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Proceedings of The 11th European Conference on Innovation and Entrepreneurship 15 16 September 2016

The JAMK University of Applied Science Jyväskylä Finland Edited by Dr Iiris Aaltio Jyväskylä University School of Business and Economics and Dr Minna Tunkkari Eskelinen JAMK University of Applied Sciences

Copyright The Authors, 2016. All Rights Reserved. No reproduction, copy or transmission may be made without written permission from the individual authors. Review Process Papers submitted to this conference have been double blind peer reviewed before final acceptance to the con ference. Initially, abstracts were reviewed for relevance and accessibility and successful authors were invited to submit full papers. Many thanks to the reviewers who helped ensure the quality of all the submissions. Ethics and Publication Malpractice Policy ACPIL adheres to a strict ethics and publication malpractice policy for all publications – details of which can be found here: http://www.academic policy for publishing in the conference proceedings of academic conferences and publishing international limited/ Conference Proceedings The Conference Proceedings is a book published with an ISBN and ISSN. The proceedings have been submitted to a number of accreditation, citation and indexing bodies including Thomson ISI Web of Science and Elsevier Scopus. Author affiliation details in these proceedings have been reproduced as supplied by the authors themselves. The Electronic version of the Conference Proceedings is available to download from DROPBOX. ( Select Download and then Direct Download to access the Pdf file. Free download is available for conference participants for a period of 2 weeks after the conference. The Conference Proceedings for this year and previous years can be purchased from http://academic Print version ISSN: 2049 1050 Print version ISBN: 978 1 911218 07 4 E Book ISSN: 2049 1069 E Book ISBN: 978 1 911218 08 1 Published by Academic Conferences and Publishing International Limited Reading, UK. 44 118 972 4148. www.academic

Contents Paper Title


Page no





Keynote Oulines From University Research to Social Innovations: Graphogame and a sustainable way to support learning capacity of children

Heikki Lyytinen

The Berkeley Method of Entrepreneurship A Game Based Teaching Approach

Charlotta Johnsson

Research papers A Study on the Effectiveness of Risk Management Implementation Among Malaysian Tier 1 and Tier 2 Cooperatives

Ruzilah Abd Malek, Ahmad Faizal Shaarani, Mohd Shahron Anuar Said, Azmaliza Arifin and IntanNurAzreen Mohamad Radzi


Does an Undergraduate Venture Creation Programme in a University Achieve its Objectives?

Nigel Adams


Humour Matters in Service Design Workshops

Helena Ahola, Päivi Aro and Taina Vuorela


Entrepreneurial Transformation Approach: UQU Path to Establish a World Class University

Hamid Alalwany and Nabeel Koshak


Social Entrepreneurship Development in Kazakhstan: Problems and Perspectives

Nurzhan Alzhanova


Strategic Entrepreneurship in Enhancing Resources and Innovation in England

Christos Apostolakis and Emre Arslan


The Evaluation of Students Meta Competencies and Management Skills in the Context of the Final Year Project

Albert Arisó, Michele Girotto and José Luis Fernandez


Specific of Sales Volumes Forecasting for Dairy Products in Russia

Marina Arkhipova and Kirill Arkhipov


A Strategic Entrepreneurship Model Based on Corporate Governance in the Iranian Manufacturing Enterprises

Hooshang Asheghi Oskooee and Nader Mazloomi


Innovation Strategies of Small Russian Firms

Yulia Balycheva


CEE Cross Country Comparison of National Innovation Systems Efficiency: DEA Approach

Marcin Bielicki and Micha Le niak


Smart Specialisation: Does it Really Matter to IT SMEs?

Alexander Borg and Christopher Middup


Inter Organizational Network Management in an Innovation Context: Combining ego and Whole Network Perspective

Jan Patrick Cap, Erik Blaich, Holger Kohl, Ariane von Raesfeld, Rainer Harms and Markus Will


How Responsible Innovation Strategies Emerge in Very Small Enterprises: The Case of a Small Wine Growers’ Cooperative

Valérie Ceccaldi



Paper Title


Cooperation vs. Firm Based Innovation: A Sectoral Comparison in Portugal

Marisa Cesário, Sílvia Fernandes and José Barata


She is the Founder: Who is the Emotional Leader?

Francesca Maria Cesaroni and Annalisa Sentuti


FDI, Environmental Regulation and Innovation Performance of China’s Enterprises: Moderating Effect of Urbanization

Yan Chen, Ye Han, Hongbing Li and Yi Li


Implementation of Crowdsourcing Into Firm’s Innovation Strategies: The Case of B2B Crowdsourcing

Sylvia Dimitrova


Managing Creative Innovation Team Composition: Diversity of Personalities and Innovative Outputs

Vytaute Dlugoborskyte and Monika Petraite


Can the Social Entrepreneur Save us? The Role of Government in the Social Entrepreneurship Equation: The Case of Afghanistan

Jawad Ehsanyar, Christina Mullen and Sacha Joseph Mathews


Recreating Innovative and Meaningful Workplaces

Anne Eskola and Liinamaaria Hakola


A Conceptual Framework for Understanding the Phenomenon of new Ways of Work

Anne Eskola and Heidi Neuvonen


Interfaces in Entrepreneurship Development: Between Tradition and Innovation

Maria de Fátima Ferreiro and Cristina de Sousa


The Adoption of a Finnish Learning Model in the UK

Michael Fowle and Nina Jussila


The Study of Entrepreneurship in Iran and Countries That are Members of Global Entrepreneurship Monitor

Hamid Gharzi and Younos Vakilal roaia


Strategy, Structure and Processes to Foster Student Entrepreneurship: The Case of IIlinois Institute of Technology (Illinois Tech)

Alexandre Nabil Ghobril, David Baker, Nik Rokop and Carl Carlson


Dependence of Innovation Strategies of Russian Companies on Technology Intensity: Structural and Dynamic Aspects

Oleg Golichenko and Yulia Balycheva


Ecosystem Approach to the Emergence of Regional Industrial Systems in Central and Eastern European Countries

Kristina Grumadaite and Giedrius Jucevicius


Modelling Innovation Activity in Regional Innovation Networks Using Fuzzy Cognitive Maps

Petr Hajek, Jan Stejskal and Ondrej Prochazka


Entrepreneurship Education in Studio Based Learning Practices

Kari Pekka Heikkinen, Seppänen Ulla Maija and Jouko Isokangas


The Challenge to Entrepreneurship Educators (Non Obstante David Birch)

Dale Heywood and Alan Southern


Entrepreneurial Characteristics in STEM: A Higher Education Institution Perspective

Simon Hill



Page no

Paper Title


Relationships of Playfulness, Work Engagement and Innovative Performance

Pia Hurmelinna Laukkanen, Sari Alatalo, Eeva Liisa Oikarinen, Taina Vuorela, Helena Ahola, Päivi Aro Tiia Kallio and Kwadwo Atta Owusu


Governing Ownership: A Case Study About the Board’s Role in Family Business Ownership Decisions

Tuuli Ikäheimonen, Marita Rautia inen and Timo Pihkala


Triple Helix Relations in Innovation: Conflicts, Tensions, and Struggles in Rentier Regions

Chidubem Ikeatuegwu and Zoe Dann


How Mobile Technologies and Social Media Merge to Help Managers and Entrepreneurs Fast Track Their Business

Alexandra Ioanid, Cezar Scarlat and Gheorghe Militaru


Developing Innovation Ecosystem of the University Through Implementation of Interfaculty Master’s Program: The Case of LMSU

Nataliya Ivashchenko, Petr Kiryu shin, Alexandra Engovatova and Darya Komarkova


A Research Framework for Adapting the Innovation Process to its Context

Alexis Jacoby


Virtual Spaces Impacting Real Places: Entrepreneurial Innovations in Trinidad and Tobago’s Tertiary Education Landscape

Freddy James, Sandra Figaro Henry and Lisa Wickham


Interactions Among Open Innovation Activities, Organizational Learning and Competence in Business and Public Organizations: Issues of Measuring

Brigita Janiunaite and Monika Petraite


On Using Games for Practicing Entrepreneurial Mindset

Charlotta Johnsson, Mari Suoranta, Ikhlaq Sidhu and Ken Singer Alexandros Kakouris


Multidimensional Learning Environments for Entrepreneurship Education

Page no


Systemic Energy Innovation Networks Funded by the European Union

Moon Jung Kang and Jongwoon Hwang


Design Thinking in Teaching: Product Concept Creation in the Devlab Program

Janne Karjalainen


Managing Super Diverse Women Entrepreneurs in Aotearoa New Zealand

Sangeeta Karmokar


The Double J Curve: A Model for Incubated Start ups

Amr Kebbi and Dave Valliere


Strategic Structure and Implementation of Regional Triple Helix Collaboration: Comparative Case Study

Tuomo Kinnunen, Satu Rinkinen, Jukka Majava and Jay Gillette


The Changing Role of Universities in Economic Growth

Dmitrij Kochetkov and Viola Larionova


Best Practices for Internal Startups: Experiences From Practitioners in Finland

Mervi Koivulahti Ojala and Jukka Märijärvi


HYRRÄT: Promoting Entrepreneurship in Welfare Services

Sirkka Liisa Kolehmainen


Agile Business Strategies: How to Adjust to Rapidly Changing Environments?

Andreas Kompalla, Michael Studeny, Andreas Bartels and Gabriela Tigu



Paper Title


Analyzing Educators’ Perspectives on the Effects of Entrepreneurship Education on Students’ Entrepreneurial Intentions

Lidia Kritskaya and Victoria Kritskaya

Tacit Knowledge Sharing and to Derive Innovation From Project Teams?

Wioleta Kucharska and


Wioleta Kucharska and


Describing the Emergence of Interaction Mechanisms Within an Innovation Ecosystem

Katja Lahikainen


How do Students Learn to Become Entrepreneurial in University?

Kiefer Lee


The Marketplace of Ideas: Exploring Open Innovation in Traditional Food Producing SMEs

Joan Lockyer, Breda O’Dwyer and Helena McMahon


International Sign: A Practical kit


Social Entrepreneurship and Disruptive Innovation: Evaluating the use of Rumie’s Free Educational Software in Seven Developing Economies

Sofia Mastrokoukou, Enrico Dolza, Carolina Carotta and Mitrofanis Georgiadis Chris Moon, Allison Kavanagh, Jackie Jeffrey, Joseph Gebbels and Karen Korsgaard

Collaboration, Geographical Proximity and its Effects on Firm‘s Open Innovation Activities

Rimante Morkertaite and Jurgita Sekliuckiene


A Poverty Reduction Oriented Approach to Small Business Development in South Africa

Lentswe Mosweunyane and Patient Rambe


Growth Management of Digital Health Care Service Start Ups – California Case Studies

Matti Muhos, Del Foit Jr, Lada Ra sochova and Martti Saarela


Efficacy of Vocational Training as an Integral Part of Entrepreneurship Education as a Transition Programme for Persons With Intellectual Disability in Oyo State

Adewale Olaosebikan Olabisi, Temitope Favour Jiboye and Mi chael Olufemi Akinyosoye


The Contributions of Obafemi Awolowo University’s Entrepreneurship Business Resource Centre (EBRC) to Community Business Development

Mustapha Olayiwola Opatola and Charles Temitope Jegede


Analysis of Factors Affecting UK Small and Medium Enterprises' Corporate Sustainability Behaviour

Gbemisola Oyedepo, Yanqing Duan, Yongmei Bentley and Qile He


Innovations in Ice Cream Production in Baltic Sea Region

Agnieszka Palka, Joanna Newerli – Guz, Aleksandra Wilczynska and Agnieszka Rybowska


Knowledge Differentiation as Basis of Innovative Activity

Svetlana Panikarova and Maxim Vlasov


Innovative and Entrepreneurship Education to Increase Employability Skills

Elisabeth Pereira, Madalena Vilas Boas and Cátia Rebelo


The Drivers of Company Innovation Activities in German Industries

Viktor Prokop and Jan Stejskal


Tacit Knowledge Sharing and Innovation From Project Teams?

: How

How to Derive


Page no 425


Paper Title


Interpretation and Construction of Co Operative Identity at Ideological Level

Anu Puusa and Antti Varis


The Appeal and Correspondence of Co Operative Values and Personal Values of the Youth

Anu Puusa, Kirsi Hokkila and Simo Leppänen


A Stakeholder Approach to Advancing Business Social Responsibility of Small Tourism and Hospitality SMMEs in Bloemfontein, South Africa

Patient Rambe, Mamello Moeti and Dennis Yao Dzansi


Technological Creativity and its Influence on Entrepreneurship Intentions of Vocational Education Students

Patient Rambe, Takawira Ndofirepi and Dennis Dzansi


Holistic Performance Evaluation to Support European Regional Development: University Industry Perspective

Tero Rantala and Juhani Ukko


Family Firms as Community Innovators in Regional Innovation Platforms

Marita Rautiainen and Suvi Konsti Laakso


Policy Framework for Supporting Business Ecosystems and Niche Development Through Innovation Policy

Satu Rinkinen, Satu Pekkarinen and Vesa Harmaakorpi


Design Thinking Methods and Creative Technologies in Virtual Worlds

Pete Rive and Sangeeta Karmokar


Market Response to Innovation Projects: The Evidence From the Russian Financial Market

Elena Rogova, Daria Guseva, Elena Tkachenko and Fabrizio Rossi


Social Network Analysis and the Study of University Industry Relations

Fernando Romero and Eric Costa


A Framework for Marketing IoT Based Innovations to the Next Billion

Abhimanyu Roy and Ali Zalzala


Entrepreneurial Identity and Leadership: The Research Imperative

Michele Rusk and Kellie Forbs Simpson


An Attempt to Identify a Typical Regional Food Product for Baltic Sea Region

Agnieszka Rybowska, Joanna New erli Guz, Aleksandra Wilczynska and Agnieszka Palka


Digital Healthcare Service Startups: Case Studies From Sweden

Martti Saarela, Daniel Örtqvist, Anna Mari Simunaniemi and Matti Muhos Navjot Sandhu, J Scott, and Javed Hussain


Informal Finance and Growth of Women Businesses in an Emergent Entrepreneurial Ecosystem: A Case of Indian Punjab

Page no


Development Trajectory of an Innovation Based Environmental Technology Start Up

Juha Saukkonen and Kari Väntti nen


Anticipation of Technology as an Entrepreneurial Skill

Juha Saukkonen, Anna Leena Va samo, Sharon Ballard and Jona than Levie


Trust and Resilience in Entrepreneurial Perspective: Empirical Findings From the Developments in Entrepreneurs’ Stories

Taina Savolainen, Mirjami Ikonen and Helinä Nurmenniemi



Paper Title


Entrepreneurial Orientations of Youth in J&K, India: A Case for Educator Influence

Vivek Sharma and Sudhir Jain


Approach to Quest Entrepreneurial Engineering Opportunity and an Application Example for Development of Breakthrough Innovation

Dmitry Shaytan and Georgy Laptev


Evolution of the Russian Regional Structure in the Space of Indicators of Innovation Development

Viacheslav Sirotin and Marina Arkhipova


A Case Study of Entrepreneurial Ecosystem Related to Growth Firms

Kirsti Sorama and Sanna Joensuu Salo


The Creation of a Fast Track, Large Group Intervention Method: A Case Study

Fernando Cardoso de Sousa, João Pissarra and Ileana Pardal Mon teiro


Business Model Innovation: A Comparative Analysis

Erik Steinhöfel, Holger Kohl and Ronald Orth Blair Stevenson and Erkki Nuottila


Design Thinking and Organizational Change: Developing a Human Centered Culture

Christy Suciu and Chris Baughn


Entrepreneurial Intention and Interest in Entrepreneurship Program Among the new Generation in Thailand

Mullika Sungsanit


Testing the Relationship Between Resource Availability and Innovation in the Construction Industry

Eva Švandová


Co Operative Platforms: Harnessing the Full Potential of Crowdfunding

Antti Talonen, Jarna Kulmala and Olli Pekka Ruuskanen


Entrepreneurial Policy for Tribal Societies: Case Study of Mizo Entrepreneurs In India

Shailaja Thakur


Parenting of the Micro Enterprise Founders; Does the Parental Approach Make any Difference in the Choice of a Family Business Successor?

Minna Tunkkari Eskelinen


Organizational Network Analysis of the Interplay Between Business Model Components

Anna Ujwary Gil


The Study of Successful Entrepreneurs (The Case of a Province in Iran)

Younos Vakil Alroaia and Roja As gar


Business Proposition Development in new Ventures as a Process of Initiation, Design, Engineering and Realization (IDER)

Robin van Oorschot, Frido Smulders and Erik Jan Hultink


Towards an Emerging Paradigm: Is Social Entrepreneurship an Insight into Contemporary Society?

Qian Wang and Iiris Aaltio


Commercialisation Strategies: Choosing the Right Route to Commercialise Your Research Results

Urszula Wnuk, Adam Mazurkiewicz and Beata Poteralska


Incorporating Design Thinking in Entrepreneurship Education

Blaž Zupan and Anja Svetina Nabergoj


Interdisciplinarity in Entrepreneurship Education: A Conceptual Framework Focusing on Pedagogy for Innovation

PHD Research Papers

Page no




Paper Title


Stimulating Innovative Entrepreneurship: How to Apply US Experience for Azerbaijan

Odiljon Abdurazzakov


Acquiring Legitimacy in Institutional Entrepreneurship: A Case for Emerging Economies.

Parisa Baig and Andrew Godley


The Links Between Innovation, Strategy and Internationalization Processes: A Comprehensive Literature Review

Fernando Barbosa and Fernando Romero


User Communities and the "Dark Energy" of Open Innovation

Christian DeFeo, Jennifer Harding and Robert Wood


SWOT Analysis and Evaluation of a Driverless Carsharing Model

Wiebke Geldmacher and and Doru Alexandru Ple ea


Conflict, Coincidence and Emerging Interactions as Logics of Innovation

Frederik Gottlieb


Trust Formation and Cross Cultural Challenges in Developing Innovation Related Multi Partnership Project: Preliminary Findings of the Initial Stage of Project Designing

Saara Hiltunen and Taina Savolainen


Election of Board Members in Cooperatives: A Review on Cooperative Governance vis à vis Corporate Governance

Kari Huhtala and Pasi Tuominen


Teachers’ Experiences on Student Enterprises

Pekka Hytinkoski


Towards Entrepreneurial Motivation: The Self Determination Theory Approach

David Iremadze


Determining the Importance of Personality Indicators Independent Entrepreneurs Using the Analytical Hierarchy Process

Syedrazi Nabavichashmi


Sustainable Business Models for Base of the Pyramid: The Role of Customer Participation and Cross Sector Collaboration

Eugenia Rosca and Julia Bendul


Social Venturing and Co Operative Entrepreneurship Business Model (SVCE bm) for Growing MSMEs in Zambia

Moulen Siame


Stand out and fit in: Entrepreneurship Emergence in China During Economic Transition

Baocheng Wu


Work In Progress Papers

Page no


Innovative Behaviour and Employee Engagement: A Case Study in a Family Business

Carolina Guzmán Pedraza, Fabio Blanco Mesa and Magaly Gaviria


HEIs and Temporality in Entrepreneurship

Cherisse Hoyte


Testing Willingness and Ability as Distinguishing Factors Between Family and Non Family Firms: Contextualizing the Relationship Between Entrepreneurial Self Efficacy and Business Performance

Tina Kociper, Bart Henssen and Wouter Broekaert



Paper Title


Page no

Entrepreneurship: Opportunity for Young Generation

Peter Marini


An Evaluation of Shared Entrepreneurship and Organisational Structures to Increase the Innovative Capacity

Kevin Reuther


Abstracts Only Innovative Spirit/5EuroStartUp: Theoretical and Practical Modules to Foster Innovation and Entrepreneurship

Laura Janssen and Michael Kriegel

The Role of European Networks in the Development and Promotion of Entrepreneurship in Europe and Among Higher Education Institutions: The Case of SPACE Network

Anabela Mesquita

Teaching Design Thinking to Novices

James Spee and Rajiv Vaid Basaiawmoit

Citation pages Google Scholar

The Importance of Paper citations and Google Scholar

Jotter Page

Blank Paper for notes


Preface These proceedings represent the work of contributors to the 11th European Conference on Innovation and Entrepreneurship (ECIE 2016), jointly hosted this year by The JAMK University of Applied Science and the Jy väskylä University School of Business and Economics in Finland, on the 15 16 September 2016. The Conference Chair is Minna Tunkkari Eskelinen from JAMK University of Applied Sciences and the Programme Chair Iiris Aaltio from the Jyväskylä University School of Business and Economics. ECIE continues to develop and evolve. Now in its 11th year the key aim remains the opportunity for partici pants to share ideas and meet the people who hold them. The scope of papers will ensure an interesting two days. The subjects covered illustrate the wide range of topics that fall into this important and growing area of research. The opening keynote presentation is given by Henry Etzkovitz on the topic of “Triple Helix Innovation in a Cri sis”. A second keynote will be given by Heikki Lyytinen on the topic of “From University Research to Social In novations”. The third Keynote will be given by Charlotta Johnsson on the topic of “The Berkeley Method of En trepreneurship A Game Based Teaching Approach”. In addition to the main themes of the conference there are a number of specialist mini tracks on topics includ ing Innovation and strategy, Entrepreneurship education in action, The theory and practice of collaboration in entrepreneurship and Challenges for entrepreneurship and innovation n the 21st Century. With an initial submission of 285 abstracts, after the double blind, peer review process there are 106 Academic research papers, 14 PhD research papers, 5 work in progress papers published in these Conference Proceed ings. These papers represent research from Australia, Azerbaijan, Belgium, Brasil, Canada, China, Czech Repub lic, Denmark, Finland, France, Germany, Ghana, Greece, India, Iran, Ireland, Italy, Kazakhstan, Kenya, Lithua nia, Malaysia, Malta, New Zealand, Nigeria, Norway, Poland, Portugal, Romania, Russia, Saudi Arabia, Slovenia, South Africa, Spain, Sweden, Thailand, The Netherlands, Trinidad and Tobago, Tunisia, Turkey, UK, USA, Zam bia. We hope you enjoy the conference. Iiris Aaltio and Minna Tunkkari Eskelinen September 2016


Conference Executives Minna Tunkkari Eskelinen, JAMK University of Applied Sciences, Finland Iiris Aaltio, Jyväskylä University School of Business and Economics, Finland

ECIE Committee Members The organisers would like to thank those members of the conference committee who assisted in the double blind peer review process. A full committee list can be seen here: http://www.academic committee/

Biographies Conference Chair Dr. Minna Tunkkari Eskelinen, Dc. (Econ.) is principal lecturer at JAMK University of Ap plied Sciences. She has worked at the University of Jyväskylä on the degree programme in Entrepreneurship and as Secretary at the Institute of Education Evaluation. She was co founder of the consultancy firm Confidentum Ltd. Her doctoral dissertation was published in 2005 focusing on family business from the perspective of the next generation. Recently her research interests have been focused on sustainable tourism from the entrepreneurs’ perspective and sustainability as a customer insight from Finnish tourists. She is also ac tively involved in innovative service design practices by co creation with students and entrepreneurs. Current ly, she is a vice member on the Board of the Entrepreneurship Education Research Association in Finland.

Programme Chair Dr. Iiris Aaltio is a Professor at the Jyväskylä University School of Business and Economics in Finland. Her research is about cultural aspects of organizations and entrepreneurship, as well as in gender and diversity issues. She has authored and co authored several books, including "Women Entrepreneurship and Social Capital: A Dialogue and Construction" and "Gender, Identity and the Culture of Organizations". Her latest work includes aspects of aging in organizations, with authored articles, and an edited special issue in the Interna tional Journal of Work Innovation. She is a board member in journals Culture and Organi zation, and Journal of Business Ethics and Organization Studies. She has also organized and chaired several workshops at the EIASM institute.

Keynote Speakers and Workshop Henry Etzkovitz is a scholar of international reputation in innovation studies as the origi nator of the ‘Entrepreneurial University’ and ‘Triple Helix’ concepts that link university with industry and government at national and regional levels. As President of the Triple Helix Association (THA), he is at the center of a unique international network of scholars and practitioners of university industry government relations. Henry is the co founder of the Triple Helix International Conference Series, which has produced a series of books, special journal issues and policy analyses since it started in Amsterdam, 1996. He is Editor in Chief of the Triple Helix Journal. Henry is Visiting Professor at the University of London, Birkbeck, CIMR; and Special Advisor to the Shandong Academy of Sciences, PRC. From 2009, Henry is affiliated with Stanford Uni versity as a fellow of the Clayman Institute for Gender Research, and then H STAR, currently Science, Technol ogy and Society (STS) where he will offer a seminar on Triple Helix innovation and entrepreneurship in spring 2017. Prior to coming to Stanford, he held the Chair in Management of Innovation, Creativity and Enterprise at Newcastle University Business School, UK. He received a BA in History from the University of Chicago, PhD in Sociology from the New School for Social Research, and Phd Hon in Engineering from Linkoping University. Heikki Lyytinen is UNESCO Chair on Inclusive Literacy Learning for All. Previously he was Emeritus Professor of Developmental Neuropsychology, when he led the EU COST A8 “Learning Disorders as a Barrier to Human Development” action from 1994 1998. He co lead the Centers of Excellence “Human Development and its risk factors” and “Learning and Motivation”, both funded by the Academy of Finland. He has been PI of the Jyväskylä Longitudinal study of Dyslexia (JLD) since 1993 and was Vice President of the UJ from


1997 2000. He is Chair of the Boards of the Agora Human Technology Centre of UJ and the Niilo Mäki Founda tion. He is a member of the Academy of Sciences and Letters (of Finland, 2003). He has published more than 300 articles in scientific journals and books. His areas of recent research include dyslexia and reading acquisi tion and most recently digital learning environments for children at risk of reading difficulties or dyslexia. Charlotta Johnsson has a broad range of both academic and industrial experience in the fields of education, technology and entrepreneurship. Charlotta is an Associate Professor at the Engineering Faculty, Department of Automatic Control at Lund University, Sweden, where she is involved in several research projects. She has served as the program director of the cross disciplinary master's degree program Technology Management (2008 2015), and she has been involved in the faculty’s pedagogical activities. Charlotta has recently spent a year with the Sutardja Centre for Entrepreneurship and Technology at UC Berkeley, USA, where she participated in the development of a novel student centric approach for teaching and learning entrepreneur ship, referred to as the Berkeley Method of Entrepreneurship. Tanja Leppäaho works as a Professor of Entrepreneurship and International Business at the University of Jyväskylä, School of Business and Economics, Finland. Previously she worked as Associate Professor at the University of Edinburgh Business School, UK. Tanja's areas of interest are international entrepreneurship, networking, family business and qualitative methodology. Her major publications have appeared in Entrepreneurship Theory and Prac tice, Family Business Review, Journal of Small Business Management, International Market ing Review, and International Business Review.

