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.

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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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Growing Your Ecosystem

This post was contributed by Miranda Weston-Smith, who on 10 March was a guest speaker at an 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.

biobeat-brandingAt a joint Birkbeck School of Science and TRIGGER event, Miranda Weston-Smith discussed her experiences in founding BioBeat together with opportunities for scientists and business graduates in bio-sciences. Miranda helps early stage biomedical businesses attract investment and develop their business strategies.

Miranda has worked with many entrepreneurs and is experienced in fundraising, business planning and technology transfer. She is a long standing Mentor for Cambridge Judge Business School’s Entrepreneurship Centre, contributes to the University of Cambridge Masters in Bioscience Enterprise course and is a member of the St John’s Innovation Centre Training Team.

Miranda studied Natural Sciences at the University of Cambridge and has a Diploma from the Chartered Institute of Management Accountants.

 

She brings experience as a Technology Manager at Cambridge Enterprise, where she assessed and marketed life science technologies, negotiated licences and spun-out companies. She was responsible for technology transfer at the University of Cambridge for the Cambridge-MIT Institute. In her five years at the seed capital firm, Cambridge Research and Innovation, she invested in early stage technologies. Miranda co-founded Cambridge Network with Hermann Hauser.

 

As a result of working with researchers, Miranda founded and runs BioBeat, a programme to inspire the next wave of bio-entrepreneurs and business leaders. It is a way to engage with successful women entrepreneurs and she explained that in her experience women adopt different strategies to issues such as working in teams, risks, and raising finance. Doctor Helen Lee, Director of Research, Department of Haematology, University of Cambridge and Founder, Diagnostics for the Real World, and Dr Jane Osbourn, Vice President Research and Development, MedImmune and Head of Site MedImmune Cambridge were hugely important catalysts for BioBeat getting underway and for the first Bio Beat conference in 2013, with an all-female panel.

Introducing the Cambridge bio cluster

Miranda introduced the Cambridge bio cluster that involved a range of organisations involved in medicines, R&D Support, clinical diagnostics and consumer health. Many of the companies involved in these areas have connections with Cambridge University. Those involved in medicines may have direct intellectual property (IP) relationships with University. For others, the relationships may be more indirect through networking between individuals and groups.

Miranda discussed the differences between the Cambridge biocluster of 2010 and of 2015. Lines are much tighter and investment has significantly increased through a range of funders. For example, Axol Bioscience after setting out to obtain £600,000 through a crowdfunding campaign, managed to bring in £1 million.

On advice for entrepreneurs, Miranda stressed that it is Important to find out where strengths of a company lie. The company needs to find where it sits in the market – where its customers are – and then funding can speed-up. For example, one company set out to exploit exhalation technology through non-invasive equipment that was developed as a veterinary product for horses and other animals. However, having discovered that managing severe breathing attacks such as asthma costs the NHS over £1 billion per year, the company is now developing the technology for human patients. The approval procedure, finances and returns are completely different in these two sectors.

Another aspect stressed by Miranda is linking-up the product and the market with the financial details. Investors are really interested in the two aspects of market and finance as well as the product, so providing projections of three-year cash-flows can be very important. Investors will be seeking creativity in potential problem-solving from an early stage.

Q&A

Miranda then took questions in a lively session during which most delegates to the seminar participated by asking specific questions or joining in the discussion that ensued.

The first question related to the institutional anchors that underpin the bio-science cluster. Miranda said that Cambridge University provided local industry links and was there as a strong, constant presence. The corporates that are present are a mainstay that can provide sponsorship as well as international connections and perspectives. BioBeat is also a way of opening up fresh energies and a way of encouraging people to do more.

In answer to later questions about the university’s role, Miranda confirmed that the institution does not usually seek absolute control of enterprises, but tries to support incubate, and accelerate ideas. Cambridge University’s IP policy is that of retention of the first right to file patent applications; but copyright rests with the researchers. This means that there are many ways to exploit the ideas and not just go through the University. In addition, Cambridge Enterprises puts in seed money, but this is generally done in a low key way. Generally the University sees itself as an enabler and incubator.

A series of questions and some discussion followed about how to get involved in networking from a student business perspective, rather than as a scientific researcher. Miranda suggested that the first thing to do is to just try it after scoping-out what events are going on. Miranda candidly admitted that when she first started, she didn’t really understand what networking was all about and that you have to learn on the job. Porosity and being interested in what others are doing are important. Also, if you go out with one or two colleagues, it is important not just to stand together; just go up to people and start talking to them.

