19th Uddevalla Symposium: Is the Future Open?

This post was contributed by James Fisk, graduate administrator at the School of Business, Economics and Informatics. Here, James reports from the 19th Uddevalla Symposium, held at Birkbeck from 30 June to 2 July 2016. Read James’s first blog on the symposium.

Delegates attend the Open Innovation session at the Uddevalla Symposium hosted by Birkbeck

Delegates attend the Open Innovation session at the Uddevalla Symposium hosted by Birkbeck

The future is, and has always been, a contested space. A space in which hopes and fears of the present are projected and embellished, a destination we’re heading toward without having quite figured out all of the co-ordinates yet.

In a world changing as rapidly as ours, as new data streams emerge and we’re able to map the world in ways never thought possible before, attention must turn to the historic driver of change: innovation. Indeed, as odd as it sounds, innovation itself, or rather the mechanisms of innovation, must keep up with the times. The concept of Open Innovation, coined by Henry Chesbrough in his book ‘Open Innovation: The New Imperative for Creating and Profiting from Technology’, takes this proliferation of data as its core consideration and asks that innovators remain open to a newly communicative world of research, ideas and data. So, what will a world invested in Open Innovation look like and is it the right model for innovators today?

Uddevalla and Open Innovation

A glimpse of this possible future arrived at Birkbeck between 30th June and 2nd July 2016 as the topic of Open Innovation was explored at the 19th Uddevalla Symposium. The annual symposium, held in the UK for the first time, invited over 150 academics, business leaders and practitioners from 27 countries to Birkbeck’s Bloomsbury campus to discuss, share and ruminate on the topic of Open Innovation – as part of this year’s ‘Geography, Open Innovation, Diversity and Entrepreneurship’ theme. The three day symposium saw keynote lectures in the morning and parallel paper sessions in the afternoon bring together diverse strands of research, with the Bloomsbury campus alight with fervent discussion and debate.

A keynote lecture from Professor Jennifer Clark, Director of the Centre for Urban Innovation at Ivan Allen College in the US, gave a tantalising insight into how Open Innovation is changing the dynamics of both private and public sector innovation. Her lecture, ‘Smart Cities and Social Entrepreneurship: Remaking Markets and Manufacturing Open Innovation Spaces’ discussed how future cities that best utilise advances in technology, particularly advances in logistics and data, will benefit the public, private and third sectors mutually. However, such advances are reliant on open platforms for software and effective, equitable technology diffusion. An attendant commitment to Open Innovation from both the private and public sector would be necessary too; the task of reengineering cities as sites of both innovation and sustainability is a challenging one with implications for all businesses, public services and third sector parties. Professors Clark’s timely lecture comes as the US city of Columbus has just been awarded $40 million dollars by the U.S Department of Transportation, to create innovative solutions for the future of urban mobility, undoubtedly a tentative first step toward the actualisation of Smart Cities.

Are we open or closed?

CIMR logoA utopian ‘internet of things’ however, is perhaps not as close as advances in technology suggest. The question of which model of innovation actually produces the greatest benefit is one fiercely debated and was the subject of the best paper award winner ‘The Paradox of Openness Revisited: Collaborative Innovation and Patenting by UK Innovators’.  The paper, written by  Professor Ashish Arora (Fuqua School of Business, Duke University), Professor Suma Athreye (Brunel Business School, Brunel University) and Dr. Can Huang, (Institute for Intellectual Property Management, School of Management, Zhejiang University), explores two seemingly contradictory strands of contemporary thought: should businesses innovate openly or protect themselves from ‘knowledge spill over’ and patent?

Their findings suggest that the answer is contingent on a number of factors, most notably the relative size of the business and whether it leads or follows in its chosen market. Their research edifies an ongoing debate among innovators, are we open or closed?

For more information about the 19th Uddevalla Symposium, you can visit their website. To see future events hosted by the Centre for Innovation Management Research, please visit their webpage.

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Strategies for university knowledge exchange

This post was contributed by James Fisk, graduate administrator at the School of Business, Economics and Informatics. Here, James reports from a workshop held Birkbeck’s Centre for Innovation Management Research (CIMR) on 29 June.

CIMR logoWhat should a successful Knowledge Exchange strategy look like? This was the question posed by CIMR (Centre for Innovation Management Research) on June 29 as they invited academics, professionals and policymakers for discussion of an issue situated at the heart of Higher Education’s changing landscape.

Knowledge Exchange, sometimes also known as Universities ‘3rd Mission’, is the process in which the exchange of ideas, research results, technology and skills between higher education institutions (HEIs), other research organisations and businesses, the public sector and the wider community takes place. It is widely regarded as the third component in a triumvirate of priorities for Higher Education, also consisting of Teaching and Research, with its aim being to reconcile the productive forces of higher education with the world outside it. Whilst a broad definition of knowledge exchange is fairly clear, understanding how it works in practice and how it should be effected, is a far more nuanced and complex challenge.

