Birkbeck School of Business International London Bus Tour

New international students to the School of Business, Economics and Informatics (BEI) were treated to a tour of London on a 1950s red Routemaster bus.

On Tuesday 8 October, thirty of Birkbeck’s new international students embarked on a whirlwind tour of London on this year’s BEI Bus Tour.

From St. Paul’s Cathedral to the glitz of Piccadilly, newly enrolled students were treated to a comprehensive tour of London’s key sights and streets. What’s more, with a classic 1950s red Routemaster, this was a tour completed in the most quintessentially British way.

After a quick stop off outside City Hall, students were given a walking tour of the eastern Southbank – besides HMS Belfast – before looping into the beating heart of Britain’s financial district. A quick photo opportunity outside St. Paul’s Cathedral doubled as the perfect rest stop before the tour headed towards the West End and Victoria.

Hyde Park Corner saw the students on their home straight before this year’s tour passed along Shaftesbury Avenue and back into Bloomsbury.

Luckily this year the weather was on Birkbeck’s side, for most of the tour anyway…

Here are some shots from an action-packed afternoon of sightseeing.

Birkbeck's red Routemaster bus

 

International students at Birkbeck were treated to a tour of London. Birkbeck international students in front of London Bridge.

The classic red Routemaster bus.

Birkbeck students at the end of the bus tour.

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The Impact of Entrepreneurial Finance, Education and Religion on Entrepreneurship

This post was contributed by Prof Carlo Milana, Prof Helen Lawton Smith and Ning Baines of the Birkbeck Centre for Innovation Management Research (CIMR). The article focuses on a workshop held by the Centre on Friday 15 April titled ‘The Impact of Entrepreneurial Finance, Education and Religion on Entrepreneurship’, sponsored by Wiley

Wiley logoRaising finance is critical for small firms and medium-sized enterprises (SMEs) to survive, innovate and grow. Innovation is typically underfinanced. In this workshop, attention was focused on the influence that entrepreneurial finance and other mitigating cultural factors such as education and religion may exercise on reducing risk in entrepreneurship in the current economic hardship.

Speakers:

  • Jonathan Potter (OECD, Paris) Recent Market and Policy Trends in the Development of Mezzanine Finance and Hybrid Debt-Equity Instruments for SMEs.
  • Victor Martin-Sanchez (King’s College, London) Unemployment and Growth Aspirations: The Moderating Role of Education
  •  Kwame Ohene Djan (University of Agder, Kristiansand, Norway) Does Religious Affiliation Influence the Design of Corporate Governance? Evidence from the Global Microfinance Industry

Chairs:

  • Carlo Milana and Helen Lawton Smith

 

CIMR logo

Mezzanine Finance and Hybrid Debt-Equity Instruments for SMEs

The first speaker Jonathan Potter presented recent and innovative work undertaken by the OECD on the Mezzanine Finance and Hybrid Debt Equity Instruments for SMEs. This is an area of financing that is relatively understudied and is one which is beset by ambiguity in definition. This ambiguity led to a series of challenges to the speaker on the nature and merits of mezzanine finance for SMEs.

Dr Potter explained that the SME sector is characterised by a wider variance of profitability and growth than large enterprises. Survival rate of SMEs is lower. It is difficult to distinguish the financial situation of the firm from its owners. Relations between the firm and its stakeholders are likely to reflect personal relationships to a higher degree than in larger firms. SMEs often obtain funds from informal sources. The problem of asymmetric information between the entrepreneur and the lender is more serious for small firms because of the blurring of the line between the firm and the entrepreneur. Various financial instruments can help overcome the asymmetric information and agency problems. An efficient financial system should have a range of instruments that matches needs of firms. If the right instrument is available for the risk/return profile the market could provide finance for a viable project.