In the discussion it was mentioned that potential entrepreneurs could attend interesting networking events. Such events are regularly attended by service providers, head-hunters, institutions and sometimes investors. In London, One Nucleus holds regular events. Miranda confirmed the value of attending them.

Asked about how the Cambridge bio-cluster compared with others in Europe, Miranda suggested that one of ways is to look at companies that are moving into the area, such as   Ilumina. Microsoft has its European R&D office in Cambridge. Astra Zeneca (AZ) already has various laboratories around Cambridge, but eventually some 1600 – 2000 people will move in to their new building. The impact on the cluster will be for example, there will be opportunities for sub-contracting work and for early stage collaborative projects.

Finally, on the subject of how Miranda saw the cluster evolving, she said she expected Cambridge University to continue to spin-out biotech companies, and with spin-outs from other companies, the cluster will grow further. Spin-outs will also come from Barbaham Institute and Addenbrookes Hospital and from companies such Illumina.

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Social is Beautiful

Birkbeck/SOAS contribution to Global Entrepreneurship Week reveals value of small-scale enterprise

For seven days each November, Global Entrepreneurship Week (GEW) celebrates the people and activities that turn ideas into enterprises. During the week, around the world, events large and small enable individuals to network, learn from experts, meet possible collaborators, and “explore their potential as self-starters and innovators” who can “launch start-ups that… drive economic growth and expand human welfare”, as the GEW website explains.

Asami Miyamoto (pictured right) of Asami Language Services takes part in a Speech Mentoring session

Asami Miyamoto (pictured right) of Asami Language Services takes part in a Speech Mentoring session

For GEW 2015, which ran from 16 to 22 November, Birkbeck teamed up with the School of Oriental and African Studies (SOAS) to present a wide range of events. One achievement of this partnership was to draw attention to small-scale enterprise and the possible social value of entrepreneurship – the “human welfare” part of GEW’s description: an important focus, alongside images of high-tech Silicon Valley start-ups attaining vast commercial success, which the word “entrepreneurship” may first bring to mind.

This social role was the focus of a talk by Hugo Sintes Pons, Enterprise Development Programme (EDP) Manager, Oxfam GB, on Monday 16 November in SOAS’s Khalili Lecture Theatre, presented by Birkbeck/SOAS. The subject for the evening was “Solving Inequality: Supporting Entrepreneurs Where It Matters Most”.

Hugo’s Oxfam web entry, says the EDP “promotes and invests in early-stage agricultural enterprises that promote economic opportunities”. Its web page explains the EDP “helps many thousands of people – especially women – to work their way out of poverty”. The programme invests “where others don’t go and where the potential for social impact is highest” by providing “expertise from a board of successful businesspeople” as well as loans and grants to build “sustainable businesses”.

Looking at the EDP, the evening offered a view of top-down assistance (capital and expertise) encouraging bottom-up empowerment. By seeking potential entrepreneurs in communities that lack resources, the programme’s aim was to enable local, small-scale entrepreneurship as a vehicle for the poor and disenfranchised to generate initiatives and some wealth and influence for themselves.

In this approach, micro, small and medium enterprises (MSMEs) specifically could benefit. In developing countries, enterprises are often “micro” and informal. SMEs have been labelled the “missing middle” as their financial needs ($5,000 to $2 million) are too large for microfinance lenders, but too small for banks or other investors. Both MEs and SMEs may therefore require forms of support that other institutions cannot offer but that the EDP can draw attention to or consider.

The EDP also sees women specifically as essential to development, and support for their enterprises can help women achieve more influence in otherwise male-dominated societies, and can create wider economic opportunities.

A question-and-answer discussion followed the talk, and the evening also considered ongoing issues facing the EDP and how it was adapting to circumstances and with experience to improve the tactics, strategy and targeting of support.

Issues raised included dealing with low or slow success rates; high costs and challenges for rural enterprises (distance, electricity supply, volatile markets, uncertain climate); difficulties in obtaining business advice; cooperatives versus private limited enterprises; women-friendly versus women-owned businesses; managing relationships with multiple stakeholders, including philanthropists providing time and money; and moving from a market approach towards an enterprise approach.

