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Stanford Graduate School of Business has received a $150m gift, the largest in its history, to focus on alleviating poverty in emerging markets. The Institute for Innovation in Developing Economies is to find ways of applying the kind of entrepreneurial skills made famous at Stanford, situated in the heart of California’s Silicon Valley, to spur economic growth.

Though one of the largest gifts ever received by Stanford University, it is just half the sum donated to the University of Chicago’s business school in 2008 by David Booth.

The Stanford money has been given by Robert and Dorothy King, the former a graduate of the business school (1960) and a venture investor through his firm, Peninsula Capital. The couple say their interest in developing economies was fuelled when some of Stanford’s international students stayed at their home. One was a Chinese student who was instrumental in founding Baidu, a Chinese-language search engine, set up with seed capital from Mr King’s Peninsular Capital. Now an internet giant, Baidu employs more than 10,000 people in China.

Providing seed capital or microfinance will not be the primary focus of the new venture, says Mr King, but there will be a focus on growing established businesses. “One of the challenges is to take businesses to scale. It’s the on-the-ground work that really excites me.” The institute will work with not-for-profit organisations, NGOs, and entrepreneurs in developing countries. Students on the Stanford MBA programme will be encouraged to participate in these projects between the first and second year of their two-year degree.

The on-the-ground work is just one of three areas of focus. The other two are academic research and teaching, through courses for Stanford students, alumni and entrepreneurs from developing countries, who will be financed to study in California through the institute.

For Garth Saloner, the South African dean of Stanford GSB, the institute should bring two benefits. “The end goal here is poverty alleviation and capacity building for Stanford University.”

One of the most distinctive elements of the initiative is that although housed at the business school, every department at the university could be involved, including engineering, healthcare, law or public policy. The multidisciplinary approach is what distinguishes the centre from others in the US, says the dean. “I do think directionally that this (alleviating poverty in developing economies) is the sort of activity that people do not usually associate with a business school. “But issues such as sustainability, governance and water policy are areas where leadership and entrepreneurship can play a critical role, he argues.

Of all top business schools it is Stanford that has been leading the way in developing interdisciplinary teaching, seen as critical as the world of public policy, law and regulation increasingly informs business decisions. At Stanford one in six MBA students study on a double degree programme – getting a degree in engineering as well as business, for example. Prof Saloner says he hopes to increase the number to one in every four MBAs.

When the Kings approached the business school with their plan, Prof Saloner said that the school had already developed a group of faculty that taught regularly on issues relating to development and entrepreneurship. A proportion of MBA students had also worked on the ground in developing economies as part of a course called Entrepreneurial Design for Extreme Affordability.

The Kings are no novices either. In 1995 they set up a venture philanthropy foundation, Thrive, to fund social ventures for young people in the US. “The experience we have had with Thrive has been the model for the institute.”

The agreement between the business school and the Kings took 18 months to negotiate. The Kings have made a $100m gift to fund the institute and committed a further $50m in matched funding, to involve other donors in the project.

Located in Palo Alto, Stanford University lays claim to having educated the creators of some of the world’s top entrepreneurial companies, including Google, Yahoo and Nike.

Nike founder and chairman Phil Knight, a 1962 graduate, gave $105m to the business school in 2006, to support the building of a new campus for the school. At the time, the Knight gift was the largest ever donation to a business school, but in 2008 investment specialist David Booth pledged $300m to the University of Chicago’s business school, subsequently renamed Chicago Booth. Mr Booth asserted that he built his fortune by applying the efficient market theories he learnt while a student at Chicago.

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