Mini Track Chairs Dr Blair Stevenson is an educator and researcher with a broad range of both academic and entrepreneurial experience in the fields of education, culture and technology. His current role is as manager of the EduLAB pre incubator program and coordinator of the LAB re search group and international partnerships within the Oamk LABs program at the Oulu University of Applied Sciences ( in Finland. EduLAB is a permanent program that brings together multi disciplinary teams of university students and professionals to develop prototypes and start ups targeting the global edtech industry. Dr Luísa Carvalho is an Assistant Professor at the Open University, Lisbon, Portugal and a Researcher at the Centre for Advanced Studies in Management and Economics (CEFAGE), University of Évora. She received her PhD in Management from the University of Évora (Portugal). She is visiting professor at international universities where she teaches on Masters and PhDs programmes. She is the author of several articles published in scientific journals, international conferences, books and book chapters. Her current research inter ests are in the areas of entrepreneurship, innovation, internationalisation and the ser vices sector. Dr Alexandros Kakouris is an external lecturer in entrepreneurship and innovation at the University of Athens, University of Peloponnese and ASPETE. He holds a PhD in Physics and a MSc in Adult Education. He has been involved in entrepreneurship since 2006, researching educational issues. His special interest concerns fostering entrepreneurship and innovation to science graduates and the support of youth entrepreneurship through counselling. He also specialises in nascent entrepreneurship and experiential learning. Anu Puusa is an Associate Professor at the Business School in the University of Eastern Fin land in Joensuu campus. Her current research interest areas are cooperatives, organizational change, organizational identity, paradigms and qualitative methodological questions. Puusa has published many journal articles and written four textbooks.


Christy Suciu gained her MBA from Webster University in Missouri, USA. She teaches design thinking in the MBA programs at the College of Business and Economics at Boise State Uni versity in Idaho, USA. She has served as a design thinking consultant for major global compa nies. Her research interests include design thinking, innovation, and strategy. She has pub lished articles on design thinking in the journal of the Academy of Management Learning and Education and The International Journal of Management and Education. Dr Christopher Moon FRSA FHEA is a multi award winning social and eco entrepreneur with a PhD from Imperial College London. He is the founder of several eco businesses including eco design and build, eco taxis and buy eco. Chris is also inspiring business students at Mid dlesex University London to be more environmentally friendly. He is widely published includ ing a book for the Economist; and is the inventor developer of the award winning patented eco bin. Chris was a finalist in the Innovation & Entrepreneurship Teaching Excellence Awards 2015. He is a psychologist by background; certified and accredited CSR consultant and Social Auditor Dr. Rajiv Vaid Basaiawmoit is currently the Head of Sci tech Innovation and Entrepreneur ship at the Faculty of Science and Technology at Aarhus University, Denmark. He works with student led innovation and entrepreneurship while also engaging in university industry in teractions. He combines a rather interdisciplinary background with a PhD in Biophysics, a Masters in Biotechnology and an MBA in sustainability. He conducts research on “Entrepreneruship for STEM disciplines”, “Expatriate Entrepreneurship” and also on using “gamification to make entrepreneurship a more engaging discipline”. Dr. Joan Lockyer is Assistant Director, International Centre for Transformational Entrepre neurship (ICTE) at Coventry University. Formed in 2015, the Centre evolved from the Insti tute of Applied Entrepreneurship (IAE). Joan joined the IAE in 2009 and recently transferred to ICTE maintaining responsibility for the development and delivery of the academic pro grammes. Joan has worked in Higher Education for 15 years, prior to which she worked in industry and consultancy. She has successfully delivered a number of European projects. Her research interests embrace entrepreneurship in a range of contexts: gender; faith; the meaning of work to artisans and artist being examples.

Contributing Authors Odiljon Abdurazzakov is a PhD Fellow at Qafqaz University, Azerbaijan. He earned his bachelor’s and master’s degrees in Business Administration from Colorado State University, USA. He was a visiting PhD Fellow at Har vard Business School in fall 2015. He is the Founding Director of the Center for Entrepreneurship Development and Research ( Nigel Adams is Programme Director of BSc Business Enterprise (BBE) at the University of Buckingham. He teaches, advises and mentors students taking this innovative two year honours degree in Business Enterprise. He is also responsible for Buckingham Enterprise Hub which is used by BBE and other students when starting and running their businesses. Ahmad Faizal is a Lecturer in the Department of Management & Finance at the Cooperative College of Malay sia where he has been a faculty member since 2003. Faizal completed his Master at National University of Ma laysia and his undergraduate studies at Northern University of Malaysia. His research interests lie in the area of Micro Finance and Risk Management. Helena Ahola, Lic (Econ), Principal Lecturer of Marketing at the Oulu University of Applied Sciences, where she currently teaches service design, research and development methods. She has been involved in e business and service design projects, published and presented her research on marketing, value creation and e retailing in several international Internet and service related conferences.


Hamid Alalwany is the adviser on Innovation and Entrepreneurship at UQU and the Director of Ithmaar Com pany. Having worked for more than twenty five years in industry and service sectors, particularly in transform ing education and health services, Alalwany has gained cross disciplinary experience in the fields of engineer ing, information systems, sustainability innovation and sustainable development. Sari Alatalo, M.A., BBA is a Senior Lecturer in English Business Communication at the Oulu University of Ap plied Sciences. She has extensive teaching and tutoring experience in the degree programs of Business Eco nomics and is also actively involved in FINNIPS examination processes (Finnish Network for International Uni versity Programmes). Her research interest is to investigate the use of humour in teaching as well as in corpo rate communication with a special focus on the effects of humor in these contexts. Currently Ms Alatalo is a project manager of HURMOS Exploring Humor as a Strategic Tool for Creating Innovative Business research project. Nurzhan Alzhanova is from Almaty Management University, Almaty, Kazakhstan. Presenting her paper titled Social Entrepreneurship as Institutional Form That Ensures the Stability of Small Enterprises of Kazakhstan. Christos Apostolakis holds an MA in Business Administration from Bournemouth University, an MA in Public Admin & Public Policy from the University of York, and a Ph.D. from De Montfort University – Leicester all of them in the UK. He currently works as Senior Lecturer in Strategy at Bournemouth University Business School. His research interests revolve around strategy and social entrepreneurship. Marina Arkhipova is a Professor, at the Department of Statistics and Data Analysis, National Research Univer sity Higher School of Economics; Education. Doctor of Sciences, 2007. Career Researcher, RIEPP, 1987 2000; Leading Researcher of Sector, Russian Academy of Science, 2000 ; National Research University Higher School of Economics, Moscow, 2009 . Emre Arslan holds an BSc in Business Administration from Izmir University of Economics in Turkey and MSc in International Business Management from Bournemouth University. He currently studies as a PhD student in Business Strategy and a part time lecturer in Research in Business and Management at Bournemouth Universi ty Business School. His research interests are business strategy particularly in strategic entrepreneurship and innovation. Hooshang Asheghi Oskooee is an Assistant Prof in Business Management Dept. of University of Qom, Ira. Ph.D. Business Administration with major in Business Policy Making (Strategic Management) from ATU in 2011. MBA Financial Management from ATU in 1995. BA – Business Administration from TU in 1992. Bachelor of Laws (LL.B.) from PNU in 2014. Parisa Baig is a 2nd year PhD student at Henley Business School, University of Reading in United Kingdom. Parisa’s research is about exploring a relationship between institutional entrepreneurship and legitimacy in the context of emerging economies that how an entity s able to manipulate the institutional schemas and acquire mass legitimacy from the stakeholders. Sharon Ballard is President and CEO of EnableVentures, Inc., and former President, Chief Executive and co founder of Reticular Systems, Inc. She held management posts in the Titan Corporation, Motorola Inc. and LINKABIT Corporation. She is the developer of the Supercoach® Entrepreneurial Training. She has worked with thousands of entrepreneurs and coaches globally and across the United States Yulia Balycheva, senior research associate at Central Economics and Mathematics Institute of Russian Acade my of Sciences and faculty member at State Academic University for Humanities, PhD. Fernando Barbosa is from University of Minho, Guimarães, Portugal. Presenting his PhD Research paper on The links between innovation, strategy and internationalization processes: a comprehensive literature review José Barata is an Assistant Professor of Economics, R&D Management and Industrial Organization at the School of Economics and Management of the University of Lisbon, (ISEG/UL). Professor J. Barata holds a PhD in Economics (1996) from the UTL. Former Vice President of ISEG/UTL, he has been Coordinator of Graduate and Post Graduate courses at the Portuguese School of Bank Management (APB).


Marcin Bielicki is a doctoral candidate at the Poznan University of Economics. He graduated from the Faculty of Finance and Accounting at this University with Master degree in 2014. His fields of interest are R&D, public aid and innovations support systems. He also practices as a public aid consultant. Erik Blaich is a junior researcher in Innovation and Benchmarking at Fraunhofer. Institute for Production Sys tems and Design Technology, Berlin. He is about to finish his master’s degree in Innovation Management and Entrepreneurship and currently works on his thesis in the field of innovation networks. Furthermore, he is an active entrepreneur himself. Alex Borg is a Consultant at the Malta Information Technology Agency. Alex is also a Business mentor, manag er and consultant with 21 years of experience in ICT covering various roles in a projectised, strategy building and policy making context. Alex Borg has been a national representative on a number of European Commis sion ICT R&I related Committees from 2009 to 2014, and is a co author of Malta’s National ICT Strategy 2014 2020. Carl Carlson is the founder and Dean of the School of Applied Technology at the Illinois Institute of Technology (IIT) in Chicago. He is also Full Professor of the Information Technology and Management Department and Executive Director of the Entrepreneurship Academy at IIT. He has over 160 publications in the fields of data management and software engineering. His Testing Maturity Model is used by software companies world wide. Valérie Ceccaldi is both a researcher in Management Sciences at Montpellier Research Management (Mont pellier University, France) and a Strategy Consultant at her own consulting firm, Ceccaldi Communication & Conseil (Montpellier City, France). Francesca Maria Cesaroni is Associate Professor of Business Administration at the University of Urbino Carlo Bo. She is Coordinator of the PhD in Economics & Management, Department of Economics, Society and Poli tics, University of Urbino. Her main research interests include entrepreneurship, small business, family busi nesses and corporate financial communication. Yan Chen is a Professor, School of Economics and Management, Beijing University of Posts and Telecommuni cations; Visiting scholar at University of Manchester, University of Liverpool and Brunel University (August, 2008 August, 2009); Chairman and Deputy Secretary General in China’s International Trade Practice Research Academic Committee; Anonymous reviewer of The Academy of International Business (AIB) and Asian Business & Management. Christian DeFeo earned a PhD in Creative Writing at the University of Southampton in 2010. Afterwards, he returned to a career in technology, working for the electronics distributor Premier Farnell where he created innovative online community programmes. He is presently studying for a second PhD in Mechanical and Manu facturing Engineering at Loughborough University. Sylvia Dimitrova is a PhD Candidate at the Department of Management and Engineering of the University of Padua, Italy. She holds a master’s degree in Industrial Engineering from the University of Montreal École Polytechnique de Montréal, Canada. Her research interests are in the fields of innovation and technology management and knowledge management. Vytaut Dlugoborskyt is a PhD in Management candidate with the research topic on Managing Creative In novation Teams in R&D and Technology Intensive Organizations at Kaunas University of Technology, Lithuania. She is currently working as a Research associate at GLORAD – Research Center for Global R&D Management concentrating on creativity and innovation. Jawad Ehsanyar is a Junior Student at University of the Pacific. He is majoring in Business Administration with concentration in Finance. Jawad is President of International Student Club and Vice President for the Council of Social Entrepreneurs at University of the Pacific. He has actively participated in all kinds of conferences, re search, and other global opportunities.


Anne Eskola works as a Principal Lecturer of accounting at JAMK University of Applied Sciences in Finland. She has received her DSc degree in accounting from the University of Jyväskylä. She is also a member of Law and Tax Committee in the Chamber of Commerce and has published both textbooks and scientific articles. Maria De Fátima Ferreiro has a PhD in Economics. Assistant Professor at ISCTE Lisbon University Institute. Re searcher of Dinâmia’CET IUL. Current areas of research: innovation and territory, governance processes, en trepreneurship and territory, transitions paths towards sustainability. Current areas of teaching: history of economic thought, contemporary issues in economic theory and policy, sustainability and territory. Sandra Figaro Henry is an Educational Technologist at the School of Education, at the University of the West Indies, St. Augustine campus on the twin islands of Trinidad and Tobago Mrs. Figaro Henry holds a MSc. in Ed ucational Technology from New York Institute of Technology. With over thirty years’ experience in education and teacher education, she is committed to preparing educators for teaching with technology in the 21st cen tury. Michael Fowle is programme director of Northumbria’s Entrepreneurial Business Management degree and was team coach to the first graduating cohort. He is a serial entrepreneur and has won the DTI Startup of the Year 2004 and the MIT International Business Plan Competition 2010 with his own companies. Wiebke Geldmacher (MA) is a PhD student at the University of Bucharest of Economic Studies. Her academic research area focuses on the acceptance and the framework design of a self driving carsharing model in Ger many. Wiebke works as a Business Consultant for SRP Consulting AG. Hamid Gharzi is a PhD student in Industrial Management in Islamic Azad University, Science and Research Branch, Tehran. He has 18 years of work experience which is a bend of corporate and academic work in the area of Industries. He has published more than 10 research papers in various international journals. Gharzi has presented 8 papers in various international conferences in different countries. Jay Edwin Gillette is Professor of Information and Communication Sciences at Ball State University in Indiana, USA, and a Senior Research Fellow at the Digital Policy Institute. He also served as Fulbright Nokia Distin guished Chair in Information and Communications Technologies at University of Oulu, Finland, and Visiting Fellow at University of Oxford, UK. He is also a technology journalist, writing for Network World and IDG syndi cate. Michele Girotto holds a Master degree in Business Communication from the Universitat de Barcelona and a PhD in Business Management from the Universitat Politècnica de Catalunya (UPC). Michele is Associate Profes sor at the Management Department of the UPC and coordinator of the program Final year project, of the Busi ness and Management Degree of EAE Business School. Oleg Golichenko has a degree of Doctor of Economic Sciences. He is a chief research associate at the Central Economics and Mathematics Institute of the RAS. He is also a professor at the National Research University Higher School of Economics and the Moscow Physics and Technique Institute in Moscow, Russia. His research interests are related to investigation of innovation development processes on micro macro economic levels and design of social economic and innovation policy. He is an author of more than 200 scientific publications. Frederik Gottlieb has a background in Interaction Design(Ba) and Participatory Innovation(Ma) from the Uni versity of Southern Denmark. He is currently conducting research in the cross field of Design, Innovation and Entrepreneurship. His research is focused on deep involvement in the research context, using Autoethnography as the main methodological approach. Kristina Grumadaite is a PhD student and a junior project researcher in the Department of Strategic Manage ment, School of Economics and Business, Kaunas University of Technology, Lithuania. Her main research inter ests are: emergence of self organising industrial systems, especially in immature socio economic contexts, innovation ecosystems, smart development of social systems and emotional intelligence. Carolina Guzmán Pedraza is PhD at the Department of Management and Business Administration Technical University of Catalonia (Spain). Her research interests include organizational support, leadership and services


innovation. She is a lawyer with experience in the study of innovative behavior in family owned firms and management. Petr Hajek is an associate professor with the Institute of System Engineering and Informatics, Faculty of Eco nomics and Administration, University of Pardubice, Czech Republic. He works with modelling of economic and financial processes using soft computing methods. He has published his research in leading journals such as Knowledge Based Systems, Decision Support Systems, etc. Liinamaaria Hakola is a project manager at JAMK University of Applied Sciences in Finland. She is Master of Science in (Econ. & Bus. Adm) from the Turku School of Economics, University of Turku and is currently a doc toral student at the University of Jyväskylä. Kari Pekka Heikkinen ’s, M.Sc (tech.), work experience includes electrical engineering, project, staff, business and product management and product concept development at Nokia Corporation. Currently he’s a Senior Lecturer and Project Manager in Oulu University of Applied Sciences, and finalising his PhD in the Industrial Engineering and Management department at the University of Oulu. Bart Henssen received a Ph.D. in Applied Economics and holds a position as research manager at the Depart ment of Business Science at Odisee University College (Brussels, Belgium). He also lectures courses in Human Resource Management and Research Methodology and is Adjunct Director of the Research Center for Entre preneurship Odisee. Dale Heywood is Programme Director MSc Entrepreneurship at the University of Liverpool and Senior Fellow of the Higher Education Academy. She was a serial and portfolio entrepreneur prior to entering academia. She is currently conducting longitudinal research into entrepreneurship education and its effects on the students’ experience. Simon Hill has been a lecturer with the International Centre for Transformational Entrepreneurship at Coven try University since 2009, delivering enterprise education inspired by both his academic research and hands on experience. From an early age, he has run a number of businesses whilst studying and is the founder of the Android app YearDot. Saara Hiltunen, is a PhD student, Project Researcher and part of a Trust research group at Business School, University of Eastern Finland. Saara is developing networks between Kuynpook University (KNU) in South Korea and UEF in Finland. Saara previously worked as a project manager and a lecturer at university of applied sciences. She worked for over 15 years in oriental countries: Thailand, Vietnam and China and has a profes sional background in nursing and preventive healthcare. Kirsi Hokkila is a PhD Student at the University of Eastern Finland. She received her master of Business Admin istration degree in 2013 and started her doctoral studies in 2014. Her doctoral dissertation topic deals with co operative entrepreneurship with a special interest in new generation co operatives. Cherisse Hoyte is currently a Lecturer in Enterprise & Entrepreneurship at the International Centre for Trans formational Entrepreneurship (ICTE) in Coventry University, where she teaches both undergraduate and post graduate courses on entrepreneurship and management. She holds a doctorate in Entrepreneurship from the University of Nottingham and her main research focus is on the entrepreneurial process. Kari Huhtala since spring 2015 has worked as director of cooperation at Pellervo Society which is the umbrella organization of Finnish cooperatives. Kari formerly worked as trainer of board members especially in member based organizations like cooperatives. Eleven years in banking under challenging conditions in 1990's has given Kari a broad and overall picture of several branches and the strategy work. Kari has a master’s degree from the University of Helsinki in 1989 (agricultural economics). Kari is a part time doctoral student at Lappeenranta University of Technology in Business Sciences and Organizational Management. Pia Hurmelinna Laukkanen is a Professor of Marketing, especially International Business at the University of Oulu Business School, and an Adjunct Professor (Knowledge Management) at the Lappeenranta University of


Technology, School of Business and Management. She has published over 50 refereed articles in academic journals, and contributed to book chapters and over 100 conference papers. Pekka Hytinkoski ( is a doctoral student at the University of Turku/Finland (topic: learning in and through student co operatives). He has worked 11 years as an e learning coordinator of the Finnish Co op Network Studies Program (CNS network) where he is responsible for the production, development and coordi nation of the program. Tuuli Ikäheimonen D.Sc. (Econ. & Bus.Adm.) Tuuli Ikäheimonen works with funding and research policy issues at the Lappeenranta University of Technology (LUT), Finland. She has a strong background in family businesses and family business research, especially in family business governance and board of directors. Chidubem Ikeatuegwu is PhD researcher, focusing on ‘Academic Entrepreneurship in Petroleum Rentier States’ at the Department of Strategy Enterprise and Innovation, University of Portsmouth, UK. Chidubem holds a Bachelor’s degree in Mechanical engineering, Master’s degree in Advanced Manufacturing and another in Project management from the University of Portsmouth. Alexandra Ioanid is a PhD student at University Politehnica of Bucharest with background in Computer Sci ence. Current research interests are social networks and management. Davis Iremadze is from Ambrose University, Calgary Alberta, Canada. Presenting his PhD Research paper on the subject of Towards Entrepreneurial Motivation: The Self Determination Theory Approach. Jouko Isokangas, PhD, defended his doctoral thesis in 2009 on entrepreneurship education (EE). He has devel oped methods for EE since the early 1990s. Currently he is a Development Manager and Principal Lecturer in the area of EE at Oulu University of Applied Sciences. Alexis Jacoby is professor on the Master's programme in Product Development at the Antwerp University, Belgium. He holds a PhD in Product Development and teaches innovation and product development method ology. He worked as a design consultant in industry. His research focuses on methods and tools in the Front end of Innovation. Sudhir Jain is Professor at I.I.T. Delhi and specializes in the areas of ‘Managerial Economics’, ‘Entrepreneurship’ & Intellectual Property Rights. Previously, he has held the positions of MHRD IPR Chair Professor, Head of the Department of Management Studies at I.I.T. Delhi, Director General, National Institute for Entrepreneurship & Small Business Development (NIESBUD) under the Ministry of MSME, Govt. of India, and Vice Chancellor, Shri Mata Vaishno Devi University, Katra, Jammu & Kashmir, India. He is a Fellow of the Indian Society for Training & Development. Freddy James is a lecturer in educational leadership at The University of the West Indies, St. Augustine, in the School of Education. Her research focuses on innovation, change and improvement in educational settings. She has published widely in international, regional and local peer reviewed journals. Brigita Jani nait is professor and Head of the Department of Educational Studies at the Faculty of Social Sci ences, Arts and Humanities, Kaunas University of Technology. Her research is focused on the issues of change management and social innovation implementation; development of innovative culture at individual and or ganizational level; higher education; curriculum development. Temitope Favour Jiboye is a Lecturer at the Institute of Entrepreneurship and Development Studies Obafemi Awolowo University Ile Ife Nigeria. She is presently a PhD student in the Department of International Relations at the same Institution. She has attended many Conferences on Entrepreneurship and has many papers pub lished in reputable Journals locally and internationally. Sanna Joensuu Salo works as a principal lecturer in marketing at the Seinäjoki University of Applied Sciences (SeAMK). Before SeAMK she was working at the University of Jyväskylä, in Information Technology Research Institute. She has specialized in public relations and organizational communication, market orientation in the


context of growth firms and entrepreneurship education. Her publications have been accepted e.g. in Educa tion + Training and Journal of Small Business and Enterprise Development. Nina Jussila is a coach at Northumbria University and is also a graduate of JAMK’s Tiimiakatemia, the original Team Academy. Nina has worked in Team Academies across the world and in North and South America, Africa and Europe. Her research interests are entrepreneurial learning models, business accelerators and team coaching. Moon Jung Kung is a researcher at KIST Europe in Saarbruecken where she joined in 2007, where she has par ticipated in many international projects on developing eco innovation and open innovation strategies. She holds a Diplom in Environmental Science from Leuphana University Lueneburg and is expecting to finalize the Ph.D. on open innovation strategies toward environmental sustainability at TU Berlin. Janne Karjalainen is a Master of Science (MSc), in Technology and Electrical Engineering from the University of Oulu. He has worked at Nokia in various roles in software development projects. He is currently Lecturer and LabMaster at the Oulu University of Applied Sciences running DevLAB at Oamk LABs ( Amr Kebbi is an MScM candidate 2017 at Ted Rogers School of Management (TRSM) Toronto, Ontario, Cana da. I am a researcher in progress with 18 years of industry background in international chemical sales and sales management. I am interested in entrepreneurship, entrepreneurial competencies, and incubation. I believe knowledge is empowering, and I have passion for teaching. Soraya Khalaji Zavajeri Tax Audit in Organization for Economic Affairs and Finance, Zanjan, Iran. BA – Account ing. Tuomo Kinnunen is a project manager and a doctoral student in Industrial Engineering and Management at the University of Oulu. He has a Master’s degree in Industrial Engineering and Management. Kinnunen has worked in several international research projects. His research work and interest include business ecosystems, innovation platforms and product development covering different angles. Petr Kiryushin, (Phd.) is Assistant professor at the Faculty of Economics of Lomonosov Moscow State Universi ty. He is Head of the “Management of biotechnology” Msc program at LMSU. Petr graduated from Lomonosov Moscow State University, where he received a joint master degree at Central European University and Lund University. His research interests include: regional innovation systems, sustainable regional development and green economy. Mervi Koivulahti Ojala has over 20 years working experience in ICT industry as a senior manager. Her research interests include innovation, change management and ICT in high tech companies. Sirkka Liisa Kolehmainen is Senior lecturer at Helsinki Metropolia University of Applied Sciences, in Health Care Diagnostic Services and Service Management, and a Master degree programs in Social and Health Care Management and In Health Business Sirkka Liisa is a Management Physiotherapist, Entrepreneur, Podiatrist and Lecturer. Andreas Kompalla is a PhD Student at the Bucharest University of Economic studies. Researching on plan based an agile business strategies in the Automotive Industry. Management consulting focusing 4 application of lean methods on logistics and production processes. Andreas Kompalla holds a Business administration (di ploma) from the Technical University Berlin. Andreas is completing PhD Studies at University of Economic Stud ies in .Bucharest Suvi Konsti Laakso MSc (Tech.) works as project researcher in Lappeenranta University of Technology, LUT Lahti. Her research interests are user involvement, co creation, innovation networks and living labs. She is fi nalizing her doctoral dissertation related to co creation and innovation networks. She has also experience in managing and setting up international research projects as well as working in multi disciplinary research envi ronment.