The event also introduced the audience to the Global Social Entrepreneurship Network (on Twitter @GlobalSEN). Supported by the Cabinet Office, this platform works with social entrepreneurs around the world, pooling their learning, models and expertise.

Overall, the talk was an excellent starting point for GEW 2015 at Birkbeck and SOAS.

GEW Bazaar

Small-scale and social enterprises led by women were also prominent at the Bazaar in the SOAS junior common room on 18 November, a Birkbeck/SOAS version for GEW of an event that SOAS holds roughly once a month.

At the event, SOAS Student Enterprise Officer Issy Schmidt explained that the Bazaar exemplifies the college’s enterprise provision, offering a platform to entrepreneurial students and alumni, and invited external entrepreneurs and small-scale enterprises.

The partnership also found a venue for an event involving a project that perhaps epitomises entrepreneurship’s welfare role: on Tuesday 17 November, Birkbeck’s Clore Management Centre hosted the launch of the book Yeshialem Learns About Fistula, by SOAS student and founder of the Women’s Health Organization International, Habiba Cooper Diallo.

This children’s book, about a medical condition that can result from childbirth, is of great social rather than commercial value, and publication required considerable entrepreneurial ability from the author. Together, Birkbeck and SOAS played a part in promoting this book, in providing a platform for a project that perhaps represented an aspect of these colleges’ partnership in promoting social enterprise for GEW 2015.

Businesses at the Bazaar included Women Worldwide, founded by director Susan Ma, in October 2014 as a platform to sell products made by women, “supporting these women to earn a living through craft, and not through charity”.

On display were an enticing range of creams, jewellery and other beautifully handcrafted items sourced globally, and Susan saw her company as addressing a need that extends beyond developing countries: “It’s for women all over [the world]… We’ve got women who are refugees here… It’s about trying to create opportunity through trade, and for women to be able to take their own direction in life and make their own choices – and money helps that.”

She also considers a wider economic argument for women’s empowerment: “One projection I have heard is that if we empowered all women in the world today, its economy would increase by $30 trillion.” That’s almost twice US GDP in 2014.

Susan was one of the day’s external participants. An invitation to speak at a careers event led to the Bazaar and involvement in Student Hub internship schemes.

Another enterprise at the Bazaar was the henna stall run by economics students Khadeeja Shahid and Sharmeen Shani. Besides raising money for the Sindh Institute of Urology and Transplantation, the two entrepreneurs were helping to extend henna’s cultural reach in London – and generate male as well as female interest in a form of body art reassuringly less permanent than tattooing.

Social anthropology student Tayler Ulmer has brought her family’s baking from back home in Chicago to SOAS, giving others the chance to try it at the Bazaar. Did she see herself as a global entrepreneur? “Sure,” the Bazaar had given her a taste for business….. and for London “I love it here… It’s very diverse – just a great experience… I think I want to live here – as long as I can make my own food!”

Starting a business

For those inspired to turn ideas into business, perhaps by events during GEW, Enterprise Club at Birkbeck on Wednesday 18 November offered some important insights on first steps.

The evening’s facilitator, Ben Leon, founded executive coaching and consulting company Bravo Lima, and has extensive experience in many areas of business, particularly travel.

Points addressed included planning – strategy on one page – and realistic schedules divided into timeframes of six months, three months and one month, with the customer at the centre of the strategy.

Highlighting examples from his own career as well as case studies of other businesses, Ben indirectly discussed what Michael Porter and Mark Kramer, in a Harvard Business Review article, call “creating ‘shared value’ – generating economic value in a way that also produces value for society by addressing its challenges”. Doing this could help start-ups build a virtuous cycle of recommendations and advocates.

Reflecting Birkbeck’s student diversity, international differences were discussed, ranging from policy, regulation, and tax complexities around starting new businesses in France, to attracting international trade to Brazil, and ecommerce in Georgia.

The discussion identified various resources. For business mentoring, Birkbeck has Enterprise Pathways, Mentoring Pathways, and the Work Readiness Programme. Outside Birkbeck there are the Institute of Directors’ 99 Programme and student membership, Meetup, London Small Business Centre and general interest events on Eventbrite.

For business services there are Upwork or Fiverr to find freelancers to work with, firms like Veale Wasbrough Vizards for start-up-specific legal services, Escape the City to seek like-minded people looking to change career, and Worthwhile for those seeking to start a career with social impact.