Mezzanine finance is a hybrid instrument – typical mezzanine facility blends several instruments, such as subordinated loan (interest rate above senior loan; principal normally repaid at end as “bullet”), participation in ongoing revenue or profits, or participation in upside share price growth with equity “kicker” (commonly an “equity warrant” allowing purchase of shares at floor price, or equivalent remuneration). It operates in private capital market, in private investment partnerships (with up to about 100 private investors). Funds are supplied by private investors (Limited Partners) – high net worth individuals; family offices; pension funds; other institutions. It has a defined life span (5-10 years) – tend to select investees and do deals in first 3 years, then hold and close fund taking returns at around 8-10 years. At maturity fund, it is liquidated and money returned to investors. Rules are determined by market practice.

However, with uneven presence in OECD countries, commercial mezzanine tends to be focused on larger firms and leveraged buy-outs. It is not generally issued to SMEs with modest returns and which do not want to relinquish control. Public intervention may be needed to stimulate the sector and extend to SMEs, where the private sector does not provide funding. Public intervention mechanisms can be in the form of participation in the market through mandates to private funds; direct provision of funds to SMEs and guarantees/preferential funding of private investment companies.

Mezzanine financing therefore can respond to a market failure in finance for established companies in traditional sectors seeking to grow or effect transformations. It involves features that respond to asymmetric information and agency problems affecting SME finance, allowing higher returns without taking control. It is a relevant niche in the spectrum of finance instruments. Mezzanine finance can fill the gap as the SME owner not required to cede control, can pay the principal at the end, the investor accepts more modest returns but can take a share of the upside. It should lead to more growth in existing SME sector. The public sector can play a role in stimulating this part of the market. Several OECD countries found the instrument valuable, e.g. France, Germany, USA, but in half of OECD countries there was no public mezzanine programme and officials were not familiar with the product.

An issue raised in discussion was about the nature of the UK market and activities of the British Business Bank, particularly given their strong interest in developing this form of finance. It is also clear from the questions asked that there is more research to be done in this field in a number of ways. These include aiding understanding of the extent to which mezzanine can actually impact on earlier stage financing, and how and why it is suitable for firms in some sectors rather than others. And, more evidence was needed on how mezzanine actually operates in some (e.g. European countries) in practical terms and what lessons this might carry forward to future policy.

CIMR_15_04_16_2

Unemployment and Growth Aspirations

Victor Martin-Sanchez’s theme was unemployment, entrepreneurial growth aspirations (EGA) and the moderating role of education. He argued that policies targeting human capital formation and entrepreneurial training contribute not only to enhance opportunity-seeking entrepreneurship, but also to territorial economic performance by enhancing the growth aspirations of entrepreneurs.

His research shows that the characteristics of the individual (founder/entrepreneur) and the environment in which the firm operates can act as drivers of EGA. However, during economic slowdowns, it is not clear how the interaction between entrepreneurs’ background and environmental conditions drives the EGA. The paper aims to investigate how an entrepreneur’s education and training shape the relationship between changes in unemployment rates, a variable that signals the economic and employment conditions, and EGA. Entrepreneurs’ judgmental decisions are actually beliefs or conjectures. The conjectures or beliefs depend on how they think the environment in which their firms operate will evolve. If those beliefs about new products or superior production processes are proved right, the entrepreneurs earn a profit; otherwise, they incur a loss. Through the different education processes, individuals gain knowledge and build mental frames and models used to interpret and make sense of the reality that surrounds them.

Education and entrepreneurship training experiences may enable entrepreneurs to gather and process information more efficiently. Accordingly different levels of education will be expected to moderate differently the way unemployment rate changes influence those entrepreneurs’ growth aspirations. Entrepreneurs with higher education are more likely to readjust accurately their conjectures or beliefs about the potential of their new ventures, in the light of changes in the environment. Individuals can learn opportunity‐seeking processes through the avenue of entrepreneurship training, thereby improving both the number of ideas generated and the innovativeness of those ideas. It has been commonly argued that economic crisis periods may destroy some of the old ways of doing business, while new alternatives for those who are able to identify them and dare to take them. The skills and knowledge gained through training in entrepreneurship help entrepreneurs to identify and pursue better opportunities, even in a difficult economic environment. It is shown that an increase in the unemployment rate reduces EGA. There is a connection between economic conditions and entrepreneurial behavior. The general effect of unemployment rate change is contingent upon the entrepreneurship training of the individual. Knowledge and skills gained by individuals’ opportunity identification and exploitation may vanish the influence of global economic conditions. Opportunity identification is a unique capability that might be developed in parallel with other capabilities.

