for Sustainability published the study The Cost of Biodiversity Loss, estimating that the biodiversity financing gap is such that an additional $700 billion annually would be needed to reverse the decline in biodiversity by 2030.
In our paper Biodiversity Entrepreneurship (recently accepted by the Review of Finance), I worked with co-authors Sean Cao (Maryland), William Xiong (Binghamton), and Hui (Frank) Xu (Lancaster) to examine a new challenge for entrepreneurial finance – biodiversity start-ups – and provide implications for remedying their difficulties. Fine-tuning a large language model (LLM), we compare financing dynamics of 630 biodiversity-linked start-ups with those of other general sustainability ventures and generic (not ESG-related) startups. Through this lens, we identify three risk conditions contributing specific challenges for biodiversity startups: resource constraints for potential investor outreach, a limited investor base, and the mainstream media’s tendency to focus on larger companies rather than the small-and-medium-sized concerns that focus on biodiversity protection.
These businesses are in a class of their own: they raise less capital, but attract a broader coalition of value investors and impact funds and public institutions. My co-authors and I hope that, by adding to a growing body of studies related to this issue, we may call attention to the incredibly high rates of potential economic growth that are hampered by these risk conditions. Perhaps this research can inform policy and practice for mobilizing private capital toward biodiversity preservation, emphasizing hybrid financing models and strategic communication.
Impact investors and public-sector actors can intervene in promoting biodiversity innovation. Programs encouraging blended financing arrangements may complement private sector investments, thereby supporting ventures that advance broader ecological goals while contending with inherent scale and risk challenges. We highlight promising avenues for future research, including a deeper examination of investor coalitions, the long-term performance of biodiversity startups, and the broader societal impacts of their nature-positive innovations.
As sustainability and resilience awareness grow more pronounced, understanding these mechanisms will be increasingly vital for both financial and environmental decision-makers. Our team is brainstorming a number of extensions. Your thoughts on the paper are most welcome.
New rules, new challenges, new opportunities, a new name!
One more important note about this year’s EMI Conference. Lourdes Casanova has done a powerfully-inspired job of keeping the Institute’s doors open for industry in new ways through lasting relationships. We are blessed to maintain stalwart partnerships with likeminded financial professionals who want to prevent the human suffering and the loss of opportunity that results from it. At the close of last weekend’s 15th anniversary celebration, we welcomed a new era, marked by the generous naming of the Canizares Center for Emerging Markets. This wonderful gift from Gail and Roberto Canizares expands EMI into a more holistic global umbrella for accepting the challenges we’re facing. Stay tuned!
Our research always accepts the challenge
Whenever we commit to a research endeavor, we’re committing to an open-ended, possibly fruitless, certainly frustrating experience during which we learn from what we find and don’t find, confirm and negate, discover unexpectedly. Our faculty shine in this area, with some of these specific notables from the last month.
FT Research Insights rankings were released this week and we were of course pleased to see that by external measures, our work is growing in its impact and effectiveness to industry and practice, to research relevance, and most importantly on student preparedness for their careers. You can read about the rankings here.
Our faculty productivity is remarkably high in the past three years. Check out some examples:
- David Rand’s publications study the impact of AI on political persuasion – the methodologies, effects, and observed outcomes of its use – have been accepted in the journals PNAS and Nature.
- Nature has also accepted Jacqueline Rifkin and her co-authors’ examination of the effects of video participation in major life interactions like job interviews, court proceedings, and face-to-face consultations.
- Will Cong and his co-authors received three of the five best paper awards at the Financial Management Association Annual Meeting in Vancouver.
- Suzanne Shu and our former student Rin Yoon received the ACR Conference Best Competitive Paper Award for “The Impact of Adding a Financing Option to Affordable Purchases.” In addition, Suzanne and our former student Deepak Sirwani learned that their paper “When ‘Year’ Feels Near: How Year versus Length Framing Alters Time Perception and Consumer Decisions” has been accepted in the Journal of Marketing Research.
- Kaitlin Wooley and co-authors will publish The failure gap in Journal of Personality and Social Psychology.
I am so proud of our colleagues’ many accomplishments.
And I couldn’t leave without mentioning
My travels to Asia this month allow me to connect with alumni and educational partners in Hong Kong, Beijing, Shanghai, and Seoul. The Cornell China Business Forum – our second annual – promises to rock the house on November 14 with presentations by our Greater China Alumni Advisory Council members, alumni volunteers, our college partners (Tsinghua’s PBC School of Finance, Peking University’s Guanghua School of Management), Forum speakers, and the whole Nolan, Dyson, and Johnson alumni community. I will report back in an upcoming blog post.
Our university is strong. During his inauguration last week, Cornell President Mike Kotlikoff stressed that the challenges before us will “have an impact far beyond our own institution.” He added, quoting his predecessor Dale Corson, that we are “bound to respond to these problems out of a deep sense of our common destiny, and develop out of these responses a new sense of our common purpose.” On November 7, 2025, Cornell University reached an agreement with the United States government, restoring funding without any restrictions on academic speech, content, or curricula, is more than a good sign. Kotlikoff re-stated the pledge that Cornell will serve as a model for others to follow: “A university committed to open inquiry, and the values of our democracy; that prizes access and diversity, rewards merit, and protects everyone from discrimination and bias; a source of knowledge, creativity, and innovation; a place of personal transformation and intellectual awakening; a contributor to our country’s strength and well-being – now and for generations to come.”
Our Provost Kavita Bala has launched a Task Force on the Future of the American University to refocus our attention to where we as Cornell need to go to navigate today’s challenges.