Lidia Kritskaya is an MA graduate and part time assistant at the Division of Research Management at the Uni versity of Agder, Norway. She also participates in different projects under the supervision of the professor Irina Gladisheva at the Northern (Arctic) Federal University, Russia. Lidia Kritskaya’s primary area of research inter ests includes entrepreneurship and life quality. Wioleta Kucharska is a PhD candidate, the dissertation title: Determinants of brand value creation in social media in the context of network economy (waiting for official defence in June 2016) and research assistant at the Management and Economy Faculty of the Marketing Department at the Gdansk University of Technology. Her research focuses on social media, knowledge sharing, and effectiveness of marketing activities, brand val ue and equity. Katja Lahikainen works as Project Manager at the Lappeenranta University of Technology (LUT), Finland, coor dinating LUT’s Entrepreneurial University process. Since 2010, she has been PhD student at the LUT School of Business and Management. Her research interests include functioning and development of regional entrepre neurial ecosystems, especially social networks residing within the ecosystems. Viola Larionova, holds a PhD in Physics and Mathematics, and is Associate Professor, Head of Department of Economics and Management in onstruction and Real Estate Development at Graduate School of Economics and Management (Ural Federal University), Director of E learning Department at Institute of Open Educational Technologies. Viola is the author of more than 90 publications and 3 monographs. Mosweunyane Lentswe is a lecturer at Central University of Technology, he hold a Masters in Business Admin istration from Central University of Technology, Free State. He is currently a fully registered Doctoral student at the same university. L Micha Le niak is a PhD student at the Poznan University of Economics. He graduated from the Faculty of Management at this University with Master degree in 2013. He studied finance and accounting directing his interest particularly in area of investment and corporate financial strategies. He also practices as a controlling and financial reporting specialist. Peter Marini is a doctoral student and instructor at the Department of Corporate Economy, Faculty of Eco nomics and Administration, Masaryk University in Czech Republic. He is a member of research teams focused to the topics of competitiveness, quality and development of the SMEs; and educational support initiatives in the field of entrepreneurship and start up. Sofia Mastrokoukou Received a Bachelor Degree in Philology and Linguistics from the University of Ioannina, Greece and a Master’s Degree in Lifelong and Adult Education from the Open University of Cyprus. she has worked at the University of Florence as tutor for the Master’s Degree School. In addition, during the last two years, she has been working with the NGO Idea Rom at the Educational Department. She is Phd Canditate at the University of Montpellier, France. Adam Mazurkiewicz is a Prof., CEO – Institute for Sustainable Technologies National Research Institute, Ra dom, Poland. He is a Manager and expert in research projects – systems engineering, machine construction and maintenance, materials engineering, technology transfer, foresight. Adam is an expert in FP6, COST, Polish interdisciplinary research groups. He is head of a few strategic national and international programmes. Adam has authored 300 publications including 22 monographs. Anabela Mesquita is a Professor at the Porto Accounting and Business School / Polytechnic of Porto. She is the Vice Dean and the President of the SPACE European network. She is also a member of the Algoritmi Research Centre (Minho University) and the Director of CICE (Research Centre for Communication and Education). She has also been evaluator and reviewer for European Commission projects. Ileana Pardal Monteiro Assistant professor of the Tourism School/ University of Algarve. MA in Organizational Behaviour, and PhD in Organizational Psychology, she is a board member of the Portuguese Association of Creativity and Innovation. Member of the CIEO/UAlg research center, she has worked in Human Resources Management in Public Administration.


Rimant Morkertait is pursuing her PhD in Management and at the same time is working as a junior re searcher at the Department of Strategic Management, Kaunas University of Technology (KTU) in Lithuania. Her research interests are in the area of internationalization of SMEs, international entrepreneurship, open inno vation, and business networks. Matti Muhos is the Research Director of Micro Entrepreneurship at the University of Oulu. He has a title of docent in technology business at University of Jyväskylä. D.Sc. (Tech.) Muhos has received his doctorate in in dustrial engineering and management from Universtity of Oulu. Syed Razi Nabavi is a PhD student in Human Resource Management in University of Semnan. He has 20 years of work in public and private company. He has published more than 10 research papers in various international journals. Nabavi has presented 8 papers in various international conferences in different countries. He also has more than 10 years experiences of research in area of small and medium enterprises. Florabel Nieva is an Assistant Professor of Entrepreneurship Department at Effat University in Jeddah, King dom of Saudi Arabia. She obtained a degree in Entrepreneurship, Master in Business Administration (MBA), and Doctor in Business Administration (DBA) at Aquinas University Legazpi (AUL) in the Philippines. Her re search focuses on social entrepreneurship, corporate entrepreneurship technopreneurship and academic en trepreneurship aspects. Eeva Liisa Oikarinen MSc is a Doctoral Candidate of Marketing at Oulu Business School. Her main research interest is humour as a marketing communication and branding tool in online media with special focus on the effects of humour in job ad context. Currently she is working as a Project Manager of the multidisciplinary re search project HURMOS Developing humour as a strategic tool for creating innovative business. Mustapha Olayiwola Opatola is a Phd holder who joined the Institute for Entrepreneurship and Development Studies, Obafemi Awolowo University, as a consultant in 2013. He has been involved in consultancy services related to entrepreneurship in small and medium sized businesses. Before joining the University, he has worked in the private sector as an entrepreneur. Opatola has published many academic papers both locally and internationally. Gbemisola Oyedepo is currently a PhD student in the Business and Management Research Institute at the Uni versity of Bedfordshire, Luton, UK. She holds a BSc in Management and Accounting from O.A.U, Ile Ife, Nigeria and an MSc in Finance and Business Management from the University of Bedfordshire. Her research interests include SMEs, sustainability and sustainable supply chains. Agnieszka Palka, PhD.Eng. Works as lecturer at Gdynia Maritime University in Poland, Faculty of Entrepreneur ship and Quality Science. She received a science degree with specialty in food technology. She has been con ducting various research related to quality of goods, especially frozen food, changes in food quality during storage and consumer behaviour on the market. Elisabeth Pereira holds a PhD and Master in the fields of Economics and Business Management. She is Assis tant Professor of Economics at the University of Aveiro, Portugal and researcher in the field of Competitiveness and Innovation at the Research Unit GOVCOPP. She is author of several dozen articles, chapter of books and communications at international conferences. Beata Poteralska, PhD, is a senior researcher, Head of the Innovation Strategies Centre at Institute for Sustain able Technologies National Research Institute, Radom, Poland. She is a manager and expert in national and international research projects in the area of innovativeness improvement, technology transfer, technology assessment and foresight. Beata has authored over 80 publications including 4 monographs. Viktor Prokop is a professor assistant and second year doctoral student at Institute of Economics, Faculty of Economics and Administration, University of Pardubice. He is co researcher of the grant project: Modeling knowledge spill over effects in the context of regional and local development; and explores the issue of meas uring the knowledge economy in his dissertation.


Patient Rambe holds a PhD in Educational Technology from the University of Cape Town, South Africa. He cur rently holds the position of Senior Researcher in the Department of Business Support Studies at the Central University of Technology in South Africa. Tero Rantala is a Researcher and PhD student at Lappeenranta University of Technology, LUT Lahti. His current research focuses on performance measurement and management of university industry partnerships, includ ing the measurement of effectiveness of innovation activities in private and public sector organizations. Kevin Reuther is an international PhD Student and research assistant. He studied Business with his majors in Management, Information Logistics and Business Psychology at the University of Applied Sciences Zwickau in Germany and the University of the West of Scotland. Currently, he is researching the field of organisational structures and innovation for preparing his PhD. Satu Rinkinen (MSc) works as a researcher and a doctoral student at Lappeenranta University of Technology, LUT Lahti. She works in research projects and is working on her doctoral dissertation. She holds a master’s de gree in Geography, and her current research interests include innovation policy, innovation systems and re gional development. Elena Rogova is a professor of the faculty “Saint Petersburg School of Economics and Management”, National Research University Higher School of Economics. Her research interests are related to financial management of innovation activities, including innovation projects evaluation, venture capital, valuation, risks, and intellectual capital and real options. Fernando Romero holds a Ph.D. in Science and Technology Studies from the University of Manchester. He is at the Production and Systems Engineering Department, and at the Research Centre ALGORITMI, in the Universi ty of Minho. He publishes regularly in the area of Industrial Innovation, Innovation Systems and innovation management. Eugenia Rosca is currently pursuing a PhD at Jacobs University, Bremen where she is involved in many teaching and research activities. Her primary research interests include sustainable solutions in developing countries, namely industrial sustainability through business models and value co creation activities. Michele Rusk is a Fellow in Entrepreneurship at Newcastle Business School, Northumbria University. Previous ly as an expert in Design Management she led curriculum development of the subject at the Faculty of Art, Design and Built Environment at the University of Ulster. Prior to that she held an academic enterprise devel opment role as Head of Consultancy within the University of Ulster’s Office of Innovation. Michele Rusk is an experienced public sector development adviser with over 17 years of practice in the United Kingdom and in ternationally. Martti Saarela is a Researcher and PhD candidate at Oulu Southern Institute of University of Oulu. He has a Master of Laws and Master of Science in Economics. His primary research interests are the development of micro companies, public business services, external entrepreneur support, public procurement, and regional development. Joseph Mathews Sacha is an Associate Professor of Marketing at the University of the Pacific. She has been working, teaching, researching and advising in marketing, customer service and international business for al most 20 years. Recently, she has been mentoring and training social entrepreneurs from across the globe. Navjot Sandhu is a Senior Lecturer in Finance at Birmingham City University. Since joining Birmingham City University, she continues to develop the discipline of bank lending decisions for small and medium farmers, an important area of research that has potential to impact on government policy and agricultural sector at large Juha Saukkonen (M.Sc.,econ), Senior Lecturer of JAMK University of Applied Sciences, coordinator of High Tech Management specialization. Juha is involved yearly in 50+ E E (education enterprise) projects, 2 3 larger R&D projects. Juha is a member of Finnish Network Academy in Futures Studies and has published on topics in Entrepreneurship, Project based learning and Foresight.


Taina Savolainen is Professor of Management & Leadership. She leads the research group of 'Trust within Or ganizations' in the University of Eastern Finland, Business School. Her main focus is currently in process ap proach to trust research. She is contributor in the three books of TRUST Inc. in the global network of Trust Across America Trust Around the World where she was named as 100 Top Thought Leaders in Trust 2015. Ulla Maija Seppänen is a Master of Health Sciences (MSc), Occupational Therapist (reg.) and Psychotherapist. She has strong background about therapeutic practices as well as developing new teaching and learning meth ods. She is currently Senior Lecturer and Head Coach at Oamk LABs in the Oulu University of Applied Sciences, Finland. Dmitry Shaytan is co founder of innovationStudio, Lomonosov Moscow State University, Faculty of Economics, where he manages acceleration programs, and teaches entrepreneurial management courses. He is entrepre neur, founder and general manager of the innovation company “ETB” that designs software and hardware based innovative solutions. Educational background: MS in physics, and MBA. Dmitry Shaytan is co founder of innovationStudio, Lomonosov Moscow State University, Faculty of Economics, where he manages acceleration programs, and teaches entrepreneurial management courses. He is entrepre neur, founder and general manager of the innovation company “ETB” that designs software and hardware based innovative solutions. Educational background: MS in physics, and MBA. Moulen Siame is a Lecturer at The Mulungushi University, Zambia and a Research Fellow at Nyenrode Business University. Moulen has published: Differences & Similarities of NGC bm & SVCE bm and Good performing (co operative) Enterprise with –SVCE bm in Zambia Viacheslav Sirotin is a professor at the National Research University Higher School of Economics, who holds a PhD from the Academy of Anti Aircraft Defense, Kharkov, Ukraine, 1990. Viacheslav’s career has involved Mili tary Service, 1981 2001; and roles as a professor at Moscow State University of Economics, Statistics and In formatics and National Research University Higher School of Economics, Moscow. Kirsti Sorama Ph.D. (Management). Dr. Sorama works as a principal lecturer in entrepreneurship at Seinäjoki University of Applied Sciences. Before SeUAS she worked at the University of Vaasa in Faculty of Business Stud ies. Her research interests have been business networks and growth, nascent entrepreneurship and anticipa tion of the future. Erik Steinhöfel studied economics and engineering at the University of Applied Sciences Berlin and the Univer sity of Technology Sydney. He works as a senior researcher at Fraunhofer IPK, Division Corporate Manage ment. His main areas of expertise are strategic and operational knowledge management as well strategic plan ning and innovation management. He refined his expertise in these fields through several public and industry projects set in Europe, Asia and South America. Jan Stejskal is an associate professor with the Institute of Economics, Faculty of Economics and Administration, University of Pardubice, Czech Republic. His domain is connection of the public economy in the regional scope and view. Especially, he analyses regional policy, tools of the local and regional economic development, and public services. Mullika Sungsanit is a lecturer, an InfoDev WorldBank consultant and certified trainer, and a former manager of Business Incubator and IP Management Office. She had developed and delivered training program for Women Entrepreneurs in Mekong and the Caribbean. Her research interests are around entrepreneurship de velopment and managing a growing venture. Eva Svandova works as an assistant professor at Masaryk University, at the Faculty of Economics and Admin istration, Czech Republic. Her scientific interest is focused on organizational design from the contingency theo ry perspective, inter organizational cooperation and innovation management from the view of enterprises. She has been involved in few research projects concerning competitiveness ability of the Czech enterprises. Antti Talonen works at the University of Tampere as a doctoral student and project manager. His doctoral the sis focuses on competitive advantages of mutual insurance company. The thesis puts specific attention to


sense of psychological ownership. In addition to this, Talonen has carried out research and development pro jects related to cooperatives and mutuals. Latest projects include development of a crowdfunding platform for cooperatives and research on shared value potential of cooperatives. Shailaja Thakur graduated with a bachelors’ degree in Economics from Delhi University. Subsequently, she did her post graduate studies of an MPhil and PhD from Jawaharlal Nehru University, India. Shailaja has worked in the private sector for five years and has more than ten years of teaching experience. Currently, she is teaching Economics at Sri Venkateswara College, Delhi University. Anna Ujwary Gil has a PhD degree in Management from the Warsaw School of Economics in Poland. Since 2011 she has been an editor in chief of the Journal of Entrepreneurship, Management and Innovation (JEMI). In 2010, her book titled Intellectual Capital and the Market Value of a Company won a prestigious award from the Polish Academy of Sciences. She is a Project Manager within the National Center for Science and Experi ence Researcher of the 7th FP of the EU international project of MC IAPP. Alroaia Younos Vakil has 18 years of work experience which is a blend of corporate and academics and spe cializes in the area of entrepreneurial development in SSIs. He has carried out consultancy work for the minis try of cooperative and commerce organization, as well as private company. He has published more than 80 research papers in various international journals. Younos has presented 65 papers in various international con ferences in different countries. Similarly, he has published 15 books. Younos had done 15 research projects on different issues of entrepreneurship development in SSIs. Younos at the present is as a head of DOS in man agement, IAU. Robin van Oorschot has a background as an industrial designer. For his PhD research at the Delft University of Technology he is investigating how to use Design theory to improve Entrepreneurship theory and how to use Design education to improve Entrepreneurship education. Qian Wang, holds an M.Sc. Degree in Economics and Business Administration, and is studying as a doctoral student in Jyväskylä University School of Business and Economics, University of Jyväskylä, with management and leadership as a major. Her research interests include entrepreneurship, entrepreneurship education, women entrepreneurship, social entrepreneurship, qualitative meta analysis and ATLAS.ti. Aleksandra Wilczy ska, Associate Professor, Ph.D., D.Sc. Eng., works as lecturer at Gdynia Maritime University, Department of Commodity Sc. and Quality Management. She received science degree with speciality in quality of food stuff. She has been conducting various research related to quality of regional and traditional food, an tioxidant activity of food products and raw materials. Baocheng Wu is currently a PhD student at School of Business, UNSW Canberra. Prior to studying at UNSW, she obtained her Master degree in Economics from South China University of Technology. Baocheng’s research areas of interests are entrepreneurship, institutional theory, and practice theory. Blaz Zupan is a research fellow at the department for Entrepreneurship of the Faculty of Economics, University of Ljubljana. He is engaged in many entrepreneurship related courses and specializes in the field of new idea development. Alongside the educational and research work he is also a co founder of several companies and an active business consultant.


A Study on the Effectiveness of Risk Management Implementation Among Malaysian Tier 1 and Tier 2 Cooperatives Ruzilah Abd Malek, Ahmad Faizal Shaarani, Mohd. Shahron Anuar Said, Azmaliza Arifin and IntanNurAzreen Mohamad Radzi Cooperative College of Malaysia, Malaysia [email protected]

Abstract: The rapid growth in the cooperative sector is evident by the number of the establishments, which stood at 12,493 in 2015. Malaysia’s cooperatives are diverse in terms of type, size and degree of complexity, thus, requiring the implementation of an efficient risk management. This study aims at assessing the extent of implementation of risk management in cooperatives and examines the awareness and commitment of management staff on risk management. Also examined is the establishment of specific risk management committees and risk management units in cooperatives. The study covers 40 Tier 1and Tier 2 cooperatives and 194 respondents comprising management staff involved in top management meetings. Data were collected by way of questionnaire survey and analysed using descriptive statistics, comparison of mean, correlation analysis and regression analysis. Among the salient findings is that the level of awareness on risk management is higher in Tier 1 cooperatives than in Tier 2 cooperatives. Keywords: effectiveness, cooperative risk management, commitment

1. Introduction 1.1 Background of study The cooperative sector in Malaysia has undergone transformation in various forms which exposes many of the cooperatives’ activities to various risks. This was not the case before. It is noted that the cooperative sector has also been establishing business connections outside the sector. This is because the cooperative sector is unique in that it has a large membership forming a huge market. With effective management, a cooperative could be run judiciously and be able to pursue a more risky business venture, thereby improving dividends to members and protecting the interest of stakeholders. With discipline and transparency, the management could establish accountability in the cooperative sector. To ensure that cooperatives provide a comprehensive policy on risk management with the necessary procedures and infrastructure for the numerous risks, the cooperative board members (ALK) must understand all aspects of the business activities of the organisations. It is only then that the cooperatives can begin to manage its risks and identify, evaluate, monitor and handle such risks.

1.2 Problem statement While cooperatives are experiencing growth in yearly profit there are several weaknesses in their management systems and that the cooperatives are facing internal problems which need to be rectified. Otherwise, the organisational activities would be adversely affected and its image tarnished. As such, there is a need to study risk management in cooperatives and the extent of commitment in managing its risks to ensure that the organisations generate high income. It is imperative that cooperatives run its business based on the principles of cooperative. As it is, most cooperatives in Malaysia pay little attention to risk management. Therefore, board members and management staff must take precautionary measures to ensure their organisations remain healthy by continuously examining its infrastructure, human capital and working framework. Growth in the activities of cooperatives is rapid, and this requires management to effectively and strategically handle risks. As a result of the rapid growth in the sector, there are now 12,493 cooperatives with a total membership of 7,418,019 (Cooperative data as of 30 June 2015, SKM). These cooperatives are made up of various types, sizes and complexities of operational set-up and pose a challenge to SKM in its efforts in monitoring, supervising and controlling the cooperative movement.

1.3 Study objectives The objectives of the study are: !

To examine the profile of Tier 1 and Tier 2 cooperatives in Malaysia;


To determine the effectiveness of the implementation of risk management;


Ruzilah Abd Malek et al. !

To determine the awareness of management on the implementation of risk management in cooperatives;


To evaluate the extent of awareness of the management on risk management in cooperatives;


To examine the relationship between awareness of management towards risk management and the effectiveness of risk management in cooperatives; and


To examine the relationship between the commitment of staff on risk management approach and effectiveness of risk management.

2. Literature review Risk management comprises all proactive activities of the management in specific programmes designed to accommodate potential failures in such programmes (Irzan, 2012). Risk management is defined as a scientific approach to real risks with the aim of reducing or removing such risks from a business (Vaughan, 1997). Rejda (2005) on the other hand, defined risk management as a process of identifying an organisation’s exposure to losses and selecting the most appropriate technique to accomplish it. Kloman (1992) defined risk as a good practice in dealing with the unexpected encumbrances that could surface from time to time which are detrimental to the organisational finance and derail any planning to provide benefit to individuals, organisations and the community on general. According to The Royal Society (1992), there are two approaches in risk management, namely, reactive approach and proactive approach. In the case of reactive approach, an institution determines its tolerance towards risk and changes its goals by following guidelines established to accomplish such goals. The proactive approach is a holistic risk management in which all potential risks are taken into consideration whether or not these would actually occur. Each of the potential risks is deemed capable of causing damage in its normal setting. Therefore, the management must evaluate and continuously monitor its risk, make projections and learn from problems encountered in the past (internal and external) which may resurface. According to C.O.S.O (2004), an organisation is considered to have an effective risk management if it fulfils eight components of Rangka Kerja Pengurusan Risiko Organisasi (RKPRO) (organisational risk management working framework). These are internal environment, determination of objective, identification of risk, evaluation of risk, reaction on risk, keeping tab on activities, information and communication, and monitoring of risk based on the organisational capability and suitability. Carey (2001) states that success in incorporating risk management depends on the ability to respond to situational changes which requires the involvement of workers. Hagigi dan Sivakumar (2009) show that effective risk management not only depends on the organisational ability in reducing or avoiding risk, but also on the ability to develop risk strategy that is in line with the organisational goal and risk prioritization. In addition, it is important that all individuals in an organisation have a better understanding of risk and risk-taking so that the organisation is effective in managing its risks. Risk management deals with risk directly by controlling, avoiding and reducing the adverse effect of risk. According to Lembaga Perkhidmatan Kewangan Islam (IFSB, 2005), there are five strategic processes in handling risk, namely, identifying, measuring, evaluating, controlling and monitoring (Figure 1)

Figure 1: Risk management process


Ruzilah Abd Malek et al. Identifying Risk Risks comprise all possible dangers to the operation of an organisation (Tummala and Leung, 1996). According to Tchankova (2002), one could identify risks by looking at the sources, hazard factors and risk exposures as follows: !

Sources of risks and elements of organisational environment that exert positive or negative impact on any undertaking such as embarking on new products with uncertain current market conditions. The risk is associated with quality and market acceptance.


Hazard factors are specific situations that increase the likelihood of profit and loss. Failure to understand development in the market for new products exposes the organisation to a high risk.


Exposure to certain risks causes a business organisation to face possible losses. However, losses will only occur when such risks actually materialise.

Measuring Risk According to White (1995), an organisation measures risk by visualising and estimating the likelihood of it occurring. In this process, the organisation focuses its effort on determining the opportunities that come with the risk. According to Irzan, Mutasim, Mohamad and Fazli (2012), risk measurement involves evaluating the probability of a risk occurring. That is, risk management focuses on examining potential risks and that risk measurement aims at reducing risk to a minimum, hence the foundation to controlling risk (Startiene and Remeikiene, 2007). Evaluating Risk According to Irzan et al. (2012), measuring and evaluating risk appear to be similar in nature, but it is important to distinguish between the two. Measurement of risk is a process of estimating the level of risk by comparing such risk with the benefit resulting from the undertaking (White, 2005). The risk evaluation phase involves critical examination of all action plans taken during risk measurement. Risk evaluation looks at the effectiveness of the overall risk reduction, total resources needed, the need for changes to the original venture and selection of optimum action to accomplish the organisational risk management goal (Tummala and Leung, 1996). Controlling and Monitoring Risk Controlling and monitoring risk is very important to see the progress of an undertaking (Tummala and Leung, 1996). It is also useful to update the identified risk and the associated hazard factors. Past studies point out that organisational commitment is important for the development of an organisation ant that a highly committed organisation is likely to be more successful (Shirbagi, 2007; Stanley, Herscovitch and Topolnysky, 2002). Organisational development, strategic changes and evaluation are also important. Meyer and Allen (1997) define organisational commitment as the commitment of employees towards their organisations. And, organisational commitment is an important feature as it represents the overall contribution of employees in enhancing the capability of their organisation and creating conducive working environment (Shirbagin, 2007; Meyer and Herscovitch, 2001). The importance of organisational commitment in risk management is evident under Kod Tadbir Urus Malaysia (Security Commission, 2007) which states that commitment is one of the factors that influence risk management. The ability to measure level of commitment enables the organisational management identify the involvement of staff at all levels in risk management activities. According to Foote, Seipei, Johnson and Duffy (2005), employees who understand the importance of risk management would be more committed to the overall effectiveness of risk management. Figure 2 presents the theoretical framework of the study based on literature review of past studies in relation to the effectiveness of risk management in cooperatives.


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Independent Variable Dependent Variable

Identification Measurement Assessment

Management Commitment

Effectiveness of Risk Management

Control Mediator


Figure 2: Study framework on effectiveness of risk management in cooperatives

3. Methodology This study seeks information on the relationship between organisational commitment and risk management in cooperatives. For this, there is a need to have an integrated data set that could be meaningfully analysed. Data collection was accomplished by way of questionnaire, and such an approach is most appropriate when the emphasis is on quantitative data related to the measurement of attitudes, perceptions and opinions (Burn and Groves, 1993). The respondents for this study were officers who attended meetings involving the top management of cooperatives as they had access to accurate information on risk management in their respective cooperatives. This study is quantitative, using statistical analysis, objective in nature and looking strictly at the results of analysis. The study began by constructing the analytical instrument in the form of a structured questionnaire. The questionnaire was developed to obtain data on the extent of commitment on the part of management in coming up with the effective risk management system in cooperatives. There two sources of data, namely, sample survey and SKM. The sample survey involved 13 Tier 1 and 27 Tier 2 cooperatives. The respondents from each cooperative in the sample consisted of those in the top management such as general managers, managers and management executives involved in top management meetings. A total of 256 questionnaire forms were sent to the 40 cooperatives with a 78 per cent return (194 completed forms). Although not all of the questionnaire forms were complete, these were representatives of all cooperatives. Data collection took four months.

