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IF BUSINESS SCHOOLS TREAT GLOBALIZATION AS A DRAMATIC PHENOMENON RATHER THAN AS PERVASIVE REALITY, PORKOVICH ARGUES, THEY WILL BE ILL PREPARED TO TEACH THEIR STUDENTS TO LEAD AND INNOVATE IN THE 21ST CENTURY. Preventing a Financial Crisis—Before It Happens To manage financial crises, governments often turn to bailouts to provide financial help to suffering industries. But bailouts only exacerbate the problem by giving banks incen- tives to concentrate their lending to specific sectors, according to a new study. That concentration of financ- ing can place already fragile econo- mies on even shakier ground. That's according to a study by Amar Gande, assistant professor of finance at Southern Methodist Uni- versity's Cox School of Business in Dallas, Texas; Kose John, professor of finance at New York University's Stern School of Business; and Lemma Senbet, pro- fessor of finance at the University of Maryland's Smith School of Business in College Park. In their paper, the three research- ers examine how banks, bailouts, and economic specialization can lead to financial crises in emerging markets. The researchers find tration effect, leads to more special- ization, which only intensifies an economic spiral. The answer? The authors propose the implementation of two tax struc- tures—one for the banking sector and one for the corporate sector. A tax on banks, say these researchers, The Death of Globalization Business schools may need to re-evaluate the way they teach, promote, and in many ways revere the concept of globalization. In a paper published in the March Italian edition of the Harvard Business Review, Boris Porkovich, associate dean of gradu- ate programs at the International University of Monaco, argues that globalization is no longer a special phenomenon—and, therefore, should no longer define business schools' perception of the world. In "The End of that the state of a country's economy relies on two pri- mary issues: the economic specialization and banks' lending practices. When banks finance a wide range of businesses, they help the economy stay diversified and healthy. However, if an economy relies too heavily on a single industry, even the slightest bump in the road can have devastating effects. When the economy goes into freefall, banks tighten the purse strings and concentrate their lend- ing in very specific sectors. This cycle, called the bank debt concen- Amar Gande, who worked with researchers Kose John and Lemma Senbet (not pictured). would apply to loans paid in full, decreasing banks' incentive to play it too safe. A tax on corporations would act as an insurance premium "to defray the cost of a bailout scheme" at times of financial crisis. Prior research in this area has focused too heavily on reactions to financial crises after they occur. Tax structures that change banks' incen- tives and reduce economic special- ization would prevent such crises by "fixing the roof while the sun shines," the authors write. The study, "Bank Incentives, Economic Specialization, and Finan- cial Crises in Emerging Economies," is forthcoming in the Journal of International Money and Finance. Globalism and the Rise of Innovation: A New Challenge for Business Educa- tion," Porkovich describes how con- cepts such as overcoming borders, responding to cross-cultural chal- lenges, and addressing differences in culture and communication are no longer concepts unique to the academic mindset. Rather, they now form the foundation of the lives of a new wave of leaders, whom Pork- ovich calls the "global generation." For these leaders, a borderless busi- ness environment, driven by improv- ing technology and accelerated busi- ness cycles, is not a special force to be considered. It's simply a given. The challenge for business Boris Porkovich schools is to create programs that reflect the global generation's mind- set and integrate globalization into their thought processes. If business schools treat globalization as a dra- matic phenomenon rather than as pervasive reality, Porkovich argues, they will be ill prepared to teach their students to lead and innovate in the 21st century. BizEd MAY/JUNE 2008 55