Economist shows kinship counts

“The power of tribes” draws on research by Pankaj Ghemawat, the Anselmo Rubiralta Professor of Global Strategy at IESE Business School which shows that two countries sharing common language trade 42 percent more with each other than two otherwise identical countries that lack that bond.

Ghemawat’s work also reveals that two countries that once shared imperial ties trade 188 percent more than countries without such common ancestry. And imperial ties affect trade patterns more than membership of common currency which boosts trade by only 114 percent.

The Schumpeter column notes that cultural ties matter in business because they lower transaction costs.

“Tribal loyalty fosters trust. Cultural affinity supercharges communication. Reading contract is useful, but you also need to be able to read people.

“Even as free trade and electronic communications bring the world closer together, kinship still counts,” it says.

Written by The Economist staffers, the Schumpeter business and management column and associated blog are named after Austrian-American economist Joseph Schumpeter who likened capitalism to “perennial gale of creative destruction”.

[For other Schumpeter blogs: economist.com/blogs/schumpeter]

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