4. Results and discussion 4.1 Effectiveness of risk management in cooperatives In general, half (20 or 50%) of the cooperatives have management committees, while less than half (15 or 43%) have risk management units staffed by cooperative employees. These units are fully responsible for identifying potential risks and taking suitable actions. It is clear that Tier 1 cooperatives are relatively more effective in implementing risk management than their counterparts. Specifically, 77 per cent (10 out of 13) of Tier 1 cooperatives have risk management committees compared with only 37 per cent (10 out of 27) for Tier 2 cooperatives. Meanwhile, 69 cent (8 out of 13) Tier 1 cooperatives have their own risk management units compared with only 30 per cent (7 out of 27) for Tier 2 cooperatives.


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4.2 Awareness about management of cooperatives On the average, awareness about risk management is higher in Tier 1 cooperatives than in Tier 2 cooperatives. The mean scores are also higher in Tier 1 than in Tier 2 cooperatives for identification (4.14 against 3.84), measurement (4.17 against 3.98), evaluation (4.16 against 3.88), control (4.10 against 3.87) and monitoring (4.6 against 3.75). The difference in scores ranges from 0.18 (measurement) to 0.41 (monitoring). Difference in awareness about risk management between Tier 1 and Tier 2 cooperatives is expected because of the difference in their features. Tier 1 cooperatives are large-impact organisations, with supervision and risk management being continuously evaluated by SKM. One SKM officer acts as the communication manager of each Tier 1 cooperative, indirectly enhancing risk management in the latter. On the other hand, supervision in risk management in Tier 2 cooperatives is only carried out occasionally by SKM in 2-5 years and that no SKM officers were specifically assigned to monitor these cooperatives. Identifying Risk Generally, awareness about three aspects of risk measurement is high. The mean score for “Cooperative identifies risk based on its impact on organisation” is the highest for all cooperatives (4.06). This is followed by “Cooperative identifies each risk associated with organisational objective (4.04), and “Cooperative identifies risk based on its sources (4.02). This shows that awareness about the process of identifying risk based on activities having substantial impact and potentially derailing the accomplishment of goal is relatively the highest. So is awareness about identifying risk based on its sources. The lowest mean score is for “Cooperative provides procedures by systematically identifying its risk (3.76), followed by “Cooperative applies procedures for identifying risk (3.80). In general, risk management in these cooperatives is still unsatisfactory, with many respondents not realising the importance of their organisations following a systematic procedure in identifying risk. Without a concrete and well-formulated risk identification procedure, it is unlikely that risk management could be done effectively. Measuring Risk In general, awareness about measuring risk as manifests in “Cooperative risks are analysed based on financial impact” has the highest mean score of 4.20 Awareness on risk measurement has been directed more towards activities having substantial impact on cooperative finance. Furthermore, the emphasis of risk measurement is on the impact on cooperatives with mean score of 4.08. This is followed by “Cooperative risks are analysed based on reputation “(4.02), “Cooperative risks are analysed based on accomplishment of objective” (3.97). The lowest mean score, albeit still relatively high, is “Cooperative risks are analysed based on likelihood of occurrence (3.95). This implies that cooperatives also place emphasis on the likelihood of something happening when measuring risk. Evaluating Risk The evaluation item “Cooperative collects information on risks before making decision on action to make” has the highest mean score of 4.09, implying that cooperatives are aware that collecting sufficient information is essential in making decision on risk management. This is followed by “Cooperative analyses and evaluates the chances of accomplishing organisational objective” (4.07), “The interest of stakeholders is important in evaluating risk facing cooperative” (4.03) and “The action of cooperative in analysing risk includes arranging these according to priority and selecting risks that require the immediate action of management” (4.02). The lowest mean score (3.66) is for item “Cooperative knows the strengths and weaknesses of collaborating cooperatives in managing their risks”. That is, awareness towards risk evaluation in other closely related cooperatives may have an impact on a cooperative. Controlling Risk Respondents were of the view that their cooperatives understand which risk to address in accomplishing their objectives (mean 4.01) and that their cooperatives use a technique of transferring their risk to a third party in


Ruzilah Abd Malek et al. their risk management (mean 4.00). This implies that awareness about controlling risks is more focused towards risks that could affect the accomplishment of organisational objectives. Cooperatives also seek to control specific risks (3.99) and avoid any risk at all (3.94). The lowest mean score (3.80) is for the item “Cooperative adopts various techniques of risk management in accepting and maintaining risks”. That is, on the average, cooperatives are using a limited range of techniques in their risk management. Monitoring of Risk In the case of risk monitoring, the management of cooperatives is always seeking feedback on risk to ensure that the organisation handles its risk appropriately. This is evidenced by the mean score of 4.15 for item “readily accepts various information regarding risks”. The item “It is important to ensure the importance of risk management in reporting the management of cooperative” has the second highest mean score of 4.06, followed by “Controlling risks in cooperatives must be consistent with the risks being faced” (3.91). Meanwhile, the lowest mean score (3.74) is for “This cooperative has specific indicators used to monitor the effectiveness of its risk management technique. This implies that not all cooperatives have specific indicators to be used to monitor the effectiveness of their risk management.

4.3 Commitment of cooperative management The results show that the commitment of cooperative staff is on the moderate level at best, with mean score of 3.47 and median 3.50 Only one of the six components representing commitment has a high meanof 4.25: “This cooperative is very important and beneficial to me”. This implies that cooperatives are important and beneficial to respondents such that the problems of cooperatives are their problems. This is true because they are employees of the organisations.

4.4 Relationship between management awareness and effectiveness of risk management The results of correlation analysis to determine the relationship between management awareness about risk and effectiveness of risk management. This relationship is seen through the six components of risk management, namely, identification, measurement, evaluation, control and monitoring. As a whole, there is a positive, but rather weak relationship between management awareness and control, evaluation and identification, while measurement and monitoring do not impact on effectiveness that much. Effectiveness of risk management(r=0.453; p,4) were mostly associated in the component 1 with skills that represent those competencies concerning organizational and analytical skills as well as capacity of synthesis. Notwithstanding, in component 2, we observe that the higher number of values were mostly associated with competencies related to creativity. We have tried to gather evidences about whether the students were aware of their learning and if they were aware of their skills to solve new problems in different set of situations. This aspect is particular important for graduate students of business management and administration who need to deal with a challenging and fast changing reality. The concept of developing a framework for assessing the meta-competencies has to do with the importance of having an accurate system of understanding, both from the perspective of the higher education institutions, as well as from the student’s perspectives what were their learning path that does not end at the degree achievement. This can be wrapped up in the subjective perception of "I know I can learn to do what I have or I can find the necessary tools to analyse and propose a solution according to different given situations". A first preliminary result that we can suggest, by using the methodology of Principal Components, are associated with observing basically correlations referred to variables that we can associate with the organization and analytical skills integrated in the dimension 1 and with creativity capacities integrated in dimension 2. In table 1 we can observe the integration of the components that build up the two dimensions. Table 1: Integration of the different set of generic competencies Dimension 1 (Organizational, analytical and methodical set of competencies) Set personal goals and objectives Organise time to goals Organize and manage information High capacity for criticism and self-criticism Relational skills (listening, communication and feedback) Oral and public speaking skills Capacity of autonomous work (work independently) Capacity to adapt to new situations Face new challenges Entrepreneurial spirit and initiative capacity When performing a task, I frequently evaluate my progress on my goals Capacity of adaptation

Dimension 2 (Creativity driven set of competencies) I like to face new challenges I like to generate new ideas (creativity) Concern for quality in all tasks Oral and public speaking skills. Capacity of organization and planning Organise time to goals


Albert Arisó, Michele Girotto and José Luis Fernandez We may observe that there are in component 1 factors such as: "I do not persist much when there is hard work before leaving it", "if the task is very difficult not even want to start", that correspond to the profile of the organized, analytical and methodical student, but it lacks importance in the creative profile. However, both dimensional sets of competencies valued the importance of time management to control objectives achievements, and capacity of confronting challenges, together with oral and public speaking skills. Nonetheless, it may suggest that in the dimension 1, there is a contrast between the initiative driven and entrepreneurial skills as well as facing new challenges capacities with a high low persistence to keep up with hard work and lack of motivation to start difficult tasks, which presents a higher contrast against the more creative profile in dimension 2. As such, in the creative set of competencies we may observe the integrated importance of being able to generate new ideas, by facing new challenges, that resonates with the importance of having a higher concern for quality results. This is also integrated within the importance given to be able to manage well the time when progressing towards objectives, as well as the emphasis put on the relevance of planning and organising. Table 2: Components analysis Components

1 - Organizational, analytical and methodical competencies

2 – Creativity related competencies

A1. Often set personal goals and objectives



A4. I organize my time to better meet my goals



A7. I'm good at organizing and managing information



A11. Do not resist much hard work before leaving it.



A12. If the task is very difficult, I don't want to start



A13. I think you can accomplish almost anything if you want



A15. I like to face new challenges



A16. I like to generate new ideas (creativity)



A19. I believe I have a high capacity for organization and planning



A20. I think I have a high capacity for criticism and self-criticism



A21. I always try to maintain an ethical commitment



A22.I have an excellent level of relational skills (listening skills, communication and feedback)



A23. I am a person able to work independently



A24. I always try to adapt to new situations



A26. I like to take the initiative and considerer my entrepreneurial spirit is high



A27. For me quality is always important in all tasks



A28. I have an excellent oral skills and public speaking skills



A29. I have excellent written communication skills



Essentially, we can observe that overall students perceive themselves to have organization, method and tools to deal with problem solving, mostly concerned on organization and analytical skills, regardless of their creative nature and concern for quality. It is also interest to find out that the competency associated with the maintenance of ethical commitment are valued very low by both set of profile of students, which is an interest contrast when it comes to understand the importance of ethical issues when developing professional and management projects in the final year of an undergraduate business student.

5. Discussion As described in the current ongoing paper, we are developing a process of assessing the meta-competencies in the final year projects of business management undergraduate students. This project has a goal of coming up with an accurate process of evaluating the generic competencies in the FYPs. The overall project on the one


Albert Arisó, Michele Girotto and José Luis Fernandez hand tries to assess the institutional perspective by analysing the supervisor’s perspective during the whole supervision process, and on the other, we want to come across with the identification of what are the level of awareness of the students concerning their generic skills. Therefore, in this paper we only take an initial approach to the student’s survey, trying to focus on the particular aspect of the skills associated with creativity and initiative. It is still pending to develop a deeper application of the Principal components analysis. This preliminary results have shown an initial identification of two sets of meta-competencies that put in contrast a more analytical, methodical and organizational set of skills profiles, against a more creative set of skills profile, with an observation of a common correlation of aspects associated with facing new challenges, time management and public and oral speaking. Accordingly, the outcomes coming from our preliminary analysis showed us that the most valued skills by the students were initially combined in two main factors: the first factor was related to organizational and analytical capacities while the second factor would be represented by competencies related to creativity. However, this is only an initial preliminary approach to the results, that should be analysed in depth. Thereupon, this paper tried to identify the extent to which student perceptions of their development of the FYP include meta-competencies. Framed by this analysis the study wants to propose the elaboration of an integrated assessment framework that ensures the appropriated meta-competencies build-up and evaluation. In this paper we have prompt the preliminary results from a survey where we asked undergraduate students from a Business School in Spain about which skills they have developed in their elaboration of the FYP, coming up with two main set of a first approach to the meta-competencies in the FYP. Furthermore, by the development of the supervisor’s study to be integrated with the student’s perspectives on competency-based learning process, the practical result of the project will have to do with the development of rubrics that would comprise the findings of the student’s survey on generic competencies, aspects that are not currently assessed in their FYPs. Our goal is to implement the appropriate descriptors, by integrating in the rubric, the set of components that were strongly valued by the students, and that would include both dimensions, in order to facilitate their development. Moreover, it would have an important implication for the learning and training path, as the institution would have guidelines for enhancing a more balanced profile of students on organizational and analytical skills, combined with the creative and initiative driven profile. On the other hand, in terms of scientific contribution, we would like to further deepen the gap in understanding generic competencies in the accomplishment of the FYPs by the students, developing a conceptual model based on the construct of meta-competencies. This idea is driven by the fact that we found out that in the FYP the student must be able to harmonize and prioritize the different skills learnt during their studies. The metacompetency framework is outlined in the reflection process that the student may develop when thinking of their skills development process, and it may help to increase the student's ability to choose and match specific skills depending on the different professional situation in which they may find themselves.

References ANECA. (2005). Libro Blanco Título de Grado en Economía y Empresa. Madrid: ANECA. Bologna declaration. (1999). European Ministers of Educ., “The European higher education area,” European Union, Bologna (Italy), Joint Declaration, (1999). [Online]. Available: documents/MDC/BOLOGNA DECLARATION1.pdf ͒ Bain, Ken. (2007). Lo que hacen los mejores profesores universitarios, Publicacions de la Universitat de Valencia, Valencia, pp. 20-27. Barnett, R. (1994). The Limits of Competence: Knowledge, Higher Education and Society Buckingham: SRHE/Open University Press. Bunge, M. (2004). Emergencia y convergencia. Novedad cualitativa y unidad del conocimiento. Gedisa, Barcelona. Delgado, Bonilla, M.I. and Martín López, C. (2012). Evaluación de competencias en el Trabajo Fin de Grado en Administración y Dirección de Empresas: una propuesta de la Facultad de Ciencias sociales de Talavera de la Reina. UCLM. Revista de formación e Innovación Educativa Universitaria, 5 (4), pp. 241-253. De la Iglesia, M.C. (2011). Adecuación del grado de desarrollo de la formación en competencias a la necesidad en el entorno laboral, según la opinión de los estudiantes. Revista Complutense de Educación Vol. 22, No.1, pp. 71-92. Haynie, J. M., Shepherd, D. a., and Patzelt, H. (2012). Cognitive Adaptability and an Entrepreneurial Task: The Role of Metacognitive Ability and Feedback. Entrepreneurship Theory and Practice, Vol. 36, No. 2, pp. 237–265.


Albert Arisó, Michele Girotto and José Luis Fernandez Henson, R.K., Roberts, J.K. (2006). Use of Exploratory Factor Analysis in Published Research: Common Errors and Some Comment on Improved Practice. Educational and Psychological Measurement. Vol 66, No. 3. Mateo, J., Escofet, A., Martı ́nez-Olmo, F., Ventura, J. and Vlachopoulos, D. (2012). Evaluation tools in the European Higher Education Area (EHEA): an assessment for evaluating the competence of the Final Year Project in the social sciences. European Journal of Education, Vol. 47, No. 3, pp. 435-447. Montoro-Sanchez, M.A., Mora-Valentín, E.M. and Ortiz-de-Urbina-Criado, M. (2012). Análisis de las competencias adquiridas en los estudios de Dirección de Empresas y su grado de aplicación en las prácticas en empresas. Revista Complutense de Educación, Vol. 23, No. 1, pp. 241-263. Riggs, E.G.; Gholar, C. R. (2009). Strategies that promote students engagement. Unleashing the desire to learn. Second edition. Corwin Press Inc. A SAGE Company. Rullán, M. et al. (2010). La evaluación de competencias transversales en la materia Trabajos Fin de Grado. Un estudio preliminar sobre la necesidad y oportunidad de establecer medios e instrumentos por ramas de conocimiento. Revista de Docencia Universitaria, Vol. 8, No.1, pp. 74-100. Tobón, S,. Pimienta, J., and García, F. Juan Antonio. (2010). Secuencias didácticas: aprendizaje y evaluación de competencias, Ed. Pearson, México, p.8. Tubbs, S.L., and Schulz, E. (2006). Exploring a taxonomy of global leadership Competencies and metacompetencies. Journal of American Academy of Business, Cambridge, Vol. 8, no. 2, ProQuest, pp.29. Watts, F., García-Carbonell, A. and Llorens, J. A. (2006). Introducción. En Watts F. and García-Carbonell, A. (ed.) La evaluación compartida: investigación multidisciplinar. Universidad Politécnica de Valencia, pp. 1-9. Tuning Educational Structures in Europe I (2003). Final Report. Pilot Project - Phase 1. ask=view_category&catid=19&order=dmdate_published&ascdesc=DESC.


Specific of Sales Volumes Forecasting for Dairy Products in Russia1 Marina Arkhipova 1 and Kirill Arkhipov 2 department of Statistics and Data Analysis, faculty of Economics, National Research University Higher School of Economics, Russian Federation 2The department of Mathematic statistics and econometrics, Plekhanov Russian Economics University, Russian Federation


[email protected], [email protected],

Abstract: The article is focused on forecasting of dairy products sales. We estimate the probability of buying in innovative product by a consumer on the base of the model including a set of various factors-determinants. The proposed methodology has been tested using real data on dairy products sales in Danone Russia, the largest producer of dairy products in the CIS area. The quality of the model exceeds the quality of existed models used by the company. Keywords: forecasting, new products, supply chain collaboration, cooperation and partnership, panel data

1. Introduction The variety of products becomes an important component of successful business in Russia. In the dairy market, consumers pay significant attention to the locality of production (region of production, farm and even the name of the cow) and their innovativeness. These tendencies require closer collaboration throughout the supply chain from manufacturers of ingredients and packaging, dairy factory and distributors (retailers). Specific feature of dairy plants the supply in Russia is the low transportation speed of the goods in the country (an average of 17.4 km/h), reflecting poor development of transport infrastructure and the unreliability of railways providers. For producers of goods with small shelf life, Russian logistic specific (large distances within the country and at the same time low concentration of population excluding several districts) leads to the need to develop a complicated network of plants and warehouses. Such operational model gives high logistic costs and significant attention must be paid to operations efficiency and forecast accuracy improvement. It also has a negative impact on inventory turnover of raw materials (31 days in Russia, 12-16 days to USA and Europe). At the same time in Russia only about 80% of deliveries are performed in compliance with all requirements for product quality, delivery date, quantity of goods, while in Europe and the USA this figure is close to 100%. Russia is also slightly behind Europe and the US in terms of customers’ service level (CSL), key reasons are low level of supply chain integration with retailers and absence of a frozen horizon in orders from customers (tab. 1.). Unlike the contract terms in the EU and North America in Russia customers can cancel orders the same day of scheduled delivery or place extra volumes orders in short notice, while in Europe and America these terms are strictly regulated. Closer collaboration allows improving the accuracy of sales volumes forecasting, decrease logistic and production costs and finally supporting customers’ service level on a high rate. Table 1: Key indicators characterizing the supply chain of dairy factories in the world Indicator Average weighed distance between dairy factory and consumers, km Average weighed distance between raw & pack suppliers and dairy factories, km










Average speed of goods transportation through the country, km/h




Average goods turnover, days Suppliers service level (average number of deliveries on time, on quantity and without quality issues), %







Average customers’ service level in dairy market, %




(Data Source: informational portal Council)


This work was supported by a grant from the Russian Foundation for Humanities №16-02-00716а


Arkhipova Marina and Arkhipov Kirill Russia is one of the world’s leaders in terms of dairy products sales volumes increase; however production growth in the country is limited by weak state support of agriculture. Further dairy market development in the next 2-3 years is possible only due to import goods with reduction of investments by Russian enterprises in fixed assets and stimulation of inflationary processes. On average 45% of the cost of dairy products on shelves is the value of milk, thus current trend of milk prices increase threatens to significantly inhibit the development of Russian dairy market. Large number of risk factors for sales volumes forecasts deviations on dairy market and low shelf life of the products and its ingredients require specific models, which can deliver high-performance, accuracy and adequacy in process of demand planning. While traditional products have a sufficient retrospective data about the impact of key factors on sales volumes, for the innovative products, which are even sometimes representing a new product category, such framework is missing, so application of traditional statistical methods of sales forecasting is not possible. Approbation of classical statistical forecasting models described in section 3, such as trend-seasonal, adaptive, ARIMA models, etc., to build a sales forecast even for traditional dairy products on real statistical data from Danone Russia had revealed their ineffectiveness and low accuracy of predictive assessments. For example, the average relative error in modulus for the different products on average ranged from 18% to 34%, average forecast bias -8%. The low quality of such models is mostly determined by the necessity of taking into account specific factors of dairy products: low shelf life of the product and its gradients. In the conditions of crisis and tough competition such errors is not desirable for the company, as they lead to significant material and financial losses. In this regard, the problem of predictive models accuracy improving is relevant, which take into consideration the influence of various factors on the dynamics of the dairy market. Sales models forecast accuracy improving allow manufacturing companies to reduce the loss of finished products and ingredients, gain competitive advantages in general which is especially important during the economic crisis period. In the long term period improvement of sales volumes forecasting models of dairy products enables to optimize investments in production capacities and their locations, create a model of effective distribution of finished products. At the mid- and short-term horizon, an accurate prediction can satisfy the demand of customers with optimal cost and minimal losses of finish product due to shelf life expiration.

2. Literature and data sources review There are two main types of forecasting, depending on their purpose and structure: Macro forecasting is concerned with forecasting markets in total, aggregated volumes. This is about determining the current rate of Market Demand and predict what will happen to sales in the future (Dybskaya V., 2002; Ballou Ronald H., 1999; Coyle John J. et al, 2003; Arkhipova M., Akkhipov K., 2014). Micro forecasting is concerned with detailed forecasts at SKU level. This is about determining a product’s market share in a particular industry and considering what will happen to that market share in the future. The selection of which type of forecasting to use depends on several factors, described in different sources, for example (Mkhitarian V., Arkhipova M., Sirotin V. et al, 2016; Arkhipov, K., 2012; Arkhipov, K., 2013). Among such key factors are: !

The degree of accuracy required – if the decisions that are to be made on the basis of the sales forecast have high risks attached to them, then it stands to reason that the forecast should be prepared as accurately as possible. However, this involves more cost


The availability of data and information – in some markets there is a wealth of available sales information (e.g. clothing retail, food retailing, and holidays); in others it is hard to find reliable, up-to-date information


The time horizon that the sales forecast is intended to cover. For example, are we forecasting next weeks’ sales, or are we trying to forecast what will happen to the overall size of the market in the next five years?


The position of the products in its life cycle. For example, for products at the “introductory” stage of the product life cycle, less sales data and information may be available than for products at the “maturity’ stage when time series can be a useful forecasting method.


Arkhipova Marina and Arkhipov Kirill Researchers usually have a following standard approach to create a forecast for a particular SKUs, described in Langley John Jr., John J., 2008; . Shapiro J.F., 2001; National trade and marketing research agency and others. The first stage in creating the sales forecast is to estimate Market Demand. Definition – Market Demand for a product is the total volume that would be bought by a defined customer group, in a defined geographical area, in a defined time period, in a given marketing environment. This is sometimes referred to as the Market Demand Curve (Shapiro J.F., 2001; Global supply chain non-profit consulting organization). Stage two in the forecast is to estimate Company Demand. Company demand is the company’s share of market demand. This can be expressed as a formula:

company Demand " Market Demand ! Company ' s Market Share A company’s share of market demand depends on how its products, services, prices, brands and so on are perceived relative to the competitors. All other things being equal, the company’s market share will depend on the size and effectiveness of its marketing spending relative to competitors. Step Three is then to develop the Sales Forecast The Sales Forecast is the expected level of company sales based on a chosen marketing plan and an assumed marketing environment. Note that the Sales Forecast is not necessarily the same as a “sales target” or a “sales budget”. A sales target (or goal) is set for the sales force as a way of defining and encouraging sales effort. Sales targets are often set some way higher than estimated sales to “stretch” the efforts of the sales force [Langley John Jr., John J., 2008; Models and methods of logistics theory, 2008; National trade and marketing research agency ). Sales forecast accuracy improving requires a complex analysis of statistical tendencies and the factors that influence the dynamics of the time series. Modern scientists paid great attention to statistical models of forecasting economical processes. In the works Anderson, D.R, Sweeney, D.J, Williams, T.A., Freeman, J. and Shoesmith, E., 2009; Bowerman, B.L., O’Connell, R.T., 2000; Box, G.E.P., Reinsel, G.C., and Jenkins, G., 1994; Makridakis, S., Wheelwright, S.C., and Hyndman,R.J., 1977; Mkhitarian V., Arkhipova M., Sirotin V., 2016 basic principles and applications of trend-seasonal, adaptive and ARIMA models for sales forecasting are described. However, there are not enough works describing specific of sales forecasting of new dairy products with small shelf life. On the other hand, there are many works devoted to planning hub works. Hub is a managing structure of a network company that centralizes purchasing of finished products or materials that helps to get best purchasing prices and fast reaction to a changing market needs to increase goods turnover (Dybskaya V., 2002). Common warehouses are turning from just a place for physical keeping of goods to centres for optimization of products and materials flow, conversion of incoming materials from suppliers to a ready to use batches for production plants. Now in many countries, including Russia yearly conferences and forums take place, where mostly retailers’ representatives share their experience in using hubs. Companies operate either through their own hubs or use service of logistic providers (3-PL). Researches in supply chain determine two main types of hubs, depending on average lead time from it to its clients: American type with optimal distance to clients 400-500km and European with optimal distance 2-3 times lower (Langley et al, 2008). In American hub type, orders are prepared in the evening and are delivered to clients during the night time. In Russia most of the companies use American type of hubs due to significant territories. Implementation of such model requires high amount of investment for organizational innovations, and in this case companies have to choose between extensive and intensive development. In current conditions of deceleration of economic growth in Russia, for many companies the choice of intensive development becomes obvious. Implementation of hub model of supply planning also needs


Arkhipova Marina and Arkhipov Kirill good system development and centralized materials requirements planning which should be based on ERP system. The only disadvantage of using hubs is increasing of average lead time (Shapiro et al, 2001). Among main advantages that companies gain after changing their type of materials planning from direct deliveries to plants from suppliers to hub model are (Arkhipova M., Akkhipov K., 2014): !

