Darden Professor Finds Ways to Promote Latin American Startups

Dec. 13, 2007 — Peter Rodriguez, associate professor of business administration at the University of Virginia's Darden School of Business, studies developing economies in Latin America with the intent of finding ways to spur sustainable growth.

Through his research, Rodriguez has learned that even amid profound poverty, there is no shortage of good business ideas. But unlike in the U.S., where banks customarily extend lines of credit for small business development, it is very difficult to get money from a third party in a developing country.

Rodriguez sees angel investing — early stage, private funding — as a prerequisite for growth in Latin America. "Lack of finance limits entrepreneurship and therefore limits economic growth," he says. "But the critical institutions that unleash economic growth are formed by people. If we believe that these institutions really matter, then growth can happen anywhere, because institutions are human-made."

Taking a cue from Bangladeshi economist Muhammad Yunus, whose revolutionary employment of micro-credit earned him the Nobel Peace Prize, Rodriguez is now working to stimulate business infrastructure from the ground up.

Rodriguez is working with Agora Partnerships, a nonprofit organization that identifies promising business ideas and potential investors in emerging economies. Agora finds the ideas and funding, while Rodriguez and Darden M.B.A. students provide business consultation, helping entrepreneurs with tasks such as market research, accounting and improving their business plans.

"This is the counterpart to micro-credit," says Rodriguez. "It’s getting money to the people who need it, but also delivering business expertise for free."

Rodriguez and a student team helped an entrepreneur with no business experience translate his idea for building bamboo houses in Nicaragua into a sound business plan. Bamboo is ecologically sustainable and inexpensive to grow, and bamboo homes have proven to be capable of standing up to hurricanes. Yet the business team’s market research revealed public skepticism about the durability of bamboo homes. This important finding influenced the final design of the house, which includes a brick façade to quell consumer fears.

"This is a way for M.B.A.s to use what they know and what they are learning to make a difference," says Rodriguez. These creative business collaborations are enabled through video and Web conferencing and also trips to Nicaragua. Last year, 16 M.B.A. students under Rodriguez’s supervision spent 2,000 hours assisting burgeoning Nicaraguan companies.

Nicaragua is just the start. Citing overwhelming student interest, Rodriguez has plans to continue this work in other areas of Latin America as well.

"The hope is that if development can proceed this way it will attract more investors, which will encourage more entrepreneurs and support an infrastructure for small businesses that allows risk-taking," says Rodriguez. "We’re bridging the gap."

— Written by Melissa Maki, research communications coordinator for the Office of the Vice President for Research and Graduate Studies.