Concluding, Ben warned that start-ups could be rewarding but hard work. While those concerned with intellectual property rights and protecting ideas would have to take care with what and how to communicate, the speaker outlined the benefits of sharing the burden by taking advice, sharing ideas and meeting others with complementary strengths.

Speed Mentoring: Key Note Speaker

Dr Harveen Chugh (pictured right) leads a Speed Mentoring session

Dr Harveen Chugh (pictured right) leads a Speed Mentoring session

The Speed Mentoring event on 19th November in the Court Room of Senate House, was the perfect opportunity for entrepreneurial students to get some one-to-one expert advice on a whole range of subjects. The Key note speaker was Dr Harveen Chugh, who recently established her own entrepreneurship consultancy business working with universities, start-ups and the government.

During her speech, Harveen suggested that starting an enterprise was down to the passion and desire of the individual, and firmly believes that there is an entrepreneurial personality with specific traits. These traits include creativity, being innovative, a risk-taker and an idea-generator. Entrepreneurial individuals could be motivated by money, ambition, or not having any fear of failure.

She also pointed out that more enterprise support is available now than ever before, with last year seeing a record-breaking 581,713 start-ups in the UK, which meant it ranked 4th most entrepreneurial country in the world, and the most entrepreneurial in Europe.

Harveen drew attention to Accelerators, which can speed up the process of launching businesses and typically take equity for seed funding to help finance the start-up. She highlighted the importance of selecting an Accelerator which has the most relevant network of contacts. She also emphasised the proximity of London’s own Tech City: with so many experienced entrepreneurs so close, it is incredibly helpful to get involved at the silicon roundabout. As she pointed out, it is the third-largest technology start-up cluster in the world after San Francisco and New York City.

Harveen highlighted the importance of being prepared to be able to discuss a new start-up with anyone at any time, as funding can come from anywhere. Harveen also encouraged students to organise sale meetings in order to experience the process and take feedback on focus areas.

She concluded by drawing attention to an important attitude shift, where it is now ‘cool to fail’ in business. Many employers see the passion and courage necessary for establishing a start-up as positive attributes. There are also now more opportunities available for entrepreneurially-minded individuals within organisations to lead and develop projects.

Her final words encouraged her audience to go out, take the risk, and enjoy it!

Speed Mentoring Sessions

Harveen’s speech was then followed by 1-2-1 speed mentoring for students with 11 specialist entrepreneurial mentors, allowing students the opportunity to discuss their enterprise ideas and gain valuable advice and insight into starting their own business.

The mentors were:

  • Dr Harveen Chugh, Entrepreneurship Consultant
  • Natalie Campbell, Founder of ‘A Very Good Company’; Director of ‘Kensington Creates’
  • Vivi Friedgut, Founder of ‘Blackbullion’
  • Asami Miyamoto, Founder of ‘Asami Language Services’
  • Ben Leon, Managing Partner of ‘Bravo Lima’
  • Frederique Prevost, Founder of ‘Aware Square’
  • Nishal Desai, Co-Founder of ‘Imin’
  • Ilma Ibrisevic, Business Development Associate at ‘Balloon Ventures’
  • Naqiyah Sultan, Founder, ‘Kashka’
  • Yasmin Desai, Founder of ‘thestartupgirl.co.uk’
  • Anisah Osman Britton, Founder of ‘Allia.io’

“There was a wonderful buzz in the room for the Enterprise Speed Mentoring event. As a mentor, whilst the 1-to-1s with the students were short and intense, I was impressed with their level of preparedness for the sessions and their engagement.  The incredible richness of diversity of business ideas the students brought to the table was inspiring, and the feedback received was the most rewarding.”

Ben Leon, Managing Partner, Bravo Lima

Tea & Cake Drop In.

This was an opportunity for students to drop in and gain specific one to one advice related to their business ideas or enterprises provided by Claire Renwick, Student Enterprise Manager, SOAS.

Advice included:

  • Branding
  • Funding
  • Marketing
  • Target Market
  • Networking

The event was an opportunity for students at all stages of their enterprise journey to have an honest chat regarding their business idea in a relaxed and welcoming atmosphere.

The way ahead

Together, Birkbeck and SOAS presented a variety of exciting events during GEW 2015. The experience offers an enticing prospect for future collaborations. Please visit Enterprise Pathways for upcoming opportunities.

