A few score of immigrants were sworn in today as U.S. citizens at Monticello, the home of Thomas Jefferson (third U.S. President and founder of University of Virginia.) The new citizens pledged to “absolutely and entirely renounce and adjure all allegiance and fidelity to any foreign prince ...potentate, state or sovereignty.” These words sound quaint in a world where oath-taking has become a rarity. But the solemnity of the event ensured that none of these new citizens was kidding. They are buying in to America seriously. A reasonable question on this Independence Day is “Why?”
America does have its problems: hostilities in Iraq and Afghanistan, historically high indebtedness, high unemployment, sagging economic confidence, an environmental catastrophe in the Gulf of Mexico, rising distrust of major institutions in society such as government, the media, and business—to name a few. (One can’t find a developed country in the world that isn’t feeling considerable pain at present.) But whatever impulse toward triumphalism and exceptionalism that an American might feel today, the current state of the world might warrant some humility.
Still, naturalized citizens tell a bright story: liberty, freedom of speech, and opportunity motivate their move. They want to make a better life for themselves—this is what used to be called, “the American dream.” Out of some 210 countries in the world, worldaudit.org ranks the U.S. in the top 10% on the basis of democracy, press freedom, economic freedom, civil liberties, and low corruption. This is consistent with other rankings, such as those by the Heritage Foundation, Reporters Sans Frontieres, and the World Bank. The U.S. remains the world’s largest economy. It is an extraordinarily creative country, judging by the success of industries as varied as entertainment (Hollywood), media (cell phones), information technology (Apple, Google), transportation (Boeing), medicine (Amgen, Celgene, Genzyme), retailing (Wal-Mart, Target, Best Buy), and so on. It remains a leader in research. Each year, it draws a large share of Nobel Prizes and similar recognitions for high achievement. Its universities are strongly represented in various global rankings. And it offers one of the most welcoming environments for entrepreneurs and inventors. Each year, a huge volume of new businesses is started in the U.S. Though many of these do not survive indefinitely, America offers a culture of second chances. In short, this country offers the opportunity to take risks toward the goal of making a great life.
One other motive merits some consideration. Each year, I get to know dozens of international students who enroll in Darden’s MBA programs. These people are pioneers in the best sense of the term: making a big gamble with financial support from family and friends; surmounting differences in language and culture; working hard; looking forward with optimism; and taking risks. Many aspire to start and lead a company (research suggests that immigrants are 30% more likely than native-born Americans to start their own business.) These students tell me in many ways that they have come to Darden and America to prove what they can do in the context of other excellent students.
Perhaps America is a magnet for talented visitors and immigrants because it is a proving-ground for excellence. Two other bits of information lend some credence to this:
1. Why do foreign firms choose to offer their stock for sale in the U.S.? In a couple of research articles, Susan Chaplinsky, Latha Ramchand, and I looked at initial public offerings of stock in the U.S. by foreign firms. You might think that distance and unfamiliarity would prompt U.S. investors to demand a higher return from these foreign issuers. In one article, we reported that there are no discernable differences between U.S. and foreign firms in the cost of issuing stock in the U.S. And in the other paper, we concluded that even for firms from the riskiest countries (i.e., the so-called “emerging markets”) the costs of issuance were immaterially different. We found that the markets weren’t necessarily indifferent to the riskiness of the foreign home countries. But rather, only the best firms actually made it to the U.S. markets. Thus, to make a successful initial public offering in the U.S. is quite a mark of quality. This is consistent with anecdotal evidence from CEOs and CFOs that the very demanding securities laws and listing requirements, and the sophisticated investment community in the U.S. hold a high standard relative to many other countries in the world. To issue stock here is to be world-class.
2. Why are foreign b-schools setting up shop in the U.S.? I chair a task force of b-school Deans on the globalization of business education. (More about this in coming months.) In that capacity, some journalists called me to invite my comments on the entry of non-U.S.-headquartered b-schools into the U.S. I said to one journalist, that entry is an interesting choice on the part of these schools: "We have an abundance of schools here and usually the idea is to go where the competition isn't. The schools are driven a desire to establish and succeed in the U.S. as a basis for validating their models. Aiming to have a successful business school in the United States is like wanting to see your plays produced on Broadway -- the audiences are most discerning." To another journalist I said, “"The U.S. is where the MBA was invented and, to some extent to establish a footprint in this market, is an additional means of legitimizing a school's brand and stature globally." Alice Guilhon, Dean of the French b-school, SKEMA, said, “For European students, this is a dream; America is a dream for them. And it is a dream for us, to be known in the U.S….To be in America is to be close to the headquarters of all the big firms, to be where the story began. …To be well-known in America, it is leverage for the visibility of the school in the world.” David Bach, dean of programs of Instituo de Empresa, another entrant, said, “… you have very sophisticated customers. … we want to show that we can have success in such a competitive, difficult market.”
All of this has led me to reflect on what all of us are celebrating this day. Is it independence from? Or is it independence to? Much of the focus is on the Declaration of Independence from Great Britain on July 4, 1776. But I will lift a toast to the notion of independence to –through the Declaration of 1776, our founders created an independent society where it is possible to strive in world-class competition, to prove your personal best, to test yourself against strong competition, and to leave a mark on the world of which you will be proud.