The implications of the research are that there needs to be improvement in the design of public support policies towards entrepreneurs. A better understanding of the determinants of growth intentions will be relevant for anyone with a stake in growing venture, such as venture capitalist, customers, and suppliers.

Does Religious Affiliation Influence the Design of Corporate Governance?

Kwame Ohene Djan’s take on individual and cultural influences on the availability and use of SME finance was that of the influence of religious affiliation, in particular Christianity, compared to secular lending bodies, on the design of corporate governance. His work is inspired by a previous study that investigated the impact of religion on agency costs finding that religion has a significant negative influence on owner-manager agency costs. He points to the mitigation of regulation of religious affiliated firms by the national banking authorities. He drew on evidence from the global microfinance industry.

Like the other speakers, the importance of temporal context was raised. The context here is the debate which began with Max Weber’s classic work. The Protestant Ethic and Spirit of Capitalism where he claims that the Protestant Ethic which focuses on personal agency and diligence, spurred economic development. Although Weber’s thesis has been disputed the more general idea that certain religious attitudes may have positive implications continues to be discussed and supported. The extensive debate regarding the historical role of religion in the development of modern capitalism sharply contrasts with the meager attentionn that has been devoted to religion in current development research efforts.

The objective of the current research therefore is to investigate how religious affiliation influences the design of corporate governance in social enterprises with evidence from the microfinance industry. By using the random effects model, differences are tested between Christian and secular MFIs along various variables including the regulatory framework, Board Size, Board Meetings per Year the number of Female CEOs and the number of International Directors.

The study used panel data on 403 MFIs based in 73 countries across the countries in the world. Generally, the results indicate that Christian MFIs do not have a slacker governance design. The tests indicate, however, that Christian MFIs are relatively less regulated by national banking authorities.

The speaker was challenged on whether it would be more helpful in aiding understanding of microfinance and region if the results were couched as religious affiliation per se rather than Christianity.

The take away from this workshop is that it is very difficult to get a holistic understanding of financing SMEs in both traditional and high-tech sectors. However, by juxtaposing different cultural perspectives as well as economic provides insights that would not normally be available. Exciting times!

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Adapting to changing career priorities

This post was contributed by Birkbeck student, Emma Curry, who recently attended a networking event hosted by the Transforming Institutions by Gendering contents and Gaining Equality in Research (TRIGGER) team – a research project in Birkbeck’s Department of Management

CareerOn 10 July, the TRIGGER team was delighted to welcome Dr Carol Small (a former senior lecturer at Birkbeck who has worked in a variety of industries) to discuss her experiences of working within computing, and to share some advice on how to adapt to roles within different kinds of organisations. The event also sought to provide a networking opportunity for Birkbeck staff, students and alumni, many of whom were interested in pursuing a career in IT.

In search of career ‘flow’

Dr Small opened proceedings by asking the audience: what are the constituents of a good career? Rather than money, power, or academic prestige, Dr Small suggested one goal that might be worth striving for is that which psychologists define as ‘flow’. A position of ‘flow’ in your career is one in which a high level of skill meets a high level of challenge, meaning that you are constantly excited by your work and do not notice the time passing.

Dr Small then took us through the various roles she had worked in over the course of her career, and the challenges and opportunities that each role afforded. Her career began as a commodity broker (a job in which she was the computer) before moving on to becoming a programmer in the civil service. She then moved into academia, completing an MSc and PhD at Birkbeck and taking on a lecturing role.

Career steps: Academic and banking

In an academic job the role is split into three components: teaching, research, and administration, which, as Small highlighted, can be challenging if your interest lies in only one of these aspects. A lengthy academic career can also be a problem for moving back into industry, unless you have a specialism that is particularly sought after. However, as Small emphasised, such a move is possible, provided you plan ahead, and move in incremental steps, perhaps by moving into an interim role in order to gain some experience.

Following a move away from academia, Dr Small worked on encryption for a small software company before moving on to become a freelance programmer at Deutsche Bank.