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Can policy transform regions into entrepreneurship and innovation hubs?

This post was contributed by Helen Lawton Smith, professor of Entrepreneurship at Birkbeck’s Department of Management. Prof Lawton Smith attended a workshop – ‘Can Policy Transform Regions into Entrepreneurship and Innovation Hubs? Theory, Evidence and Practice’ – hosted by the college’s Centre for Innovation Management Research (CIMR) on Friday 4 December

Angel of the North - Image courtesy of Tom Blackwell under CC via Flickr.com

Angel of the North – Image courtesy of Tom Blackwell under CC via Flickr.com

The latest CIMR workshop brought together both those who design policies and those who analyse the policy making process. It hosted representatives from the north of England, suggested to be comparatively disadvantaged economically, and the prosperous south. International comparisons were offered to provide insight into what works in policy making and what should be avoided.

 

 

The speakers were

  • Professor Roy Sandbach, ‘Innovation North East… building regional prosperity’
  • Dr Elvira Uyarra, ‘Key challenges of ‘smart’ policies for regional transformation’
  • Dr Adrian Healy, ‘From principles to practices in Smart Specialisation: Lessons from European Regions’
  • Professor Bjorn Asheim, ‘Smart Specialisation – an innovation driven strategy for economic diversification’
  • Rupert Waters, ‘Challenges for policy-makers in Buckinghamshire’
  • Professor Jeremy Howells, ‘Innovation intermediaries and innovation: Changing dynamics and future perspectives’
  • Dr Federica Rossi, ‘Evaluating the performance of regional innovation intermediaries: insights from the experience of Tuscany’s “innovation poles”’
  • Dave Waller,’What makes a successful innovation ecosystem: great innovation and technology; great policies; plenty of investment funds; great culture or none of the above: just leave it to the market’
  • Dr Ana Colovic, ’Why are cluster policies created and how do they work? A comparison between Austria, France, Japan and Sweden’
  • Dr Rosa Fernandez, Chair of final discussion session

The following five themes were addressed throughout the day:

  1. Is it possible for regions to be transformed into Entrepreneurship and Innovation Hubs?

Policy makers everywhere are under pressure to transform lagging regions into leading centres of entrepreneurship, while continuing to support already successful areas of innovation. Roy Sandbach opened the workshop, drawing on the North East Strategic Economic Plan of 2013. The Plan encouraged the North East to ‘become an exemplar for open innovation and Smart Specialisation’, through innovation which would create economic value, social good or both. The Plan hoped to create the conditions and networked solutions to transform the region.

Other speakers argued that the role of policy is to develop new paths for policy, extend existing ones, and create an entrepreneurial state embedded in the economy. Jeremy Howells suggested that the role of policy makers is primarily to change the behaviour of firms, in order to convince them that it is in their interests to innovate.

Adrian Healy spoke on the political reality of delivering Smart Specialisation, using experience from a seven country FP7 Smart Specialisation Project. He argued that innovative and entrepreneurial regions develop independently of politics. Healy cited evidence from academic studies that 80% of economic growth is demand-led, so that only around 20% of structural change could be addressed by policies. He also suggested that policy can sometimes follow practice, such as when private sector developments are imitated by policies which provide supporting infrastructures. In addition, he argued that public procurement can have a crucial role in stimulating entrepreneurship. An example he gave of this was the North East subsea programme, which was not part of the regional development strategy.

Dave Waller also shared his own experience of local innovation policy and practice in England. He demonstrated the dissonance between local politics and economic theory, using an example from Oxfordshire. The result was wasted resources, duplication and fragmentation. Waller suggested more international benchmark evidence was required, building on work such as mapping research and innovation in Amsterdam.

The first theme was not without controversy therefore, and Sandbach concluded with a lesson for the Northern Powerhouse; ‘We must drive the Powerhouse as an economic vision fuelled by innovation rather than as a political item with insular, local devolution debates at the heart.’

  1. How important is analysis, international comparison and evaluation in developing appropriate policies?

In order to make effective policies, all the speakers agreed that policy makers need to be exceptionally focused on analysis. This might include analysing the national and regional context, the area’s potential for innovation, current programmes, global benchmarking, networks, entrepreneurial activity, university strengths or local corporate innovation strategies.