Purchasing bigger orders for hub to supply optimal quantity to the plants that deliver materials from this hub. It helps to achieve low purchasing price, increase materials turnover and decrease probability of shortage of material at plant;


Optimization of warehouse operations that helps to decrease exploitation expenses;


Optimization of transportation schemes that helps to increase transport fill rate and exclude inefficient usage of trucks;


Optimization of input control of materials, that enables to decrease expenses for quality control.

Researches determine two main types of hubs: enclosed and open (Coyle et al, 2003). Enclosed hubs are used only by one company that operates with them and in open hubs model warehouses are used by several clients. For trade network companies more popular and preferable type is open hubs, in this case the average warehouse fill rate is close to maximum capacity and products turnover is high. For production companies if hubs are used for materials flow management, usually enclosed hubs models used (Arkhipov K. 2014; et al). It is the consequence of the fact, that most of production companies don’t use special external warehouses for materials storage, but they use storage capacities of their plants. In spite of increasing number of conferences, scientific applied researches and publications at this topic, most of the focus is concentrated on using hubs for finished products flow management what is useful for retail companies, meanwhile, insignificant attention is paid for studying hubs for materials for companies with territory-spread production capacities (Arkhipov K., 2013). Such models have its specific features and differences from classical hub models used for finished products. That explains the novelty and potential of further researches of such models, their development and implementation in Russia.

3. Methodology of forecasting the sales of dairy products using a combined model To improve forecast accuracy of sales volumes of finished products with low shelf life the following factors should be included in the model: !

Trend is considered as a long-term tendency of consumption of dairy products. For dairy products, trend characterizes the life cycle of a product, which on average for dairy products is 2-4 years;


Seasonal effect for dairy products reflects short-term demand deviation connected with specific of the season. The most significant of them are demand increase in summer for drinking yogurts, specific healthy drinks sales uplift in cold winter season, sales decrease in fasting period in spring, etc.


Baseline reflects the level of sales at 1% of weighted distribution with fixed influence of all other factors;


Promotions and marketing support. This group includes: television and Internet advertising, customer relationships management and other marketing activities;


Trade marketing activities in the sales channels are characterized mainly by temporary reduction of prices on certain kinds of products;


Price change history and product elasticity for the price. The annual increase in prices for dairy products generally leads to higher sales a week before the price increase and to a decline in sales during the week after the price increase;


Uncertainty in the market that can be caused by various factors including sales deviation due to competitors’’ activities;


Other factors.

Below the model is described of sales volumes forecasting of dairy products on an example of cheese desserts Danissimo. Analysis of the dynamics of cheese desserts Danissimo sales during the period since 2008 to 2015 showed that, on the one hand, there is a stable upward tendency of sales of this product, however, on the other hand, we can


Arkhipova Marina and Arkhipov Kirill note emerging effect of market saturation starting from 2011 and decrease in sales growth that can also be caused by the crisis. A stepwise including model is proposed to take into account several factors affecting sales of dairy product. . On the first step of the study retrospective data on the sales volumes of Danissimo cheese desserts was adjusted depending on the customers service level (CSL). Note that every company has a target (average) level of the CSL, which the enterprise can provide based on the current operational efficiency (transportation delay, quality problems, materials out of stock, production issues, etc.). If any time in the past CSL was below the target level that means problems with the sale of the product. Taking into account that such sales issues can’t be predicted in advance, retrospective data containing actual sales volumes was corrected in the periods when CSL was below target level. One of the most important factors influencing the volume of sales is the percentage of weighted distribution. This indicator reflects the volume-weighted sales share of retailers where analysed product is available on shelf. Changes in this indicator lead to significant volatility of the total volume of the sale of products; therefore, it must be taken into account when building the forecast model, using formula bellow: n

WD "

# Sales i "1 m


# Sales j


j "1

Where n is the number of retailers where analysed product is presented; m – total number of markets in the analysed category (dairy products). On the next stage of the research, weighted percentage of distribution was obtained for each retrospective time period. The actual sales level on 1% weighted distribution was estimated on retrospective data to eliminate the impact of fluctuations in the values of this indicator to sales volume history. On the third step, we built a baseline that reflects the sales level of the product at 1% WD, which would be in the market excluding the influence of all factors. The analysis showed that sales at 1% weighted distribution did not change during the period since 2008 to 2015. Graphical analysis of the dynamics of baseline and sales at 1% of weighted distribution shows that in the first two years of the analysed period, the increase of sales was mainly due to the growth of weighted distribution. Note that during model constructing the following factors were also taken into account: the effect of marketing, television and commercial support of sales. In order to forecast the sales volumes of cheese desserts by time series cleaned from the influence of the considered factors the following models were constructed: trend-seasonal, adaptive models, the seasonal trend model with multiplicative seasonality, the harmonic model, additive model, a model with dummy variables. Accuracy characteristics were calculated for each model, estimated autocorrelation and auto regression functions in the residuals. To further improve accuracy and adequacy of predictive models, a combined model was proposed to make sales volume forecasts of dairy products. This model for each time period t takes the forecast obtained by each of the available models with a weight depending on the accuracy of the forecast at step t-1. It allows increasing significantly the accuracy of predictive assessments. Forecasting models 1-4 were included into the initial set with the weight in inverse proportion to their forecast accuracy. Comparison of models in terms of accuracy is presented in table. 2. The analysis of Table.2 shows that all constructed models forecast the growth of sales of cheese desserts in 2016. The most optimistic forecast is obtained by an additive model (+5,1%), the most pessimistic is model with dummy variables (+3,5%). The highest growth rate across all models is assumed for the first quarter (10-12%), with attenuation in the second quarter (5-6%). The rate of growth in the third and fourth quarters is expected


Arkhipova Marina and Arkhipov Kirill to be 1-3%. A significant increase in the quarters I and II caused by the impact of marketing and television (according to the forecast, these two activities stimulate sales increase 6.8% a quarter). In III and IV quarters of trade-marketing support leads to 1% increase with almost constant level of percentage of weighted distribution. Table 2: A comparison of the characteristics of the models adequacy forecast sales of cheese desserts № 1 2 3 4 5

Model description Trend seasonal model type Trend seasonal model with multiplicative seasons Harmonic analyses with AR(1) in residuals Additive model Model with dummy variables with AR(1) in residuals Combined model with AR(1) in residuals

Average relative error in modulus, %

Accuracy indicators Average absolute error in modulus, %



Average relative amount of displacement, % 3,69




7,57 6,59

136,9 132,9

2,70 3,59




Source: own elaboration Analysis of the adequacy of the combined model with AR(1) in the residues (Fig.1) showed that the correlation at all lags are statistically insignificant, the residues have a normal distribution.

Figure 1: Autocorrelation and the partial autocorrelation functions of the residuals of the combined model Analysis of the accuracy and adequacy characteristics of the model shows that all statistically significant dependences were included and the model can be used to predict the sales volume of dairy products with low shelf life.

4. Sales forecasting of products-new products on the market of dairy products with the use of logistic regression To predict the sales volume of novelties dairy products, especially in the first few months of their launch at the market, it is especially important to estimate the share of potential consumers and new product off take. It is very important for the enterprise to estimate in advance potential customers’ demand for a new product, and to figure out key factors that have influence on it. Logistic regression models are quite accurate to predict the probability of choosing a product a (Mkhitarian V., Arkhipova M., Sirotin V., et al 2016; Yiu-Kuen Tse, 2009; Aivazian, S. and V. Mkhitarian (2011); Dubrov, A, Mkhitarian, V. and L. Troshin (2011); StatSoft), they provide statistically reasonable probability of a purchase of a new product by potential consumers.


Arkhipova Marina and Arkhipov Kirill The logistic regression model was created and applied in Danone Russia to forecast sales volumes of a new product (Activia cheese bi-layer with the taste of kiwi-strawberry). As a dependant variable we used a binary variable y – probability of a new product purchase by customer. When you build the model as the dependent variable was the binary variable y is chosen – the fact of purchase of a new product potential customer:

' $1, пew product purchased y"& $ %0, new product not purchased As independent variables during the first step of preliminary analysis, we selected 12 indicators that have a significant impact on the respondent’s decision about the purchase of a product. To study the relationship between qualitative and quantitative indications matrix for the nonparametric correlation coefficients of Kendall τ was calculated. It enabled to exclude multicollinear highly correlated variables in an explicit form. As a result, for analysis for further research we selected 5 most informative indicators that have a significant impact on dependant variable y: x1 – dummy variable, "gender of the buyer" (m/f); x2 –quantitative variable "number of full years of the respondent" (years); x3 – quantitative variable "population in the place of residence" (thousand people); x4 – quantitative variable "mean monthly income per one family member" (RUR); x5 – dummy variable "participation in the motivational or promotions conducted by Danone Russia in the past" (yes/no). Coefficients estimation helped to obtaine the following model.

yˆ " (1 * e ( z ) ) (1 z ) " (0,83 * 0,52 x1 ( 0,0035 x 2 * 0,23x5 (4,91)



R2(McFadden)=0,711; LRstatistic =124,28; s! " 1,11 . Statistical tests proved the significance of the constructed model and all coefficients. The adequacy of the model is also confirmed by the normal distribution of the indicators included in the model and the proximity of the covariance matrix of indicators in different groups. The model has high predictive characteristics. The results of applying the model to the elements of the sample showed that 83.9% of respondents’ choices were correctly classified. To improve the accuracy of the model and evaluate the robustness the method of "sliding examination" was used in SPSS application, which allowed to adjust the model with further improving of its predictive characteristics (tabl. 3). The percentage of correct predictions grew up to 90,8%. Table 3: Characteristics of models’ accuracy Event probability Actual values

Forecasted values Product not Product purchased purchased 2791 293

Product not purchased Product purchased 51 Total of correctly predicted customers’ decisions, %


Correct predictions, % 90,5 92,1 90,8

Source: own elaboration Evaluation of model coefficients allowed to identify the factors that have a significant influence on the decision about the purchase of goods by the customers. So, the probability of purchase is significantly higher for women and is decreasing with age. Error of the model bellow the Normal distribution (Fig.2). Analysis of the model leads to the conclusion, that Danone Russia should not abandon the on-going promotions, as the probability of purchase of dairy product novelties among customers involved in promotions in the past years is much higher than among customers who did not participate in such actions.


Arkhipova Marina and Arkhipov Kirill

Figure 2: Logistic regression residues In order to assess the quality of the model we used the ROC-curve. ROC-curve shows the dependence of the number of true positive classifications on the number of false positive classifications. The indicator that measures the area under the ROC-curve (ATC) is in the range from 0.5 (random selection) to 1 (perfect classification). In our case (Figure 3) to construct the logit AUC value = 0.9906, which is close to the ideal classification.

Figure 3: The ROC-curve for the logit model The obtained results were taken to create the forecasting model for new dairy product in Russia. To do this, we formed a representative sample of customers and collected information on indicators that have a statistically significant influence on the decision of respondents about the purchase of the dairy goods-novelties. Then we determined the expected share of consumers (SC), ready to make a purchase of product novelties. For our product “Activiabi-layer cheese with a taste of kiwi-strawverry” the value of SC was 17%. As off take estimation (OT) we used an expert estimation, which is very close with an average purchase frequency of the goods in the Danone Russia in the category "modern dairy products". Frequency of purchase of analysed product was 0.67 units of product per month or 0.15 units per week. In addition, population size was on the sales territory. At the next stage; the obtained values were used to calculate the estimations of sales volumes according to the formula:

Sales(t) " WD(t) ! P ! SC ! OT ,


Arkhipova Marina and Arkhipov Kirill where WD(t) is the share of shops, where the new product is on shelf (in product matrix) in week t; P – the population in sales area, people; SC – the share of consumers for whom the probability of purchase is high, estimated by a logistic regression model; OT – is a number of purchases per week. The obtained sales volumes for product "Activiabi-layer cheese with a taste of kiwi-strawberry" for each week are presented in table. 4. Table 4: Forecasted sales volumes of product novelties, tons of finished product Week

Weighted distribution, %

1 2 3 4 5 6 7 8 9 10 11 12 13 14

5 8 12 18 27 37 44 49 53 55 56 56 58 59

Population in sales area, thousand people 4 500 7 200 10 800 16 200 24 300 33 300 39 600 44 100 47 700 49 500 50 400 50 400 52 200 53 100

Share of customers ready to buy a product (SC), thousand people 765 1 224 1 836 2 754 4 131 5 661 6 732 7 497 8 109 8 415 8 568 8 568 8 874 9 027

Sales volumes forecast, kilo pieces of finished product 114 182 273 410 615 843 1 002 1 116 1 207 1 253 1 276 1 276 1 321 1 344

Sales volumes forecast, tons 16 26 38 57 86 118 140 156 169 175 179 179 185 188

Source: own elaboration Thus, the logistic regression model allows to solve the main problem related to the prediction of customers demand for new dairy products in a condition of absence of historical data to build a standard predictive model. Sales forecast accuracy improving for new dairy products with short shelf life allows the company to introduce innovative products at lower cost, ensuring product availability in the right quantity, right time and right place with optimal operational costs.

5. Conclusion In article the combined model of sales volumes forecasting is proposed, and the model to predict the probability of purchase of new dairy products by respondents in the absence of retrospective data to construct classical model. In this case, usage of logistic regression model allowed us, on the one hand, to evaluate the probabilistic volumes of sales of new products, and on the other hand, to select the statistically significant factors that have a decisive influence on the decision about buying the product. Approbation of method was carried out on real data of the largest producer of dairy products in the CIS area Danone Russia for different product groups (for example, Activia cheese bi-layer dessert with the taste of kiwi-strawbery), which allowed the company to significantly increase the accuracy of forecasting model and obtain some interesting from the practical point of view the conclusions.

References Aivazian, S. and Mkhitarian V. (2011) Applied statistics and essentials of econometrics. Moscow: UNITY. Anderson, D.R, Sweeney, D.J, Williams, T.A., Freeman, J. and Shoesmith, E (2009) Statistics For Business and Economics, Cengage Learning EMEA, UK Arkhipov K. (2013) Statistical analysis of models of formation of insurance reserves and forecasting demand for finished products / Questions of Statistics, №8. Arkhipov, K. (2012) Model optimization of costs for the supply of products from the head office to branches // Scientific journal "Economics of Contemporary Russia." №4 (59)


Arkhipova Marina and Arkhipov Kirill Arkhipova M., Akkhipov K. (2014) Supply process optimization using hubs for materials. Proceeding of the 9th European Conference on Innovation and Entrepreneurship (2014) Edited by Galbraith, B., University of Ulster Business School and School of Social Enterprises Ireland Belfast, UK. p.43-50 Ballou, R. H. (1999) Business Logistic Management. - Prentice-Hall International, Inc.; Bowerman, B.L., O’Connell, R.T. (2000) Forecasting and Time Series: An Applied Approach, 3rd ed. Brooks/Cole Box, G.E.P., Reinsel, G.C., and Jenkins, G. (1994) Time Series Analysis: Forecasting and Control, 3rd ed. Prentice Hall. Coyle John J., Bardi Edward J. and Langley John Jr. (2003) The management of business logistics.A supply chain perspective. – South-Western devise of Thomson Harming; Dubrov, A., Mkhitarian, V. and Troshin L. (2011) Multivariate statistics. Moscow: UNITY. Dybskaya V.V. (2002) Logistics for practitioners. Effective solutions in warehousing and material handling. - M .: VINITI, 2002; Dybskaya V.V.(2002) Logistics for practitioners. Effective solutions in warehousing and material handling. - M.: VINITI Global supply chain nonprofit consulting organization [http://] Informational portal Council of Supply Chain Management Professionals [http://] Langley John Jr., Jphn J. (2008) Coyle Managing Supply Chains: a logistic approach. –Engage Learning Canada; Makridakis, S., Wheelwright, S.C., and Hyndman,R.J. (1977) Forecasting: Methods and Applications, 3rd ed. Wiley Mkhitarian V., Arkhipova M., Sirotin V. (2016) Data analysis. Textbook / Moscow, Ser. 58. Academic Course Models and methods of logistics theory (2008) Textbook, edited by VS Lukinskogo. SPb .: Peter; National trade and marketing research agency [http://] Shapiro J.F. (2001) Modelling the Supply Chain – Duxbury / Thomson Leading StatSoft [] Yiu-Kuen Tse (2009) Nonlife actuarial models. Theory, Methods and Evaluation. - Cambridge University press, 524 p.


A Strategic Entrepreneurship Model Based on Corporate Governance in the Iranian Manufacturing Enterprises1 Hooshang Asheghi-Oskooee1 and Nader Mazloomi2 1Business Management Dept. of University of Qom, Iran 2Business Management Dept. of the Allameh Tabataba’i University, Iran [email protected] [email protected]

Abstract: Recently too much attention has been paid to the relationship between organizational entrepreneurship and corporate governance (CG) and their effects on the firm performance. This research was carried out to study this relationship among the listed Iranian manufacturing firms. 80 companies from various industries are studied. To analyze data, Partial Least Squares (PLS) method of Structural Equation Modeling (SEM) was used. Findings indicates that the presence of executives in the board, the amount of ownership by the board members and also compensating board members according to the long-term performance of the firm has a positive effect on intensity of the strategic entrepreneurship (SE). However a negative result was found for the amount of stocks hold by the institutional investors. Moreover, three moderator variables namely company age; company size and company's past performance have strong impact on the relationship between CG and SE. Keywords: entrepreneurship, corporate entrepreneurship (CE), strategic entrepreneurship, corporate governance, SEM, PLS

1. Introduction Concepts of entrepreneurship and CG through several decades of academic studies have been centered. In the changing and turbulent world of today, the main challenge for companies and institutions is to remain on the path of progress and "the answer to today’s hyper-competitive environments is adaptability, flexibility, speed, aggressiveness and innovativeness, which they boil down to one word – entrepreneurship" (Christensen, 2004, p.302). Entrepreneurship can be manifested in two forms of individual and corporate. CE, also in a general classification can be manifested either through corporate venturing or SE (Morris et al., 2008). "In times when the stock market has dropped2, investment in external start-ups has fallen off" (Morris et al., 2008, p.85). SE is done within the company and can be a good way for enabling companies in terms of wealth growth, creating competitive advantages and development of activities. So, the study of SE and finding the ways to its development can play an effective role in the development of economic activities and as a result, development of countries. SE involves all levels of an organization engaging in entrepreneurial activities and a good CG system can be useful and imperative to creating and strengthening SE. Therefore, attention to the effects and relationship of CG structure with SE and also the association between SE and CG with business performance, it’s important and requires review and scientific wares. The purpose of this study was the relationship model based on theoretical studies in the literature and past research and explanation based on data collected to test. For this purpose, data collected from the selected sample, using SEM and PLS method using SMARTPLS software been analyzed, the initial conceptual model was fitted and the final model of study is shown.

2. Literature review Entrepreneurship Entrepreneurship is to create value through a combination of unique collection of resources for use of an opportunity (Stevenson & Jarillo, 1986); using innovation to pursuing continuous change, responding to it and use it as opportunity. Innovation is the means by which entrepreneurs exploit changes as an opportunity for create different (new) business or service (Drucker, 2007; Weerawardena & Coote, 2001). Numerous studies have examined such as Zahra, Morris, Covin and Kuratko have been cited by many researchers suggests that innovativeness, risk-taking and proactiveness are important indicators of entrepreneurship. Accordingly, in this study summarized the definitions and opinions of experts in entrepreneurship, its related indicators can be categorized in Table 1.

1(Listed 2

in Tehran stock exchange) Like financial crisis


Hooshang Asheghi-Oskooee and Nader Mazloomi Table 1: Classification of extracted indicators from the definitions of former authors Risk-taking (Cantillon, McClelland) Making judgmental decisions (Mark Casson) pursuing continuous change (Peter F. Drucker) Innovation (Joseph Schumpeter, Stevenson & Jarillo, Peter F. Drucker, Weerawardena & Coote) Creation of new value or value that did not exist before (Stevenson & Jarillo) Accumulating resources in a unique way (Stevenson & Jarillo) Pursuing opportunities (Kirzner , Stevenson & Jarillo, GEM, Peter F. Drucker, Mohanty) Productivity increasing (Jean Baptiste Say) Using social opportunities (Max Weber)




Corporate Entrepreneurship Theoretical foundations of CE were introduced in 1990 by Stevenson & Jarillo and research level enhanced from the level of entrepreneur (person) to the corporate level. "CE may be formal or informal activities aimed at creating new business in established companies through product and process innovations and market developments" (Kuratko, 2007, P.6), "deals with those factors that influence the process of creating new businesses within organizations in order to develop the organization and to enhance an organization's competitive position or the strategic renewal for existing business" (Collin & Smith, 2003, p.2) and is an organization-wide phenomenon that is focused on Innovativeness, risk-taking and proactiveness (Zahra & George, 2002). "An entrepreneurial firm is one that engages in product / market innovation, undertakes somewhat risky ventures, and is first to come up with proactive innovations, beating competitors to the punch" (Jogaratnam et al., 1999, p.341). By combining and summarizing the proposed definitions of CE can be concluded that the most important indicators of CE are Innovativeness, risk-taking and proactiveness. The relationship between entrepreneurship and strategic management (SM) SM and entrepreneurship both have focused on the process of adapting to environmental changes and exploit opportunities. One way to deal with the pressures of global competition and dynamic environment is using entrepreneurial strategies. They are related with corporate performance (CP). Their goal is to identify opportunities and develop them in order to create competitive advantages. "This is where the fields of entrepreneurship and SM intersect" (Kraus & Kauranen, 2009, p.38). Several researchers have addressed these two disciplines to combine concepts. Field of SM is very promising area can be combined in entrepreneurship researches. The combination of these approaches is fundamental factor for doing more researches in the field of entrepreneurship (Zahra & Dess, 2001). Academy of Management's Business policy and Strategic division founded by Karl Vesper in 1974 made an image that entrepreneurship can be considered as a subset of SM. But, researchers attempt to combine these two concepts suggests they are independent fields (Kraus & Kauranen, 2009). "Entrepreneurship and SM are concerned with growth and wealth creation" (Ireland et al., 2003, p.963). While the SM will review the company's efforts to create sustainable competitive advantage as a determinant of their ability to create wealth, entrepreneurship focuses on freshness and novelty. The basis of wealth creation through entrepreneurship is exploring and exploiting beneficial opportunities (Shane & Venkataraman, 2000). SE results from the integration of entrepreneurship and SM knowledge that involves taking entrepreneurial actions with strategic perspectives (Ireland et al., 2003 ‫؛‬Monsen & Boss, 2009 ‫؛‬Philipsen & Kemp, 2003) and focuses on areas of study related with both field, including innovation, top management teams, governance and so (Figure 1). Also, "the degree to which the firm acts entrepreneurially in terms of innovativeness, risk-taking, and proactivity is related to dimensions of SM" (Kuratko & Audretsch, 2009, p.3). Strategic Entrepreneurship CE is manifested in two forms of corporate venturing and SE (Figure 2). While corporate venturing entails company involvement in the creation of new businesses, SE corresponds to a broader array of entrepreneurial initiatives that don’t necessarily involve new businesses being added to the firm. "All forms of SE involve


Hooshang Asheghi-Oskooee and Nader Mazloomi organizationally consequential innovations that are adopted in the pursuit of competitive advantage" (Morris et al., 2008, p.88). SE requires simultaneous opportunity seeking and advantage-seeking behaviors that be followed by entrepreneurial behavior through the strategic approach and can be manifest as one of the five forms shown in the figure 2. Reviewing various forms of SE, and examples of successfully implemented in various companies suggests that the most important indicators of SE are Innovativeness, risk-taking and are proactiveness too.