Indeed, the wide variety of panellists and attendees at the workshop provided an indication as to the breadth of the debate. The panel, comprising Kellogg College Oxford Visiting Fellow Jeremy Howell, Stanford Professor Henry Etzkowitz (also Birkbeck visiting professor), HEFCE’s Senior Policy Advisor Adrian Day, Birkbeck’s Dr Pierre Nadeau and UniversitiesUK Policy Analyst Martina Tortis, took the diversity of the sector as one of its chief considerations. In a sector comprised of markedly different institutions, the question of strategy and collaboration is one that looms large.

Of course, the most appropriate strategy would be one tied to the characteristics of the institution, one that acknowledges specific strengths, weaknesses and idiosyncratic factors in its composition. However, if there are undoubtedly aspects of knowledge exchange that resist comparison and, which cannot be translated easily, how are we to construct a strategy for moving the sector forward?

Academics, professionals and policymakers come together to discuss what a successful knowledge exchange model looks like

Academics, professionals and policymakers come together to discuss what a successful knowledge exchange strategy looks like

Birkbeck’s Dr Federica Rossi, along with Marti Sagarra from the University of Girona and Eva de la Torre from the Universitat Autonoma de Madrid, offered some key insights as to how we can begin to map such diverse and varied engagement across institutions. Their application of a nonparametric technique, Ordinal Multidimensional Scaling, allowed them to not only give a holistic picture of the strategies and activities of UK higher education institutions, but crucially, to consider how knowledge exchange infrastructure correlates to the objectives, strategies and characteristics of institutions.

Talks from Rosa Fernandez (National Centre for Universities and Business) and Adrian Day (HEFCE) provided further perspective on the issue of Knowledge Exchange, as they considered how it can be made equitable and scalable in such a varied sector. Their work explored how growth in knowledge exchange is rather tied to the strategic breadth of exchange activities and commitment of resources, rather than just institutional size itself. Therefore, a small institution with a commitment to Knowledge Exchange can see sustained growth in its impact, whilst larger institutions without specific consideration for KE can experience stasis or decline in their performance.

With many more perspectives coming from a range of academics and policymakers, from discussion of the Biomedical ‘Golden Research Triangle’ of London and the South East, to a study of organisational models in British Universities, it’s clear that Knowledge Exchange has an important role to play not only in the future development of Universities, but in constructing a future for the world outside it.

You can find out about future events on the CIMR website. Those wishing to know more about knowledge exchange may find HEFCE’s guide informative.

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Recognizing Entrepreneurial Universities in Academic Rankings

This post was contributed by Matthew Jayes of Birkbeck’s School of Business, Economics and Informatics. The article concerns an international education project founded by Birkbeck visiting professor, Henry Etzkowitz – who is also a member of Birkbeck Centre for Innovation Management Research (CIMR)

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Initial results and new projects aimed at crediting academic contribution to economic and social development as well as publication and educational activities in international university ranking systems will be announced at Global Entrepreneurial University Metrics (GEUM) Meet.

On 3-5 June 2016, the International Triple Helix Institute (ITHI) in cooperation with the Triple Helix Association (THA) will host the second GEUM workshop in Palo Alto, Silicon Valley, USA.

The Global Entrepreneurial University Metrics initiative (GEUM) is an international Working Group initiated by the International Triple Helix Institute (ITHI), CWTS Leiden University, and the Psychology in the Public Interest Program, North Carolina State University, under the umbrella of the Triple Helix Association. The scope of the GEUM is to catalyze the development of new metrics including entrepreneurship, gender and diversity and furtherance of the public interest in University ranking systems.

Professor Henry Etzkowitz, of Birkbeck Centre for Innovation Management Research (CIMR), and GEUM project founder, said: “Most global University rankling systems privilege publication activity, with the effect of driving out other academic contributions to the economy and society. The purpose of the GEUM initiative is to broaden input into what is ranked and how ranking is accomplished.”

The initiative, led by Professor Etzkowitz – who is also President of the ITHI/THA – coordinated by Alexander Bikkulov (Co-ordination Manager), and with Dr Chunyan Zhou as Proposal Coordinator, begun with seven country teams from:

  • Austria
  • Brazil
  • China
  • Finland
  • The Netherland
  • Russia
  • The US

It was kicked off during a first workshop held on 22-23 June 2015 in Leiden (the Netherlands) supported by the U.S. National Science Foundation (NSF).

GEUM has already produced some new results since the first research projects from the initiative break through: Brazil, Finland, Austria and Russia have conducted the GEUM studies in their countries and will present the results in the workshop that will move between Dinah’s Garden Hotel, Stanford University and a prototypical Silicon Valley “garage Setting” this week-end.

“First GEUM Workshop was a good kick-off for many research teams involved – including Russian team,” says Alexander Bikkulov, Head of Center for Project Development and Fundraising at ITMO University (Russia).

“We can see this in a number of successful projects started in 4 countries during the year. And we definitely see the positive impact of having strong international contacts – both in strengthening the applications for grants and in real exchange of ideas and expertise.”

The founding country teams (Austria, Brazil, China, Finland, Holland, Russia, U.S.A) will be joined by project teams-in-organization from Japan, Spain and the U.K.

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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

 

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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.

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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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