Dr Small emphasised that the banking industry has incredibly high IT demands, so this can be an excellent route in to industry, but she warned that it is important to tailor your CV to the company you’re applying for, by making sure you ‘tick the boxes’ in terms of programming languages etc.

Often large companies are looking for a background of jobs in industry, so it is important to emphasise where your strengths lie if you have had a more varied career path. A freelancing role can be incredibly rewarding, as it forces you to do your best work for your customer, but it can also be stressful in terms of job security.

Career progression

ComputingDr Small also suggested that networking was a very important skill to develop in building your career. She advised that it is very important to overcome shyness and make as many connections as you can across the course of your career, as often companies will invite candidates they are already aware of to apply for roles. Being vocal was also an important way of rising within the ranks once you have entered a company: as Small suggested, being active and asking about promotional opportunities was a very valuable way of receiving feedback on your work.

Dr Small also emphasised the difficulties of remaining a computer programmer throughout your life: in such an incredibly fast-moving industry, it can be difficult to keep up to date with constantly-changing programming languages, and she suggested that it is often necessary to plan a move from a technical role to a managerial one relatively quickly. Managerial roles can be tricky, as they involve delegating and being less involved in the ‘nuts and bolts’ work, but also incredibly rewarding in terms of influence and variety.

Gender

The discussion then turned to issues of gender. Dr Small emphasised that often large companies such as Deutsche Bank have specific policies related to discriminatory issues, and are very interested in hiring and promoting people in protected groups. However, often these policies are not always enacted.

Small suggested remaining observant and proactive, and thinking about how you can effect change within an organisation. She also emphasised the importance of having the right sort of mentoring, from people who know the organisation well and can provide you with a checklist of ways to progress, and of finding someone equally ambitious that you can team up with.

During the Q&A portion of the event, there was also some discussion about the relationship between family and career, especially for women. In such a fast-moving industry it can be very easy during times of leave to fall behind with the latest developments. However, the importance of finding a way of keeping in touch with your organisation was stressed, even by working just a few hours a week.

In response to the final question of the event, of how you achieve ‘flow’ in a managerial role, Dr Small suggested that one of the most rewarding elements was having the power to make a difference within an organisation. With gender issues becoming ever more part of the conversation in both industry and academia, this power to bring about institutional change will be a very valuable one in the future.

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Bridging the Gap: Reporting from ICORIA 2015

This post was contributed Laurence Borel, PhD Candidate at Birkbeck’s School of Business, Economics and Informatics

ICORIA 1On 2-4 July 2015, over 150 researchers from around the world, gathered to attend the 14th International Conference on Research in Advertising (ICORIA), held at Birkbeck, University of London, chaired by Professor George Christodoulides.

The conference theme ‘Bridging the Gap’ aimed to embody the closer need for collaboration between advertising academia and practice. Over 130 papers were presented over the course of two days on the topics of advertising, branding, social media, online marketing, and new technologies.

ICORIA 2The conference proceedings kicked off on 2nd July with the Doctoral Colloquium, which offered students the opportunity to attend contemporary issues in advertising, research methodology seminars led by leading academics, alongside networking opportunities with journal editors and fellow doctoral researchers.

Day Two saw Rory Sutherland, vice chairman of Ogilvy Group UK and former President of IPA take the stage to deliver a thought-provoking keynote address, on the theme of ‘Where advertising needs to push back’. Following a day of presentations, dinner was held in the iconic Hotel Russell, where the awards ceremony for best research papers also took place (congratulations to the authors of best paper award, Morris Kalliny, Salma Ghanem, Brett Boyle, Matthew Shaner and Barbara Mueller; and the authors of best student paper, Verena Wottrich, Peeter Verlegh and Edith Smit).

ICORIA-3-and-4-webDay Three offered further opportunities to attend intellectually stimulating presentations, and concluded with a bus tour discovering the wonders of London.

ICORIA 5

The conference certainly achieved its goal of ‘Bridging the gap’; with over 240 #icoria2015 Tweets created by delegates, and 1,000 ‘Likes’ on the ICORIA 2015 Facebook page over three days.

 

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