• Innovation • Networks • Internationalization Entrepreneurial Actions

• Organizational Learning • Top management

Strategic Actions

teams and governance • Growth

Wealth Creation

Source: Kuratko, 2009, p. 369 Figure 1: Integration of entrepreneurial and strategic actions Corporate Entrepreneurship

Corporate Venturing • Internal corporate venturing • Cooperative corporate venturing • External corporate venturing

Strategic Entrepreneurship • Strategic renewal • Sustained regeneration • Domain redefinition • Organizational rejuvenation • Business model reconstruction

Source: Morris et al., 2008, p. 81 Figure 2: Different forms of CE Corporate governance Review the definition, characteristics and various forms of SE suggests that SE occurs within the organization and the organization at all levels, especially the operational and middle levels have involved in entrepreneurial activities. Since SE requires a strategic approach to entrepreneurial activities, CG issues can affect it. Therefore, a good CG system can be imperative and useful in creating and strengthening SE. One of the most used definitions of CG proposed by Cadbury (1992), suggests that, CG is a system by which companies are directed and controlled (Clark, 2007). CG is a broad concept and is reviewed from the perspective of five different theoretical frameworks. Agency theory focuses on agency conflicts between shareholders and managers, the causes and results of conflicts and effectiveness of various governance practices designed to reduce these conflicts. For this reason, SM researchers use this theory to examine issues such as innovation, CG and diversity. Internal governance mechanisms such as board composition, ownership structure and executive compensation, including issues are discussed in agency theory (Hoskisson et al., 1999). Review the studies of Davis et al. (1997), Caers et al. (2006) and other discussions about the stewardship theory leads to the conclusion that stewardship theory is a special case of agency theory. In fact, stewardship theory is the secondary model (dual) of agency theory. Because, agency theory tries to minimize potential costs to the company. But, stewardship theory looks to maximizing potential performance of the company. There are barriers and limitations on the way of CE in large companies (Ahmadpour daryani, 2008). The most important are: Limiting structures of entrepreneurial activities, loose of personal relations between managers


Hooshang Asheghi-Oskooee and Nader Mazloomi and employees due to increasing levels of management, increased bureaucracy, conservatism, avoid of mistakes and failures, the need for short-term profits and efforts to achieve it, general expectation that the CE have to make the company profitable in the short term, few number of actual entrepreneurs, failure to encourage entrepreneurs and wrong systems and methods of allocating rewards. Review of this barriers and constraints, the relationship between them and CG issues, forms part of the research's main question. That is: What structure of CG can help to create or strength SE in the Iranian manufacturing enterprises? And also, shows that the agency theory is a good vision for the study of CE. Furthermore, research results from Audretsch et al. (2009) that specifically focused on the relationship between the agent property (including board members) and SE, shows that the agency theory point of view can be used for SE research domain. Therefore, this study uses the perspective of agency theory as the main approach to study the issue and there is also a glimpse into the stewardship theory (CEO duality). It’s also essential to note that different approaches to business formation and the accompanying CG structures and regulations have evolved in different social and economic context. Some of the more important contextual and industrial variables that influence the business form and system of CG are national, regional and cultural differences; ownership structure and dispersion; firm size and structure and so on (Clark, 2007). Therefore, similar research results may be different in different countries. Despite the agency theory perspective on the separation of Chairman and CEO, some tendencies exists towards CEO duality. Among large American companies, there are CEOs who are also the board chair and this tendency has increased and rate of ROE of companies that their chairman and CEO is same person improved than those that are different people (Donaldson & Davis, 1991). According to previous discussion, it seems if to be the CEO the chairman too, can uses his/her power to influence board members to protect and promote entrepreneurship and consequently be a better business performance too. Therefore, the first hypothesis is proposed as follows. Hypothesis 1:

SE intensity is lower in businesses in which the chairman and CEO are different.

Non-executive board members, by law, only participate in board meetings. According to initial studies, sometimes this people don’t attend these meetings and they just sign minutes that are sent for them. They often aren’t aware enough of the situation of industry and even companies. Therefore, appears to be due to greater awareness of the condition and requirements of industry and company by executives, the increasing number of executives in the board can be effective to reinforcement of SE and consequently enhance business performance. So, the second hypothesis is proposed as follows. Hypothesis 2:

SE intensity has a direct relationship with the number of executive board members.

Managers' ownership is one of CG issues, particularly the agency theory. Under article No. 114 of Iran's trade law, managers must be owner of the numbers of shares to put at the disposal of company as collateral to guarantee of losses may be due to their failures. According to initial studies, most managers (are often representatives of institutional investors) have very little or no shares. Therefore, it seems the company's situation isn’t so important for them. On the other hand, employee ownership plans is one of the mechanisms to foster entrepreneurship and can make the company more attractive to employees and to help motivate and retain them (UN Conference on Trade and Development, 2004). Whereas the results of entrepreneurship are shown in the medium and long term and benefits of stock ownership is also. It seems stock ownership by board members can provide the motivation needed to pursue entrepreneurial activities. So, the third hypothesis is proposed as follows. Hypothesis 3:

SE intensity has a direct relationship with amount of private ownership of board members.

Another proposed restriction in the way of CE, is companies (especially large companies) need to short-term gains and efforts to achieve it. Today, due to the increase in institutional investing, CG systems in large companies are changed and are concentrated in the hands of a small number of institutional investors (Solomon, 2004; UN Conference on Trade and Development, 2003). In companies that are controlled by institutional investors and companies those managers' compensations are linked to corporate profits, it’s possible that managers pay attention to personal interests and short-term profits instead of considering the long-term interests of shareholders (Solomon, 2004). The basic premise is that institutional investors have a myopic view that will reduce R&D efforts. While entrepreneurship needs to R&D and R&D needs long-term investment.


Hooshang Asheghi-Oskooee and Nader Mazloomi However, several studies have shown different results, some studies proved this assumption and others have rejected it (Kells & Rogers, 1997). It seems industries and various economic and political conditions and legal status can have different effects on this issue. Therefore, it seems in the high level of institutional investors equity, entrepreneurial Intensity will be reduced. Consequently, the fourth hypothesis is proposed as follows. Hypothesis 4:

SE intensity is inversely related to the amount of institutional investors' shares.

The other proposed restriction in the way of CE, is wrong reward systems in large companies. Considering, the time horizon of the entrepreneurship's results and attention to the board member's compensations as a strong stimulus for their behaviors and decisions, it seems, if the compensations of the board calculated based on longterm performance can enhance entrepreneurship intensity. According to the provisions of articles 109, 134, 239 and 241 of Iran's trade law about duration of tenure of board members, how to determine the amount of their compensation and results of initial studies, many board members of listed enterprises are constantly changing and sometimes either be changed before two years (before termination of their tenure) by the owners (mainly institutional investors) or they resigned themselves to gain short-term profits in other companies. Also, considering that the board of directors proposes the cash dividend and the same amount approves by general assembly in most cases, it seems board members will be more willing to not consider voluntary reserves or consider a small amount and propose more money to divide especially when more of them are non-executive. Consequently, nothing left for entrepreneurship that is entail significant spending. On 24 May 2016 the law was amended. These changes can affect the above issues in the future. Obviously, the impact of these new changes should be examined in future researches. Finally, because of short duration of tenure of board members and change in shareholders combination which reduces board members job security level, and dependence of board compensation to short-term performance of the company, managers don’t pay attention to the medium and long term programs. Thus, entrepreneurship intensity can be reduced. So, the fifth hypothesis is proposed as follows. Hypothesis 5:

SE intensity has a direct relationship with the time horizon associated with the board compensation system.

Studies have proven that there is a significant relationship between entrepreneurial intensity and organizational performance (Morris et al., 2008). Also, several researchers have pointed to the relationship between CG and CP. Indeed growth and wealth creation are entrepreneurship’s defining objectives and SE is a unique, distinctive construct through which firms are able to create wealth (Ireland et al., 2003). Shareholder wealth, increases by receiving cash profit and increasing stock price in the market (Raymond P. Neveu, 1989) and undoubtedly, pay cash dividends to shareholders and rising stock prices in the market largely depends on CP. Although the main subject of the study is relationship between SE and CG, but assuming the impact of CG on SE should somehow be able to see this impact on CP. At this point, another part of the research question to be formed. How is the impact of SE and CG on CP?. Therefore, the CP can be considered as a dependent variable that can be seen results of entrepreneurship in it. For this reason, the sixth hypothesis is proposed as follows. Hypothesis 6:

SE intensity has a direct relationship with business performance.

According to Clark (2007), the size and structure of the company are among the factors affecting CG structure. According to Zahra et al. (2000), firm size has an impact on investment and innovation. Ahmadpour daryani (2008) also stated problems that large companies face in the direction of entrepreneurship. Therefore, the seventh hypothesis is proposed as follows. Hypothesis 7:

SE intensity is inversely related to firm size.

It seems, companies that have better performance in the past, it will be possible to spend more resources for investment and entrepreneurship. For this reason, the eighth hypothesis is proposed as follows. Hypothesis 8:

SE intensity has a direct relationship with past performance of business.

According to Zahra et al. (2000), younger firms are more innovative. Initial studies and examining the views of experts and managers of the companies surveyed also indicated suggests such a situation. Therefore, it’s assumed that:


Hooshang Asheghi-Oskooee and Nader Mazloomi Hypothesis 9:

SE intensity is inversely related to company age.

Also, according to Zahra et al. (2000), companies that are experiencing greater technological opportunities in their industry are more innovative than companies that have fewer opportunities. So, the tenth hypothesis is proposed as follows. Hypothesis 10:

SE intensity has a direct relationship with the technological opportunities available in the industry.

Corporate performance There are different views about the performance in studies and performance evaluation to become a disputed topic for SM scholars. CP can be classified into two general categories of financial and non financial performance. Another way, the performance criteria can be divided into two groups: retrospective and prospective criteria. Several scholars who have researched in the field of entrepreneurship and CG or have been published in journals of entrepreneurship and CG, have used different criteria, such as ROA, ROE, profit to sales ratio, earnings growth, employment growth and ... to measure CP. These criteria have been used to measure the companies performance studied in this research because their applications and their features.

3. Relationship between SE, CG and CP and formation of research's conceptual model There is a positive relationship between entrepreneurial orientation and both financial and non-financial measures of CP (Morris et al., 2007). Also, it’s observed that the active pursuit of entrepreneurial behavior by an organization can make its competition and performance much better than competitors. Implicitly, the ability to anticipate and meet the ongoing needs of customers before competitors is the emphasis on identifying opportunities, proactive behavior and being innovative. Innovation is tied directly to value creation for customers, which, in turn, can produce competitive advantage and higher levels of financial performance for the organization (Morris et al., 2007). Innovativeness, risk-taking and proactiveness have also been known as core indicators of entrepreneurship. Despite disagreement about the relationship of the board-performance in the past researches, the mainstream approach has been to argue for a direct relationship between board demography (such as board size and presence of non-executives) and company performance (Gabrielsson, 2007). Good CG has also a significant relationship with the company's financial performance (Solomon, 2004). Summarized the previous discussions and studies have been investigated separately and limited relationship between entrepreneurship and CG, CG and performance and entrepreneurship with performance, it seems, there is an integrated relationship between SE, CG and CP. This study, is looking for that model. Table 2 shows a summary of researches on these relationships. Table 2: Some studies on the relationship between entrepreneurship, performance and CG Relationship between Entrepreneurship and CG

CG and CP Entrepreneurship and CP

Researches Ireland et al. (2003); Hung & Mondejar (2005); Christensen (2004); Bitler et al. (2005); Williamson (2002); Morris et al. (2007); Conant (1992); Zahra et al. (2000); Otuteye & Sharma (2004) Bitler et al. (2005); OECD (2004); Solomon (2004); Shabbir & Padgett (2008); Earnhart & Lizal (1999); Jones (1995); Jawahar & McLaughlin (2001); Caers et al. (2006); Wong et al. (2004); Collin & Smith (2003); Chui et al. (2001); Neubaum & Zahra (2006); Deckop et al. (2006) Morris et al. (2008); Covin & Slevin (1989); Davis et al. (1991); Miller & Friesen (1982); Morris & Sexton (1996); Wiklund & Shepherd (2005); Zahra (1986)

According to previous discussions, it can be considered an integral relationship between SE, CG and CP. So, the research's conceptual model appears as shown in figure 3.


Hooshang Asheghi-Oskooee and Nader Mazloomi Figure 3: Conceptual model of research Corporate Governance Board structure:

• CEO duality • Presence / Absence of executives • Ownership by the board members

Ownership structure: • Centralized • Diffused

Board compensation system:

• Based on short-term performance • Based on long-term performance

Strategic Entrepreneurship ntrep

Corporate Performance

Moderating variables • Corporate past performance • Firm size • Company age • technological opportunities


Financial performance: Fi • Return R on sales ratio •S Sales growth • ROA R • ROE

Non-financial performance: N

• Growth in number of employees • Growth in market share

• Introducing new products • Introducing new services • Implementing new methods


• Financial risk • Technical (operational) risk • Market risk


• Search for new opportunities • Introduce new products and brands to the market ahead of competitors • Activities are eliminated in the maturity stage

4. Research methodology This research is a study of SM field. Research method is survey and analysis of secondary data. It’s a developmental research and has used qualitative and quantitative data to explore and describe the subject. This study examined the business level. Statistical population was companies Listed in Tehran Stock Exchange. There were 329 listed companies. Statistical population was screened, because 1) research has focused on manufacturing businesses (the production of goods), 2) Holdings, the group companies and companies that provide consolidated financial statements, have more than a business and separation of performance of each of their businesses was not possible due to lack of access to detailed data about each business., 3) need to review past performance of business that require the presence of companies in the stock exchange atleast for five years. Thus, the number of members of the statistical population was reduced to 158. Then, for most similarities of population and samples, the stratified sampling was used. Listed companies in Tehran Stock Exchange are classified by ISIC codes. 112 companies were selected as sample based on Krejcie and Morgan's table. Parts of the research data obtained using two questionnaires. Other sections were collected through companies’ financial statements. The study used a standardized and proven questionnaire examined by Morris et al. (2008) and the method used by Zahra et al. (2000). The questionnaires were reviewed and modified by a number of professors and scholars and were localized according to country and industry conditions. Likert method was used in one of questionnaires. 31 initial questionnaires were gathered and Cronbach's alpha was calculated to measure the validity of questionnaire. Cronbach's alpha value for the first five questions that were related to the technological opportunities was 0.844, and for the next 15 questions that were relevant to the entrepreneurial intensity was 0.77. Two questionnaires were not usable from 82 due to incomplete information. Also, about 5000 data were extracted from financial statements to calculate the value of some variables related to the companies’ performance and risk of businesses.

5. Data analysis and research findings This research has been used structural equations models, PLS method for data analysis. For factor analysis and structural equation modeling, SMARTPLS software version 2.0.M3 was used. T-test was used to test the first hypothesis. To test hypotheses 2 - 6 of the partial correlation coefficient test was used. To measure the effects of moderating variables (hypotheses 7 - 10), the method proposed by Hensler & Fassott (2010) was used. Test the first hypothesis suggests that there is no significant difference between the two groups of companies where the CEO is chairman and where the CEO isn’t the Chairman (t-Value = -0.047, Sig = 0.962> 0.05). Indeed, this hypothesis couldn’t be tested. Because, number companies where the CEO is also chairman were low. Second to sixth hypothesis test results are summarized in Table 3. Table 3: Summary of test results for the second to the sixth research hypothesis Hypothesis No. 2

Correlation 0.223

t-Value 3.416


Significant level % 5

Test result confirmation

Hooshang Asheghi-Oskooee and Nader Mazloomi Hypothesis No. 3 4 5 6

Correlation 0.314 -0.24 0.433 0.741

t-Value 3.833 2.803 3.093 5.438

Significant level % 5 5 1 0/1

Test result confirmation confirmation confirmation confirmation

Effect of moderating variables on the relationship between decision variables showed a weak effect of technological opportunities (hypothesis 10) and the strong influence of other moderating variables (Size, Past performance and Age of company) on the relationships (hypotheses 7, 8, 9). Results are summarized in Table 4 and structural equation model of research after fitting is visible in Figure 4. Table 4: The effect of moderating variables hypothesis 7 8 9 10

Variable Company size Past performance Company age Technological opportunity

ƒ2 1/22 1/24 0/46 0/02

Effect intensity strong strong strong weak

β -0/235 0/590 -0/453 0/748

Test result confirmation confirmation confirmation confirmation *

* Hypothesis is confirmed in terms of relationship. But according to the method used in research to measure the effect intensity of the variable, this relationship is weak and negligible.

Figure 4: Final model of research (SMARTPLS output) Correlations between research variables are shown in table 5. Also, R2 value for the variable of SE is 0.802, and 0.365 for business performance. Table 5: Correlation coefficients between research variables Concept 1.Corporate governance (CG) 2.Strategic entrepreneurship(SE) 3.Corporate performance(CP) 4.Company size(CS) 5.Past performance (PP) 6.Corporate age (CA)

1 1 0.6947** 0.0652 -0.6145** 0.2292* 0.5354**






1 0.4774** -0.7795*** 0.5289** 0.6102**

1 -0.2206* -0.0023 0.1086

1 -0.7045*** -0.5546**

1 0.4713**


Significant level of correlation coefficients of variables: ***p< .001 **p< .01 *p< .05 Thus, the research conceptual model shown in Figure 3 would be amended as follows (Figure 5).

6. Conclusion This research studied the relationship of SE, CG and CP. Test of the first hypothesis was not possible due to the low number of companies that their CEO was also chairman of the board. Other research hypotheses were all confirmed. Hypothesis test results showed that, with more presence of executives in the board, more amount of ownership by the board members, compensating board members according to the long-term performance of the firm and less amount of stocks hold by the institutional investors will increase SE intensity.


Hooshang Asheghi-Oskooee and Nader Mazloomi

Figure 5: Final model of research Also, there was a significant direct relationship between the intensity of SE and CP. Relationship between SE and performance was stronger than the relationship between CG and performance. This shows that the impact of CG on performance, through SE is more than direct impact of CG on performance. Considering to effects of moderating variables indicated that three moderating variables age, size and past performance of business has a strong effect on the relationship between CG and SE. Effect of technological opportunities was poor that is an important matter and requires further research. In addition, moderating effects of variables on the structural equation model suggests that the company size has a reverse effect on the relationship between CG and SE.

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Innovation Strategies of Small Russian Firms Yulia Balycheva1, 2 1Central Economics and Mathematics Institute of Russian Academy of Sciences, Russia 2State Academic University for Humanities, Russia [email protected]

Abstract: This study analyzes the different types of the innovation behavior of small firms. At the first stage, the analysis of behavioral distinctions between small firms and medium-sized companies as well as large enterprises is undertaken. Particularly, small firms’ contribution to innovation activities of the country is considered. It is demonstrated that small businesses tend to a higher degree to create new-to-market innovations. By comparison, medium-sized companies and notably large enterprises focus on spreading innovations already known in the markets. In addition, the study researches the use of different-sized companies the various innovation types including but not limited to open innovations. It is also shown that small Russian firms tend to process innovations. Besides, the considerable part of small firms’ innovations is created by others, while medium-sized companies give precedence to their own developments and large enterprises are intensively involved in cooperation processes. At the second stage, the paper analyzes the strategies of small businesses depending on their size-class. As a result, it is established that the tendency of innovation diffusion growth remains for small firms with the increase in size. In spite of significant marketable novelty, the lowest shares of innovative products sales in turnover in micro businesses are observed. Diffusion is further increasing along with the size growth. Research and development costs and costs to buy machinery and equipment connected with innovations prevail in the cost structure of innovations. High expenditures for production design pertain only to some groups of small firms, though. The main sources of innovation finance are equity capital, public funds, loans and credit lines. However, concessional lending is an essential factor only for the smallest firms. Keywords: innovation, small firm, small business, Russia, innovation process

1. Introduction There is no consensus among researchers about the influence of firm size on its innovation activity. According to Joseph Schumpeter, large companies are utterly able to create and maintain competitive positions connected with innovative activity (Schumpeter, 1942). The earliest studies support the idea that large enterprises have advantages over small ones in innovations. Empirical literature discovered that R&D rose somewhat more than proportionately with firm size. Thus, large companies’ relative investments in R&D are higher than ones of small firms. This result was interpreted as the proof of the advantages of the largest corporations to innovations creation (Hamberg, 1964, Horowitz, 1962). However, not only large enterprises are able to create successful innovations (Laursen and Salter, 2004). Despite using rational analytical approach to research and innovation activities, large companies are often limited by formal management processes and strategic planning (Hunter, 2013). On the contrary, small firms are more intensively involved in innovation activities due to their considerable flexibility. The growth of size does not always make a positive impact on innovation activity (Scherer and Ross,1990). Therefore, large companies are notably inactive, less flexible and have more bureaucracy than smaller ones. The informational flows become slower and organizational set-ups are more complex. It suppresses creative thinking and lowers capacities to innovate. Unlike large corporations, small businesses incline to innovation in a higher degree (Acs and Audretsch, 1990) and tend to significant innovation creation (Baumol, 2002). In the meantime, small firms depend strongly on the technological character of innovations being created (Peґrez-Cano, 2013). They have to disclose the essential part of information about the conducted research to the potential investors. In addition to that, large companies easily receive financing before the start of production and even earlier than the positive investment results become noticeable (Parker, 1978). Besides, small firms do not always manage to cover the costs of innovations and use the economy of scale (Cockburn and Henderson, 2001). Innovation creation and implementation also require skill availability that also causes difficulties in small businesses (Rothwell, 1989; Samovoleva and Golichenko 2012). In spite of significant limitations in small firms’ innovation activity, they are a significant source of innovations which support is necessary for ensuring sustained economic growth and employment. The aim of the study is the analysis of innovation activity of small Russian firms, identification of its sources and main factors defining the nature of the activity.


Yulia Balycheva

2. Data and research methods The data used in the study were provided by Russian innovation surveys 2013. These surveys are general data from the representative sample of more than 35,000 Russian firms representing 44 industries and 8 size classes and regions. The size of a company is traditionally determined by its class size, which is established according to the number of its employees: 1-49; 50-99; 100-199; 200-499; 500-999; 1000-4999; 5000-9999; and more than 10000. With the aim of analyzing the strategies of small companies we also use the special innovation surveys of small businesses. They include the representative samples of more than 11,000 Russian small firms. In these surveys firms are divided into groups according to the number of employees: 1-20, 21-30, 31-50, 51-70, 71-80, 81-99. The firms were asked to complete a questionnaire that addresses their innovative activities. This questionnaire yields information on many innovation indicators (in this paper, some of these indicators are used; see Table 1). Table 1: Basic indicators used in the study Inputs


Costs of product innovations

Sales of innovative products

Costs of process innovations

Sales of new-to-market products

Structure of innovation expenditures (R&D, production engineering, new technologies, patents and licenses acquisition, machinery and equipment, personnel training, software tools, marketing research) Structure of financing sources of innovations Researchers per 10,000 total employees

Innovation process Number of firms introducing product innovations Number of firms introducing process innovations

Sales of newly introduced or significantly improved products

Number of firms combined product and process innovations

Turnover of innovative firms

Number of in-house innovations

Turnover of all firms

Number of open innovations Number of innovations introduced in cooperation with other businesses

With the aim of the modeling of small firms’ innovative activity, some econometrical methods such as multiple regression and principal components methods are used.

3. Small innovative businesses in Russia Under the current conditions, innovation and development of Russian enterprises and industry are one of the top priority aims of national policy. On the governmental and scientific levels of society, these issues are taken into account as well. Despite this avowed goal, the innovation activity of Russian companies leaves something to be desired. As a result, sales of innovative products as a proportion of total turnover amount to 5-7% and 9-15% as a proportion of the turnover of innovative firms. The situation looks slightly different for small businesses. The sales share of innovative products amounts to only 2% and 22% correspondently. There have been no remarkable improvements over many years. Moreover, companies often stop innovating or begin to use less complex forms. For instance, instead of introducing new products they only imitate innovations already known in the local markets. Environments do not encourage companies to innovate or create conditions for their realization. Innovative production of small firms has considerable marketable novelty, though. Therefore, more than 39% of small firms’ innovative products are new-to-market, whereas 61% remained are new-to-firm. By this indicator, small firms considerably outrun medium-sized and large companies (see Figure 1). However, the average technological novelty is in the middle. In such a way, more than 60% of innovative production are newly introduced or significantly improved. For medium-sized companies, this indicator is equal to 53% and for large businesses it exceeds 72%. In spite of relatively high characteristics of innovative products quality of small firms, the sales share of innovative products is less than 1,9%. This fact also determines the very low contribution to the country innovative economy (see Figure 2).


Yulia Balycheva

Figure 1: Average characteristics of innovative production of small, medium-sized and large businesses (2013)

Figure 2: Innovative production of small, medium-sized and large businesses (where the sphere diameter is the total of innovative output) The structure of using process/product, marketing and organizational innovations is similar in many respects to the structure of medium-sized and large companies (see Figure 3). 74% of small innovative firms have product or process innovations within the last three years, 10% of small businesses have marketing innovations and 16% of firms are involved in activity resulted in organizational innovations. The analysis of costs distribution for different types of innovation testifies that the main efforts of Russian companies are located in the area of process and product innovations. More than 98% of costs accrue to process and product innovations both for small companies and also for medium and bigger firms.

Figure 3: Shares of innovative firms using different types of innovations, 2013


Yulia Balycheva Small firms use product and process innovations differently, though. Small businesses incline to utilize process innovations in 2013 (see Figure 4). Whereas, as against medium and large companies, the number of companies having process innovations exceeds those having products ones. This difference is equal to 10%. At the same time, the costs for process innovations surpass the costs for product ones more than for 65%. The intensive use of process innovations considerably distinguishes small Russian companies from small firms in other countries. According to some studies, the small firms prefer to invest more in the invention of new commodities and try to create something new for the market through product innovations (Yin and Zuscovitch, 1998). In spite of the high characteristics of the marketable novelty of small firms’ innovative production, these innovations are usually an imitation of products not known on local, but already known on some foreign markets. For this reason, the companies use process innovation to adapt products created by others.

Figure 4: Product and process innovations used by different sized companies (2013) The considerable part of innovations of small firms (40%) is developed by others. The value of this indicator is much higher than similar values for medium-sized and large companies (see Figure 6). What’s more, small and medium-sized companies cooperate more rarely than large enterprises. Specifically, medium-sized companies utterly incline to independent innovation creation. Around 43% of innovations here are created without external sources using.

4. The strategies of small innovative companies Further, we research the innovative behavior of small firms depending on the size class. Small firms are hereby divided into the following groups according to the number of the employees: from 1 to 20, from 21 to 30, from 31 to 50, from 51 to 70, from 71 to 80, from 81 to 99.