The workshop heard about geographical disparities, which result in varied difficulties for policy-makers in different regions. A major problem in the North East, for example, is that it has the lowest Business R&D expenditure in the UK and business formation rates have fallen by 10% in the past year. The North East is ranked lowest of 12 regions, and 89th in Europe on Attitude, Ability, Aspiration analysis, and thus presents a particular set of challenges. By contrast, London is ranked second on the 2014 Santander Enterprise Index. Analysis must also relate to the theoretical underpinnings of policy.

That there is a dialogue between academic practitioners and policy makers was very clear. Policy practitioners draw on academic theories (often developed by economic geographers) such as the theory of ‘anchor firms’. Anchor firms are different bases of analytic, symbolic and synthetic knowledge. Elvira Uyrrara argued that analysis should also relate to the formulation of programmes, including their scale of delivery and their tools for measuring and evaluating. She highlighted the diverse set of concepts that underpin Smart Specialisation and argued that the theoretical underpinnings are still in progress.

  1. What is the significance of Leadership, Engagement and Collaboration within and across regions?

There was a general consensus after Roy Sandbach’s presentation that the basis of an effective strategy relies on the set-up of a sound and inclusive governance structure. Entrepreneurial strategy requires a shared vision about the future of the region and the thorough integration of monitoring and evaluation mechanisms.

A contested issue, however, was whether Roy Sandbach was right to suggest that business leadership would always be the driving force in regional transformation, Bjorn Asheim argued that in some contexts, the public sector or universities can be directive. In some areas, it was claimed that local entrepreneurs were disinterested in the policy-making process, such as the SMEs in the North East.

In Europe, Smart Specialisation (SMART) is the single largest attempt at an orchestrated, supranational Innovation and Entrepreneurship strategy, which requires leadership, engagement and collaboration. Dave Waller, having faced the challenges of regional innovation strategies for Smart Specialisation, argued that SMART should be about addressing structural weaknesses and facilitating conversations between the right people.

SMART relies on networking, and the support of regional stakeholders. Elvira Uyrra pointed out that SMART has been criticised for not having a fully developed theoretical framework and for being too vague in terms of its target and mix of policies.

The points resonated with Jeremy Howells and Federica Rossi’s presentations on innovation intermediaries. Howells argued that intermediaries are a conceptual lens through which to view the dynamics and evolution of systems of innovation, and are of major policy significance as catalysts within a system.

Federica Rossi also identified intermediaries as important for changing the behaviour of firms and thus indirectly changing the capacity of regions to innovate. Using the case of Tuscany’s innovation poles, which aimed to provide a range of knowledge intensive business services and to strengthen the regional innovation system, she highlighted critical problems in evaluating interventions. These included a lack of sector differentiation, inadequate indicators and missing activities.

  1. What are the social and economic priorities of regional transformation?

Although innovation and job creation are obvious priorities of regional transformation, Bjorn Asheim highlighted other areas of focus, such as gender, migration and diversity. Adrian Healey also spoke about gender profiles of different sectors, as some are predominately male, and others dominated by women. It was concluded that equality of opportunity certainly needs to form part of any policy-making agenda.

Ana Colovic highlighted national differences in approaches to the design and implementation of cluster policies. She questioned whether cluster policies need to be designed if innovation is going well independently. In addition, she noted some of the challenges for policy makers in reality, such as considering whether all the policy tools available and variety of implementing agencies are made clear to actors. Colovic concluded by thinking about the contrasting budgets allocated in different countries for innovation strategies, and questioned what the appropriate level of budget would be to meet both local and national priorities.

  1. What would success look like?

Rosa Fernandez told the workshop that for Roy Sandbach, success would mean 60,000 new jobs created in the North East – but where would they come from? Dave Waller recognised success more in stronger leadership and governance, the development of useful tool kits, better spatial, temporal and more granular mapping of economic activity, and the application of Smart Specialisation principles to all aspects of EU programming.

Adrian Healey, on the other hand, measures success in terms of the gains made from shared governance, shared leadership, common objectives, overcoming fragmentation and getting beyond existing structures. He argued that success would rely on changing the mind-set of local authorities, as the only part of the system not fully connected is the public sector.

The biggest challenge for regions is to build capacity. However, as Henry Etzkowitz argued, the sheer scale of Silicon Valley’s financial and talent resources makes it difficult for Europe to compete. Maybe it need not all be bad news however, as the UK and Europe could yet be a Land of Opportunity.

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