4.1 Firms with the number of employees between 1 and 20 The most widespread strategy is the imitation of innovative products already known in the local markets. Thus, 46% of innovative production is the result of this strategy following. Companies acquire new technologies with the aim of imitation. In the cost structure of product and process innovations, the cost of new technologies acquisition is much higher than the average one among all small firms. It exceeds the average costs at 34%. Despite the fact that the imitation strategy prevails in the considered group of firms they are also intensively involved in the processes of innovation creation using their own resources. Nearly 40% of innovative products are newly introduced and new-to-market. By this indicator, this group considerably outrun not only other small businesses but also medium-size and large companies. The share of innovative firms involved in R&D activities is 34%. It slightly exceeds the average value of small firms. Meanwhile, less than 50% of group innovative firms buy machinery and equipment connected with innovations whereas larger companies are usually more intensively involved in this process. Apparently, the limited resources do not allow firms to renew production base. Firms compensate the existing restrictions on staff training and modern software acquisition. A slight subset of group innovative products is the result of the modifying strategy. Less than 18% of innovative products are new-to-firm (known in the market) and modified only. This indicator is the lowest among all Russian companies. This fact shows that the smallest firms do not aim at the improvement of earlier implemented products. Their primary activity base is innovative products introduction. These products can both be new-to-


Yulia Balycheva market and already known in the market, and new-to-firm only. In other words, instead of products modifying companies begin the introduction of new products. In spite of considerable marketable novelty of innovative products, the scale of their distribution is extremely low. For instance, sales of innovative products as a proportion of total turnover amount to only 0.7%. It is much less than the average indicator values among all small firms as well as among all medium-size and large companies.

4.2 Firms with the number of employees between 21 and 30 and between 31 and 50. The strategies of innovative behavior are similar to these size classes. As well as for the smallest size class, the most widespread innovative strategy is the imitation of innovative products already known in local markets. Around 45% and 41% of innovative products are the result of copying innovative products of other companies for the first and second group correspondently. In addition, firms imitate products new to the local markets but already known in some foreign markets. In this case, they place special emphasis on production design. The modifying strategy of earlier created or imitated products pertains to these groups of firms in much higher degree in comparison with micro-businesses. The growth of size class positively influences on companies’ inclination to use modifying strategy. 34% and 39% of innovative products are new-to-firm and modified only for the first and second group correspondently. By doing so, firms do not tend to conduct research and development for their own innovations implementation. No more than 22% of costs of product and process innovations accrue to research.

4.3 Firms with the number of employees between 51 and 70 and between 71 and 80 Hereby the most widespread innovative strategy is earlier implemented innovations modifying. Companies intensively make production insignificant modifying which does not change the main product properties. Thus, 41% and 54% of innovative products are the results of such modifying processes. As well as other small firms, companies imitate innovations. They actively purchase patent rights from others toward this goal. Although the share of innovative products new-to-market and newly introduced is relatively small (no more than 18%), the quality of these products is sufficiently high, also, the considerable part of these products (from 15% to 30%) is new to global markets. The costs of research and development prevail in the cost structure of product and process innovations. They include more than 36% of all costs connected with innovations and exceed the costs of buying machinery and equipment for innovations.

4.4 Firms with the number of employees between 81 and 100. The innovative behavior of the largest cluster of small firms considerably differs from the behavior of other small companies. Most likely, the size and greater resource opportunities allow using economy of scale and control innovative activity more effectively. Despite many differences of group innovative behavior from other small companies, the most widespread strategies are innovation modifying and imitation. Around 39% and 38% of innovative products result from these strategies respectively. The strategy of innovation creation by using firms own resources is also wide-spreading among the firms of the group. In the cost structure of innovations, the costs of research and development are equal to 30% while the costs of buying machinery and equipment count as more than 47%, though. Also, the costs of software acquisition are significant in comparison with other small firms. The scales of innovative products distribution are wide and exceed the ones of other small firms’ groups. Thus, the sales of innovative products as a proportion of total turnover amount to 27% as a proportion of the turnover of innovative firms and 3.3% as a proportion of total turnover of the group. In spite of the fact that these indicator values are the highest among small firms, they are significantly lower than the average country values.


Yulia Balycheva The main sources of innovation finance are equity capital (49%) and both loans and credit lines (34%). It should be noticed, the share of innovations financed on borrowed money considerably exceeds the corresponding indicator of other classes of small firms which on average is not higher than 25%.

5. Main tendencies of Russian small firms’ innovative behavior The analysis of dynamics of small firms’ innovative behavior for a fourteen-year period of time (2000-2013) allows to identify the following trends. We have allocated two groups of small firms depending on the ratio of marketable and technological novelty characteristics of innovative production. The first group includes the companies with the average number of employees less than 49. The decreasing dependence of the characteristics is observed in the group. In other words, there is a compensation for one product properties at the cost of others (see Figure 5). Thus, two main strategies are identified this way. The first one is the imitation of products not known in the local market while technological production novelty is high and marketable novelty is low. The second strategy is the attempts to implement in-house product innovations during the periods when the significant part of the innovative production is new to the local market.

Figure 5: Characteristics of marketable and technological product novelty in firms with the number of employees less than 49 The second group includes the firms where the number of employees is between 50 and 99. The proportional growth of innovative production characteristics prevails in this case. It is also reasonable to detect two main strategies. The insignificant modification which does not considerably change product quality characteristics and the introduction of innovations not known in the local markets by means of creation or imitation processes. As far as for all small firms are concerned, there is a tendency in the growth of open innovations use (Balycheva and Golichenko, 2014). It is caused by the use of innovations of other companies whereas the participation in cooperation processes is not the base of the activity of small firms. Moreover, the smaller the company the more inclination with time it shows to use other companies’ developments. For small companies which have sufficient resources for being involved in cooperation processes and creating innovations on their own, the growth of using open innovations is not so considerable. There is no strong tendency to use process innovation during the considered time period. For the firms with the average number of employees less than 49. The rotation of dominant using product and process innovations is to be seen. Process innovations were applied the most intensively in the years 2000, 2002-2003, 2006-2007, 2012-2013. In the remaining time, the use of product innovations was prevailing. The remarkable thing is that the beginning of the imitation period in 2006 concurred with the highest costs of process innovations during the considered period. However, process innovations are quite likely to be used with the aim of new-to-firm products adaptation. A relatively long period of prevailing use of product innovation in 2008-2011 allows firms to create necessary conditions not only for imitation products already known in the market but also for the introduction of the new ones. There is a relative balance in the use of product and process innovations in firms with the average number of employees between 50 and 99. However, the preference of the use of product or process innovations has been changing over time.


Yulia Balycheva For all groups of small firms, there is the growth in patenting for the time being. The increase in patent activity does not necessary positively impact small firms’ innovation activity. Most economists no longer consider patents to be the primary drivers of innovation activity (Lerner, 2009). One major conclusion of the empirical research is that the patent system provides an incentive for firms to innovate by reducing the risks of innovation. However, this conclusion holds true for only a portion of companies holding patents (Golichenko and Balycheva, 2012); whereas other firms use patents for purposes unrelated to the formation of offensive innovation-based competitive strategies (Hall and Dietmar, 2012).

6. Modeling of small firms’ innovation activity For the purpose of the modeling of small firms’ innovative activity, the indicator of the sales of new-to-market innovative products is chosen as the key figure describing the innovative activity connected with new innovations introduction. The following indicators were used as independent variables: X1 - costs of product and process innovations X2 - costs of R&D X3 - cost of production engineering X4 - costs of machinery and equipment connected with innovations X5 - costs of new technologies acquisition X6 - costs of staff training connected with marketing innovations X7- costs of marketing research X8 - costs of software tools connected with innovation acquisition X9 - number of researchers X10 - number of employees with higher education X11 - using equity capital to provide innovations financing X12 - using public funds to provide innovations financing X13 - using credits and loan lines to provide innovations financing According to the correlation analysis there is a strong connection between some indicators (see Table 2). For that matter at the first stage, we used principal components analysis to group the variables into categories. Table 2: The correlation matrix X1 X2 X3 X4 X5 X6








































































































X7 X8 X9 X10 X11 X12 X13


As a result of principal components, three principal components were identified, which eigenvalues exceed 1,0 and a three-factor model accounts for an acceptably high 89,7 percent of the variation in the data. There was obtained the following regression equation, where all variables are significant: y=51331+0, 205v1+0,3v2+0,5v3, R2= 0,64. The distinguished components have the following economic interpretation: v 1 is connected with innovation introduction, v2 can be associated with the acquisition of new tools and v3 is characterized by the intensiveness of using loan capital in innovation activity.


Yulia Balycheva

7. In conclusion In the study different innovative strategies of small firms were meticulously analyzed. Also, some certain sources and main factors defining the nature of the activity of small firms were identified. Traditionally, the innovation activity of small firms is considered as a crucial issue both on the governmental and scientific levels of society. However, the contribution of small Russian firms to the country innovative economy is extremely low. In spite of the fact that innovation and development of Russian enterprises and industry are one of the top priority aims of national policy, the innovation activity of Russian companies leaves something to be desired. What’s more, companies often stop innovating or begin to use less complex forms. Environments do not encourage small companies to innovate or create conditions for their realization. Despite all the difficulties, the innovative production of small firms has considerable marketable novelty sufficiently exceeding the novelty of medium-sized and large companies. The share of new-to-market innovations among small companies is much higher than among other companies. Although, these innovations are characterized by considerably high quality, small companies focus on local and national markets and do not aim at international ones. There is a tendency of innovation diffusion growth among small firms with the typical increase in size. In spite of significant marketable novelty, the lowest shares of innovative products sales in turnover in micro businesses are observed. Along with the size growth, the diffusion is also increasing. Organizational and especially marketing innovations are rarely used by small companies to gain new competitive advantages. Instead, the base of their innovation activity is product and process innovations applications. Moreover, for the smallest companies, there is a rotation in dominant using product and process innovations over time. For the small companies of bigger size, there is a relative balance in the use of product and process innovations. The intensive use of process innovations in some periods considerably distinguishes small Russian companies from small ones in other countries. Process innovations are generally used for adaptation purposes when companies imitate products usually known in the local markets. In addition to that, the active use of open innovations allows firms to intensively use the developments of others. It is established, that for all small firms there is a tendency of the increase of open innovations use. This growth is caused by the use of innovations of other companies whereas participation in cooperation processes is not the base of small firms’ activity. Moreover, the smaller the company the more inclination with time it shows to use other companies’ developments. For small companies which have sufficient resources for being involved in cooperation processes and creating innovations on their own, the growth of using open innovations is not so considerable. In spite of the fact that the most widespread strategies of innovation behavior among small firms are product imitation and modifying of earlier implemented innovations, they are much more efficient in new product creation than medium-sized and especially large companies. Whereas, the positive trends of the innovative characteristics of small firms hold out a hope for the increase of their contribution to the innovative component of the country’s economy. The study was carried out under the state assignment of the Ministry of Education and Science of Russian Federation.

References Acs, Z.J., Audretsch D.B. (1990) Innovation and Small Firms, MIT Press, Cambridge, MA. Balycheva, Y., Golichenko, O. (2014) “The Relationship Between Patents and Firms’ Innovation Activity: The Case of Russia”, Proceedings of the 9th European Conference on Innovation and Entrepreneurship – ECIE 2014, University of Ulster and School of Social Enterprises Ireland Belfast, UK 18-19 September 2014. Baumol, W.J. (2002) The Free-Market Innovation Machine Princeton, NJ.: Princeton University Press. Cockburn, I.M., Henderson R.M. (2001) “Scale and scope in drug development: unpacking the advantages of size in pharmaceutical research”, Journal of Health Economics 20. pp. 1033-1057. Golichenko, O., Balycheva, Y. (2012) “Intellectual Property and market behaviour in Russia”, Proceedings of the 4th European Conference on Intellectual Capital (ECIC 2012) Helsinki, Finland, on 23 and 24 April 2012. Hamberg, D. (1964) “Size of firm, oligopoly, and research: the evidence”, Canadian Journal of Economics and Political Science 30. pp. 62-75. Hunter, M. (2013) “Typologies and Sources of Entrepreneurial Opportunity”, Economics, Management, and Financial Markets, 8(3), pp. 58–100. Hall, H. and Dietmar, H. (2012) “Recent Research on the Economics of Patents “, Annual Review of Economics, pp. 541-565.


Yulia Balycheva Horowitz, I. (1962) “Firm size and research activity”, Southern Economic Journal 28. pp. 298-301. Laursen, K., Salter, A.J., (2004) “Searching high and low: what type of firms use universities as a source of innovation?” Research Policy 33 (8), pp.1201–1215. Lerner, J. (2009) “The Empirical Impact of Intellectual Property Rights on Innovation: Puzzles and Clues “, American Economic Review: Papers & Proceedings, Vol. 99, No. 2, pp. 343–348. Parker, J.E.S. (1978) The Economics of Innovation. The National and Multinational Enterprise in Technological Change 2nd ed. London, Longman. Peґrez-Cano, C. (2013) “Firm size and appropriability of the results of innovation”, Journal of Engineering and Technology Management 30. pp. 209-226. Rothwell, R. (1989) “Small Firms, Innovation and Industrial Change”, Small Business Economics, 1, pp. 51-64. Samovoleva, S., Golichenko, O. (2012) “Finding Risk Factors of the Innovation Activity Enterprises”, Proceedings of the 7th European Conference on Innovation and Entrepreneurship, School of Management and Technology, at Polytechnic Institute of Santarem (Portugal). September 2012–рp. 261-70. Scherer, F.M., Ross, D. (1990) Industrial Market Structure and Economic Performance, Boston: Houghton Mifflin Company. Schumpeter, J.A. (1942) Capitalism, Socialism and Democracy, N.Y.: Harper and Broth Yin X., Zuscovitch, E. (1998) “Is firm size conducive to R&D choice? A strategic analysis of product and process innovations”, Journal of Economic Behavior & Organization Vol. 35, pp. 243-262.


CEE Cross-Country Comparison of National Innovation Systems Efficiency: DEA Approach Marcin Bielicki and Michał Leśniak Poznań University of Economics, Poland [email protected] [email protected]

Abstract: Innovations improve the prosperity and living conditions of inhabitants of every economy. Therefore they is a priority of social and economic development policy of the European Union (EU). The biggest portion of the EU budget for 2007-2013, equal to 170 billion EUR, was given to the new EU members from Central and Eastern Europe (CEE) for the increase of the competitiveness and innovation of their economies. Overall national contribution amounted nearly 40 billion EUR. As the EU beneficiaries those countries were able to significantly expand and stimulate national innovation systems. The purpose of this study is to check whether the innovation policy of the Central and Eastern Europe countries has been utilized efficiently, and if yes, which of the CEE coutries, including Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovenia and Slovakia, are the leaders. Analyzed data covered the 2007-2013 period. The results indicate that not every country covered by the research used enabling funds efficiently. On the other hand, we found out that the leaders of the effectiveness in the field of innovation policy were Latvia and Estonia. We use input-oriented Data Envelopment Analysis (DEA) input-oriented. We conduct research in a comprehensive way, taking into account, key sources of the expenditure on pro-innovation activities, such as the EU funds and national contribution as input data. Subsequently all the inputs have been related to a wide range of key indicators to measure the effects of policy innovation in a field of science, technology and macroeconomic of each country, which has been used as output data. Additionally, the results were also collated with independent innovation rankings, drawn up by the governments as well as NGOs. We also indicate which Central Eastern Europe countries and their innovation systems can serve as a model for further development of innovation policy in the European Union budgetary perspective of 2014-2020. Keywords: national innovation system, efficiency, DEA, CEE countries

1. Introduction Creation of innovation-enhancing framework conditions has become a central target of policymakers around the globe. The Lisbon and the Barcelona strategies, as well as subsequent EU Commission’s directives, which targeted R&D intensity as 3% GDP of each EU member up to 2020, show that the European Union has taken steps to increase its innovation efforts and tries to become a leader of the innovation-enhancing approach. Nonetheless building the innovation in such a heterogeneous formation like the EU, requires learning from the experience of both members and other countries in the field of organization and development of national innovation systems, which are an important part of innovation policy design. Increasing awareness of this phenomenon calls for wide international comparisons of innovative strength and cross-country analysis of innovation systems’ efficiency. The term “national system of innovation” (NIS) was used for the first time by C. Freeman (1982) who stared the discussion about the specific definition of this term. Lundvall (1992) narrowed the definition of NIS only to organizations and institutions which are engaged in searching and developing activities such as R&D departments, technological institutes and universities. The broader definition includes also parts and aspects of the economic structure and the institutional set-up affecting learning, searching and adapting (Varblane, Dyker, Tamm 2007). Thus the national innovation system derives from a historically-grown subsystem of the national economy in which various institutions and organizations interact and influence one on another in the performing of innovative activity. The approach of national innovation systems was introduced in the late ‘80s. In general, the innovative activity using the NIS approach is considered in a broader sense. It usually means that instead of focusing on the number of introduced high-tech products and process innovations separately in each country, it encompasses also R&D efforts by the business companies and the public institutions as well as the determinants of innovation-like learning processes, incentive mechanisms or the availability of experts in a labor market (Balzat, Hanusch 2004). In the last decade, the importance of NIS has increased. In the European Union, NIS is supported not only at declarative level, but also by the real EU funds. The EU has become one of the major players in the world of science and technology. The EU delivers almost one-third of a production based on science and technology. Since 1984 the EU has pursued its policy of research and innovation and provided funding under the national


Marcin Bielicki and Michał Leśniak framework program. In 1984-2013 seven of the framework programs were completed. The financial framework 2007-2013 of nearly 976 billion EUR was accomplished recently and the financial framework 2014-2020 of more than 1 trillion EUR has already begun. It covers Horizon 2020 worth 80 billion EUR - which is the biggest ever EU Framework Programme, dedicated to research and innovation. If we add to that the value of mandatory national contributions, we will see that there is a huge direct or indirect stream of money flowing to the EU member countries which supports their NIS. Is that support efficient in each country? And how efficient are the national innovation systems compared among countries? This paper poses the preceding questions in the relation to the CEE countries that joined the EU in 2004 and 2007. The reason for this approach is determined by the fact that new emerging countries like: Bulgaria, the Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovenia and Slovakia are less experienced in developing their NIS and due to historical factors have performed NIS for a relatively shorter time than European innovation leaders like Sweden, Denmark, Finland, Germany or the UK. Therefore the main purpose of this study is to evaluate the effectiveness of innovation policy in relation to the Central and Eastern Europe countries. In this paper the hypothesis (H0) that there is no difference in the effectiveness of innovation support systems among Central and Eastern Europe countries is tested. The alternative hypothesis (H1) states that there is significant difference among those countries. This is the first research of its kind, totally dedicated to innovation efficiency across CEE countries. The conducted study is considerably up-to-date due to the EU budget 2007-13 ending recently providing researchers with the latest data and financial figures. Moreover, this paper responds to recommendations of the European Commission in terms of expenditures on research and development activity.

2. Measuring the effectiveness of innovation policy: Empirical studies review An increasing number of studies suggests that evaluation of national innovation policy efficiency becomes more and more meaningful. Nevertheless, each study presents a slightly different approach that determines final conclusions. In general, the analysis that has been carried out can be divided into terms of application of parametric or non-parametric methods. In parametric approach the measurement of innovation policy productivity is carried out by specifying a functional relation which intersects collected data looking for the average relations and estimating coefficients that link inputs to outputs. Alternatively, in some papers estimation is performed non-parametrically, that means without reference to a specific functional form. In such cases the interest lies in estimating an efficiency index, made by comparing each unit with the best performers in the reference group. The best performers (winners) are defined as those units which minimize the amount of utilized inputs given the level of obtained outputs (the output oriented approach) or those objects which obtain the maximum level of outputs given particular level of inputs (the input oriented approach). Such efficiency index gives a score relative to another unit without regarding the absolute efficiency (Bonaccorsi and Daraio 2004). Most econometric (parametric) studies that attempt to evaluate the contribution of R&D to economic growth rely on the Cobb Douglas production function as their basic analytical framework (Mairesse and Sassenou 1991). The examples of early studies are Mansfield (1965), Minasian (1969) and Griliches (1980) who used US panel data to estimate the R&D elasticity within the framework of a Cobb-Douglas function with R&D expenditure and conceived the issue of measuring innovation efficiency at the company level. Subsequent studies of Griliches and Mairesse (1984), Griliches (1986), Jaffe (1986), Cuneo and Mairesse (1984) and Sassenou (1988) performed the cross-industry analysis at the national level for the United States, France and Japan respectively. All results confirmed remarkable role of R&D expenditures as a statistically significant factor contributing to productivity (efficiency) differences among companies in each branch as well as in the country as a whole (Mairesse and Sassenou 1991). Further research of Adams and Griliches (1996) used a Cobb Douglas function to examine the relation between financing and the number of publications output of the American universities and the connection between research output and lagged R&D activity of the universities (Adams and Griliches 1996). Over time research on innovation widened beyond companies level. For instance, Fritsch and Slavtchev (2010) examined determinants of the efficiency of regional innovation systems. They analyzed the differences in the efficiency of regional innovation systems among German planning regions on a basis of the concept of a knowledge production function (parametric approach). The measures for innovative output were based on the number of disclosed regional patent applications within 1995-2000. The analysis proved the relationship


Marcin Bielicki and Michał Leśniak between input and output of the innovation process which was identified as essential for assessing the technical efficiency of regional innovation systems. As a proxy for input to the innovation process the number of R&D employees was used. Both outputs and inputs came from the private corporate sector only. The additional inputs were progressively added in subsequent stages of research. As a result, they confirmed that a share of private sector R&D employment has a positive impact on regional innovation efficiency. What is more, results suggest that there are still considerable differences in the efficiency of the innovative process in the two parts of the country even after reunification in 1990. Innovation activities in regions located in the Western part of the country were identified as more efficient than those in East Germany (Fritsch and Slavtchev 2010). Along with the relocation of interest in research on innovation efficiency from company level to regional and country level, the number and variety of determinants increases. Therefore, measuring the effectiveness of innovation policy at the international level by using cross-country analysis, requires more frequently the nonparametric approach. The most commonly used nonparametric method in research, taking into consideration the matter of national innovation systems efficiency at cross-country level is DEA method (Data Envelopment Analysis). It is applied by Rousseau and Rousseau (1997), Nasierowski and Arcelus (2003), Hollanders and Esser (2007), Sharma and Thomas (2008), Cullmann, Schmidt-Ehmcke and Zloczysti (2009), Abbasi, Hajihoseini and Haukka (2010), Pan, Hung, and Lu (2010), Cai (2011), Chen, Hu and Yang (2011), Guan and Chen (2011) and Hsu (2011). The total sample of countries used in the studies for the purpose of crosscountry analysis covers five regions: Western and Eastern Europe, North America, Latin America and Caribbean, Africa as well as Asia and Oceania. To sum up, the most innovative countries, in terms of efficient national innovation systems turned out to be OECD countries like: Ireland, Netherlands, UK, Germany, Hungary and Japan. However, there are smaller countries like Argentina, Kyrgyzstan or Slovak Republic which are also efficient countries. The most frequently used DEA model was output-oriented model with constant return to scale (Kotsemir 2013). Each efficient national innovation system has a different range of inputs and outputs determining its efficiency. The key details of each study are presented and described in a possible synthetic way in the tables below. Table 1: Countries sample Countries covered by all reviewed papers Australia, Argentina, Australia, Austria, Belgium, Brazil, Bulgaria, Canada, Chile, China, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Egypt, Estonia, Finland, France, Georgia, Germany, Greece, Hong Kong, Hungary, Iceland, India, Indonesia, Iran, Ireland, Israel, Italy, Japan, Kyrgyzstan, Latvia, Lithuania, Luxembourg, Malaysia, Malta, Mexico, Moldova, Netherlands, New Zealand, Norway, Philippines, Poland, Portugal, Romania, Russian Federation, Singapore, Slovak Republic, Slovenia, South Korea, Spain, Sweden, Switzerland, Taiwan, Thailand, Turkey, UK, Ukraine, USA, Venezuela

Source: Self-prepared on a basis of Kotsemir M. N. (2013) Table 2: Cross-country analysis of national innovation system efficiency with DEA method – papers review Reviewed paper

Countries sample

Study results (efficient countries in terms of innovation)

Rousseau S., Rousseau R. (1997) Data Envelopment Analysis as a Tool for Constructing Scientometric Indicators Nasierowski W., Arcelus F.J. (2003) On the Efficiency of National Innovation Systems Hollanders H., Esser F.C. (2007) Measuring Innovation Efficiency Sharma S., Thomas V.J. (2008) Inter-Country R&D Efficiency Analysis: An Application of Data Envelopment Analysis Cullmann A., Schmidt-Ehmcke J., Zloczysti P. (2009) Innovation, R&D Efficiency and the Impact of The Regulatory Environment – A Two-Stage SemiParametric DEA Approach


Austria, Canada, Germany, Ireland, Netherlands, Sweden, Switzerland, UK


Japan, Taiwan, Switzerland,

37 22

Denmark, Germany, Ireland, Luxembourg, Malta, Switzerland Japan, Slovenia, South Korea.


Germany, Sweden


Marcin Bielicki and Michał Leśniak Reviewed paper Pan Т.W., Hung S.V., Lu W.M. (2010) DEA Performance Measurement of the National Innovation System in Asia and Europe Cai Y. (2011) Factors Affecting the Efficiency of the BRICS' National Innovation Systems: A Comparative Study Based on DEA and Panel Data Analysis Chen C.P., Hu J.L., Yang C.H. (2011) An International Comparison of R&D Efficiency of Multiple Innovative Outputs: The Role of the National Innovation System Guan J., Chen K. (2011) Modeling the Relative Efficiency of National Innovation Systems Hsu Y. (2011) Cross National Comparison of Innovation Efficiency and Policy Application

Countries sample 33 22

Study results (efficient countries in terms of innovation) Czech Republic, Greece, Hungary, India, Japan, Poland, Romania, Russian Federation, Singapore, Slovak Republic, South Korea, Taiwan, Turkey, UK Netherlands, Sweden


Hungary, Israel, UK, USA


Greece, Ireland


Denmark, Germany, Ireland, Luxembourg, Malta, Switzerland

Source: Self-prepared on a basis of Kotsemir M. N. (2013)

3. Methodology The object of the study is the effectiveness of innovation support systems. The research focuses only on Central and Eastern Europe countries, i.e. Bulgaria, Czech Republic, Estonia, Latvia, Lithuania, Hungary, Poland, Romania, Slovenia and Slovakia. This study is designed to assess the hypothesis (H0) that there is no difference in the effectiveness of innovation support systems among Central and Eastern Europe countries. Alternative hypothesis (H1) states that there is significant difference among those countries. In order to verify our hypothesis, we apply data envelopment analysis (DEA) developed by Charnes, Cooper and Rhodes (1978) which is a technique based on linear programming to evaluate the efficiency of entities working in the same environment, industry or region. The basic idea of the DEA is to find the level of effectiveness with which the entity making the decision (DMU – decision making units) transforms held expenditures for the results. The DEA method calculates the efficient frontier for the whole sample analysis objects. Objects located on the frontier are efficient and their efficiency ratio takes the value of efficiency ratio equal 1. Any country not on the frontier is considered inefficient. A numerical coefficient is given to each object, defining its relative efficiency and their efficiency takes value from the interval [0-1]. The difference in value relative to 1 specifies the size of the inefficiency of a single object. The DEA model can be either oriented or non-oriented, whereby the criteria of the orientation are formed according to the inputs and outputs. An example of the non-oriented DEA model is an additive model. The profit scale criterion enables the distinction of the DEA models that set the Constant Returns to Scale (CRS Models) as well as the Variable Returns to Scale (VRS Models). The value of the effectiveness in the oriented model shows the change either in the input or output, and makes certain unit effective. The choice of the orientation is mainly affected by the exogenous conditions concerning the subject of the research. In case of the input orientation the point is to analyze the effective unit in aspect of lower usage of inputs in comparison to a certain unit. For example, the estimated effectiveness measure of 0,9 shows that the certain unit is effective only if the current results will be reached by using 10% less inputs than in reality. In other words, in the input oriented model, the non-effective units can increase their effectiveness by reducing the inputs. The DEA models with focus on the outputs can answer the question: what results could an effective unit reach, if the available outputs of a certain unit were used. In this case the effectiveness of 0,9 shows that the unit is making 10% less than the effective units, while using the same number of inputs. The result increasing strategy in the input oriented models enables the growth of the effectiveness for the non-effective units.


Marcin Bielicki and Michał Leśniak We use constant return to scale model formally developed by Charnes, Cooper and Rhode – CCR model (1978). According to the model measure of efficiency for an individual object j is calculated as the ratio of the sum of weighted results to the sum of the weighted inputs:

݄௝ ൌ

where: j = 1, 2, …, n contries, r = 1, 2, …, t outputs, i = 1, 2, …, m inputs, yrj – size of the output r per j unit, xrj – size of the input i per j unit, ur – weight for output r, vr – weight for output i,

σ௧௥ୀଵ ‫ݑ‬௥ ‫ݕ‬௥௝ σ௠ ௜ୀଵ ‫ݒ‬௥ ‫ݔ‬௥௝

For efficient countries value of h is equal to 1 (the object is located on the efficient frontier), while in case of inefficient countries its value is less than 1 and the object is below the efficient frontier. Suitable linear programming model CCR input oriented is as follows: ௧

݂݂݁݅ܿ݅݁݊ܿ‫ ݕ‬ൌ ‫ ܺܣܯ‬෍ ‫ݑ‬௥ ‫ݕ‬௥௝଴ ǡ ௥ୀଵ


෍ ‫ݒ‬௜ ‫ݔ‬௜௝଴ ൌ ͳǡ ௜ୀଵ ௠

෍ ‫ݑ‬௥ ‫ݕ‬௥௝ െ ෍ ‫ݒ‬௜ ‫ݔ‬௜௝ ൑ Ͳǡ݆ ൌ ͳǡ ǥ ǡ ݊ǡ



െ‫ݑ‬௥ ൑ െߝǡ‫ ݎ‬ൌ ͳǡ ǥ ǡ ‫ݐ‬ǡ െ‫ݒ‬௜ ൑ െߝǡ ݅ ൌ ͳǡ ǥ ǡ ݉Ǥ

All of the analyzed data come from the official European Commission databases and cover years from 2007 to 2013. We chosed that period because the main purpose of funds spent from the EU budget for 2007-2013 was to increase competitiveness and innovation economies of the new members of the European community - the countries of Central and Eastern Europe. In 2007-2013 those countries were totally given from EU more than 170 billion EUR from EU budget totally. Their overall contribution amounted to nearly 40 billion EUR. It was a powerful boost to the economies of each beneficiary, in order to significantly expand and directly and indirectly stimulate national innovation systems. Our input variables are: !

x1 – European Funds (European Social Fund, Cohesion Fund and European Regional Development Fund),


x2 – National Contribution.

Our output variables include: !

y1 – Share of high-tech exports in total export (average value for 2007-2013),


y2 – Share of R&D personnel and researchers in total employment (average value for 2007-2013),


y3 – Patent applications to the European Patent Organisation per million inhabitants (total number for 20072013),


y4 – Share of enterprises in high-tech sectors in total number of enterprises (average value for 2007-2013).

Details of input variables are presented in the table below. For wider perspective we also present total Government Budget Appropriations or Outlays for Research and Development (GBAORD) as a percentage of


Marcin Bielicki and Michał Leśniak total general government expenditure and total intramural R&D expenditure as a percentage of Gross Domestic Product (Total R&D) Table 3: Chosen inputs and additional R&D expenditure ratios Bulgaria Czech Republic Estonia Latvia Lithuania Hungary Poland Romania Slovenia Slovakia

x1 x2 GBAORD (%) Total R&D(%) 6,67 1,35 0,72 0,53 26,54 4,60 1,40 1,49 3,40 0,45 1,77 1,63 4,53 0,80 0,51 0,60 6,78 1,50 1,11 0,85 24,91 4,40 0,84 1,16 67,19 18,30 0,76 0,72 19,06 5,50 0,75 0,48 4,10 0,96 1,15 2,08 11,50 2,00 0,88 0,62

Source: EUROSTAT Chosen outputs are presented in the table below. Table 4: Chosen outputs y1




Bulgaria 7,24 0,61 21,12 2,58 Czech Republic 15,30 1,53 139,51 3,49 Estonia 10,93 1,45 157,10 5,06 Latvia 5,77 0,95 84,58 4,10 Lithuania 6,11 1,35 41,85 1,75 Hungary 20,00 1,27 145,64 6,46 Poland 5,26 0,76 62,61 3,74 Romania 6,80 0,44 16,94 3,70 Slovenia 5,23 1,80 390,53 5,75 Slovakia 6,73 0,99 61,75 3,26


4. Results The results given for chosen period are presented in the table and figure below.

Figure 1: Cross-country analysis of national innovation system efficiency with DEA method


Marcin Bielicki and Michał Leśniak Results above show what percentage of input efficiency leader needs to achieve same results as particular country. For example Estonia needs only 24% of input to achieve same results as Romania. As we can see the effectiveness of innovation policy of individual CEE Countries is significantly different. The leaders of efficiency are relatively small countries such as Estonia and Latvia, both of them has less than 2,5 million inhabitants. On the basis of these results we reject the null hypothesis (H0) and accept alternative hypothesis (H1) - there is significant difference in the effectiveness of innovation support systems among Central and Eastern Europe countries. It has to be noticed that the effectiveness leaders are not synonymous with innovation leaders. We have 2 effectiveness leaders: Estonia and Latvia. While Estonia is considered to be the European leader in innovation across CEE countries (according to the Innovation Union Scoreboard), whereas Latvia is one of the weakest innovators in Europe. But we have to take into consideration that the share of expenditure on research and development in budget of Estonia was on average 1.8% per year, while Latvia was on average 0.5% in 20072013. It should be noticed that both countries spend funds effectively but due to difference in size of those funds only Estonia is considered as an innovative country. Estonia is the leader of innovation across CEE Countries. There are two measures that provide evidence for it: the average government budget appropriations or outlays for research and development (GBAORD) which for 2007-2013 was the highest in Central Easter Europe – over 1.8% per year and the effectiveness of spending that funds which was also the highest. Therefore Estonia can be considered as a benchmark of innovation for other young European Union members. Estonia is a small OECD economy and its government’s priorities include R&D and innovation. Estonia has one of the highest Gross Domestic Expenditure on Research and Development (GERD) growth rates in the OECD area, at 11.8% a year during 2005-10. Business Enterprise Expenditure on Research and Development increased significantly from 0.42% to 0.82% of GDP over the same period.

5. Conclusion The main goal of this study is to compare the effectiveness of innovation policy of Central Eastern European Countries. By using Data Envelopment Analysis method we made a comprehensive evaluation and analysis of different types of National Innovation Systems in CEE Countries. Our results can not only alert governments of the inefficient countries, but also provide them benchmark to compare. Our analysis shows that the leader of innovation across CEE Countries is Estonia. The emergence of Estonia in the efficient frontier indicates that this country can serves as benchmark for efficient use of R&D resources. The inefficiency in the R&D resource usage highlighted by this article indicates the underlying potential thfat can be tapped for the development and growth of nations. A separate issue is the possibility of the application of the Estonian model of innovation support to other CEE countries, in particular the large economies such as Poland or Romania. That scientific problem may be an excellent starting-point for further research on the topic of innovation in the countries of Central and Eastern Europe.

References Abbasi F., Hajihoseini H. & Haukka, S. (2011) “Use of virtual index for measuring efficiency of innovation systems: A crosscountry study” International Journal of Technology Management & Sustainable Development, 9(3), 195-212. Adams J. D., & Griliches Z. (1996) “Research productivity in a system of universities” (No. w5833). National Bureau of Economic Research. Balzat M., Hanusch H. (2004) “Recent trends in the research on national innovation systems” Journal of Evolutionary Economics, 14(2), 197-210. Bonaccorsi A., Daraio C. (2004), “Econometric Approaches to the Analysis of Productivity of R&D Systems: Production Functions and Production Frontiers” In: H.F. Moed et al. (eds.). Handbook of Quantitative Science and Technology Research // Kluwer Academic Publishers, pp. 51 – 74. Cai Y. (2011) “Factors affecting the efficiency of the BRICSs' national innovation systems: A comparative study based on DEA and Panel Data Analysis” Economics Discussion paper, (2011-52). Charnes A., Cooper W.W., Rhodes E. (1978) “Measuring the Efficiency of Decision Making Units”, European Journal of Operational Research, vol. 2 pp. 429-444.


Marcin Bielicki and Michał Leśniak Chen C.P., Hu J.L., Yang C.H. (2011) “An International Comparison of R&D Efficiency of Multiple Innovative Outputs: The Role of the National Innovation System” Innovation: Management, Policy and Practice, Vol. 13, No. 3, pp. 341–360. Coelli T.J., Rao D.S.P., O’Donnell C.J., Battese G.E. (2005) “An introduction to efficiency and productivity analysis”, Springer. Cullmann A., Schmidt-Ehmcke J., Zloczysti P. (2009) “Innovation, R&D Efficiency and the Impact of The Regulatory Environment – A Two-Stage Semi-Parametric DEA Approach” German Institute for Economic Research, Discussion paper No. 883: Berlin, May 2009. Fritsch M., & Slavtchev V. (2011) “Determinants of the efficiency of regional innovation systems” Regional Studies, 45(7), pp. 905-918. Griliches Z., (1980), "Returns to Research and Development Expenditures in the Private Sector", in J. Kendrick and B. Vaccara (eds.), New Developments in Productivity Measurement and Analysis, University of Chicago Press, pp.419461. Guan J., Chen K. (2012) “Modeling the Relative Efficiency of National Innovation Systems” Research Policy, Vol. 41, No. 1, pp. 102–115. Guo P., Tanaka H. (2001) “Fuzzy DEA: a perceptual evaluation method” Fuzzy Sets and Systems, Vol 119, pp. 149-160 Hollanders H., Esser F.C. (2007) “Measuring Innovation Efficiency” INNO-Metrics Thematic Paper, December 2007. Hsu Y. (2011) “Cross National Comparison of Innovation Efficiency and Policy Application” African Journal of Business Management, Vol. 5, No. 4, pp. 1378–1387 Kotsemir M. N. (2013) “Measuring national innovation systems efficiency–a review of DEA approach” Higher School of Economics Research Paper No. WP BRP, 16. Mairesse J., Sassenou M. (1991), “R&D and productivity: a survey of econometric studies at the firm level” Science– Technology Industry Review, 8, pp. 9–43. Paris, OECD. Mansfield E., (1965), "Rates of Return from Industrial Research and Development", American Economic Review, 55, pp.310-322. Minasian J., (1969), "Research and Development, Production Functions and Rates of Return", American Economic Review, 59, pp. 80-85. Nasierowski W., Arcelus F.J. (2003) „On the Efficiency of National Innovation Systems” Socio-Economic Planning Sciences, Vol. 37, pp. 215–234. Sharma S., Thomas V.J. (2008) “Inter-Country R&D Efficiency Analysis: An Application of Data Envelopment Analysis” Scientometrics, Vol. 76, No. 3, pp. 483–501. Varblane U., Dyker D. & Tamm D. (2007) “How to improve the national innovation system of catching-up economies” Trames: Journal of the Humanities and Social Sciences, 11(2), 106-123.


Smart Specialisation: Does it Really Matter to IT SMEs? Alexander Borg1 and Christopher Middup2 1Strategy and Business Department, Malta Information Technology Agency (MITA), Malta 2Department of Computing, University of Derby Online Learning (UDOL), UK [email protected] [email protected]

Abstract: Smart specialisation is a new strategic policy framework which the European Commission has adopted to support co-ordinated Research and Innovation (R&I) investment efforts among EU Member States and regions by prioritising their endeavours through the identification and exploitation of existing strengths and capabilities when using regional funding. It is designed to support and assist entrepreneurs to discover what their firms should specialise in to become more competitive and consequently contribute to overall economic growth and job creation. This study explores the utility of this framework to owner-managers of Maltese IT SMEs through a mixed methods, exploratory “case within a survey” eventually focusing on three export-oriented firms that invest in R&I and specialise in the development of software products and services for specific niche markets. Grounded Theory approaches are used to analyse, interpret and explain the findings, generating theory inductively from the rich data generated using flexible bottom-up approaches. The study explores the tension that has developed between software product orientation and software service orientation in the firms as a result of an increasingly blurred distinction between the two when the mode of delivery is through the cloud. It reveals that in spite of the higher interest by investors in software products, custom projects delivered as a service can become a crucible for specialisation, productisation and eventually internationalisation. In this context the role of the entrepreneur becomes crucial in their choice of strategy, partnership, method, innovation, technologies and resources. These must focus the firm’s collective endeavour in securing sufficient “trust” from their first overseas client – and after that, repeat business. Entrepreneurial patterns are therefore revealed in the way opportunities are discovered by the owner-managers and differentiated strategies developed to target niche areas in spite of the perceived drawbacks of insularity and small firm size. The study reveals that in Malta this has happened regardless of smart specialisation. However, the conclusions indicate that the framework can be an aid to support policy and to replicate the patterns for the benefit of software SMEs in other regions or Member States. Keywords: smart specialisation, software SMEs, case studies, cloud computing, entrepreneurship, EU funding

1. Introduction Smart specialisation is a strategic approach that the European Commission (EC) has embedded in regional policy for the period 2014-2020 to support targeted Research and Innovation (R&I) investment efforts among Member States of the European Union (EU) (Midtkandal & Sörvik, 2013). To ensure that Europe attains “smart, sustainable and inclusive growth” by 2020, the policy helps Member State regions prioritise their endeavours by identifying and capitalising on existing strengths and capabilities when using regional funding. It is designed to support and assist entrepreneurs to discover what their firms should specialise in to become more competitive and consequently contribute to economic growth and job creation (Foray et al., 2012). Smart specialisation assumes a key role for ICT in Member States’ Research and Innovation strategies for smart specialisation (RIS3) and their “digital growth” strategies, formulated to exploit regional financing throughout 2014-2020 (European Union, 2013). Besides driving economic growth, ICT is deemed critical to support industrial and technological leadership, basic and applied research, and innovation in the private and public sector (Foray et al., 2012). Despite being a relatively small country, Malta has a thriving ICT industry that has contributed over 5% to its national GDP over the last five years (National Statistics Office)(NSO, 2013b), one of the highest contributions in the EU (Stančík & Desruelle, 2012). This excludes ICT-enabled sectors online gaming and financial services (NSO, 2013b) which together contribute over 25% of national GDP. Some IT SMEs, 99% of which are small and micro enterprises (NSO, 2013a), have developed a significant level of sophistication in their products and services. This has happened thanks to their ability to focus on a particular niche and then specialising in it. A number of them service foreign markets, despite the perceived additional obstacles usually attributed to SMEs located in a small island state.


Alexander Borg and Christopher Middup This work explores the utility of the approach to Maltese software producing SMEs. It focuses on three software firms that display characteristics that should in theory benefit from smart specialisation. These characteristics include internationalisation, investment in R&I, and an ability to specialise in the development of software products and services for specific niche markets. The utility of smart specialisation is investigated as it would apply to Maltese IT firms focussing on software as their core business, resulting in a model that can help fulfil “smart specialisation” policy guidelines and capitalise on funding opportunities. The insights gained from this investigation are then generalised to show their utility in other countries and other markets.

2. Background 2.1 Defining smart specialisation in Maltese software firms Foray & Ark (2007) argue that some of the smaller or less economically developed Member States tend to emulate the larger and wealthier regions or countries of the EU, but end up doing so on a smaller scale. As a result, R&D resources are spread thinly and widely in all science and technology domains without reaching optimal levels and critical masses in any of them. This militates against the formation of “agglomerations” or centres of excellence, involving universities, large companies and innovation service providers, needed to compete against major world players. An integrated approach to R&D is therefore needed at an EU level to ensure that Member States develop “clear visions and strategies” aimed to bring out unique areas of specialisation based on their individual core strengths and capabilities, even when these may not be high-tech sectors, e.g. tourism and fisheries. Foray et al. (2011) argue that RIS3 is a tool that can stimulate specialisation in R&D and innovation to address the scientific shortfall in such non-high-tech sectors. Since Malta performs sub-optimally in R&D, lacks the research capability, but possesses greater capabilities to harness (or imitate) innovation supported by a relatively strong IT industry (MCST, 2014; Stančík & Desruelle, 2012; European Commission, 2014), a synthetic engineering-based approach, defined by Foray et al. (2012) as the application or combination of existent knowledge to resolve problems or create new solutions using inductive approaches, appears more suitable for Maltese software firms to acquire new knowledge needed to gain a competitive advantage. Owing to the enabling role assumed by ICT in the Maltese RIS3 (MCST, 2014), smart specialisation as applied to the Maltese software industry should in theory mean the technical capability to provide software products and services to support the specialisation areas selected in that strategy using the proposed RIS3 approach. Despite having a strong IT industry, only twelve IT companies, all with a headcount above nine employees, reported intramural R&D in 2010. This equated to €2.805M, or 11.7% of the total intramural R&D figure of €23.961M and therefore a mere 0.04% of national GDP (NSO, 2012). Coupled with the widely accepted view that more R&D activity is invested in developing software products compared to software services (Cusumano, 2004), the above suggests that Maltese software firms are predominantly service-oriented with few qualifying as software products companies using Cusumano’s (2004) own definition of a software products company: one with over half its revenue originating from new sales of software products. Consequently, less rigid parameters have been adopted in defining smart specialisation in this research: The technical capability of an organisation to develop software products and related services uniquely for a vertical industry, or software products and services developed to carry out a specialised function that can be applied horizontally across several industries. This is partly based on Cusumano’s (2004) definition of a technical specialty within a vertical industry; and justified also by Malta’s two significant ICT-enabled specialties in online gambling and financial services industries (TheWorldFolio, 2015).

2.2 Orientation and the entrepreneur’s role Investors and venture capitalists have traditionally nurtured a greater interest for software products companies compared to software services companies. This is due to the higher and quicker returns on investment achieved and consequently equity value of software products firms (Cusumano, 2004; Hoch et al., 1999). However, a trend


Alexander Borg and Christopher Middup towards servitisation has recently been observed among software products firms, as it offsets losses caused by the increased competition resulting from increased availability of cheaper or free software (Cusumano, 2008). In a study of 179 Finnish software firms, Rajala and Westerlund (2012) acknowledge this trend, and conclude that customer proximity as a result of service orientation usually leads to better financial performance, but impacts market performance far less positively. Conversely, products delivered as part of a standardised service offering to better satisfy customer requirements, lead to improved market performance of the firms, but not better financial performance. Personal relationships, and therefore the role of the entrepreneur, become more crucial in a context of service orientation when implementing strategies to penetrate new markets (Moen et al., 2004). Gaining credibility as a reliable partner is vital when entering foreign markets. This is highly dependent on mutually beneficial collaborations with partners on the ground. The process eventually becomes easier once long-lasting relationships and reputation are built. By contrast, in a productised context, customers are able to mitigate risk by testing the product before the purchase decision is made (Mannermaa et al., 2000). However, in both types of orientations open innovation approaches have become widely popular as companies collaborate, exchange knowledge, adopt open source software and make their own software products available to form part of web service mash-ups and wider software ecosystems (Bosch, 2009; Rajala & Westerlund, 2012). The innovative capacity, commitment and global vision of the entrepreneur or owner-manager are fundamental to lead and inspire employees in the pursuit of their firm’s internationalisation strategies (Lawton Smith & Romeo, 2011; Gabrielsson et al, 2008).

3. Research method The research used a mixed methods, exploratory “case within a survey” method (Yin, 2009). It focused on three Maltese export-oriented software companies, code named Alpha, Beta and Gamma, that developed a high degree of specialisation. Context was defined by collecting data from a population of 36 SMEs classified under NACE codes 58 (software publishing) and 62-63 (computer programming, data processing, consultancy, etc.) which are the codes pertaining to software production (Mas et al., 2012). The choice of the three companies was the result of purposive sampling among the 19 validated responses. The questions for the survey were formulated using the reviewed secondary sources. The survey data collected were then reviewed, and used to generate semi-structured questions for the actual case study phases. The interviews were one-hour audio-recorded conversational sessions with open-ended semi-structured questions asked to corroborate conclusions already gleaned from the extant literature and survey (Yin, 2009). Figure 1 summarises the strategy.

Figure 1: Stages of case study


Alexander Borg and Christopher Middup The owner-manager was considered the most appropriate and best equipped person to represent the organisation’s paradigm, business strategy and ethos (Bergeron et al, 2004). Triangulation was sought by interviewing also long serving technical managers from each firm. Grounded Theory approaches espoused by Charmaz (2006) were used to generate theory inductively from the rich data obtained. Data from the interviews were categorised using initial coding. A CAQDAS tool was then used to sort, re-adjust and re-analyse the codes using focussed coding, before final decision-making on the most significant codes for later memo-writing.

4. Findings and analysis 4.1 Quantitative data analysis: the context-setting survey Maltese IT SMEs are active mainly in the local horizontal enterprise market through the provision or customisation of IT solutions such as finance, inventory, payroll or retail management, business intelligence, web design and related IT services to local enterprises. This study, however, confirmed that more export activity is present than is generally perceived, their markets are actually more geographically dispersed than expected, and there is a high degree of specialisation in certain vertical niches indicating an aptitude at opportunity identification by the firms. 72% of respondents declared a degree of specialisation as defined in the study, and 18 of 19 firms internationalise in varying degrees. Nine such firms declared more than half their revenue derived from overseas sales (Figure 2).

Figure 2: Distribution of exporting firms by percentage of overseas sales revenue Figure 3 shows a predominance of software-related services in the domestic and continental European markets, and to a lesser extent North Africa & Middle East and UK & Ireland. By contrast, a more balanced distribution of products, extending to 41 different countries comprising Australia, New Zealand, Asia, Africa and Latin America was discovered. This suggests that geographical distance may hinder direct engagement with the customer usually required for the provision of software-related services. This interpretation is in line with conclusions drawn by Mannermaa et al. (2000).

Figure 3: Distribution by market of software-related services and software products compared


Alexander Borg and Christopher Middup Born-global internationalisation approaches theorised by Bell (1995), Moen et al. (2004) and Onetti et al. (2012) for IT SMEs, clearly apply also to Maltese firms. In response to a specific question, practically all indicated strong agreement that international partnerships, personal contacts and networking, targeting niche markets, and Internet presence are determinant factors for internationalisation. 13 of 18 firms reported investment in R&D above 5% of annual revenue at any point during the last five years. An improved research capacity was also noted among firms with higher numbers of employees holding a tertiary level of education (Figure 4).

Figure 4: Indicative company R&D expenditure in relation to tertiary education of employees

4.2 Qualitative data analysis The codes that emerged were sorted under five categories in line with the open systems theoretical model based on General Systems Theory (GST). These were environmental influences, inputs, outputs, transformation and firm attributes. The resulting codes and categories were combined to make up a framework model (Figure 5) that could enable a common understanding and interpretation of the results for the purpose of theory building.

Figure 5: The Maltese specialising IT SME as an open system

4.3 The case study firms Alpha, the smallest of the three, had the typical characteristics of a start-up – high growth, and single product and vertical market focus (Hoffman et al., 1998). Focusing on a limited range of single function software products mainly supporting the Microsoft horizontal platform, Alpha’s flagship product has been selected to support a high growth area. It sells the product worldwide at an averagely priced licence fee and user-centricity that appeal to SMEs – 60% of which are in the US – having a mature IT set-up. Alpha fits the definition of a “born-global”


Alexander Borg and Christopher Middup perfectly, and considers agility and deftness to improvise quick fixes as crucial to roll out its products ahead of its competitors. With >50 employees, Beta is a long established company with a mature set-up. Strong domestically in the horizontal enterprise market where its competitive advantage is market proximity, Beta is now a world market leader in a highly specialised niche in a vertical market (a retail segment in travel and tourism) where it sells products to +250 headcount clients in 40 countries. Beta had the opportunity of test-bedding its first vertical solution in Malta. Since then this niche market grew rapidly. Beta declared that 25%-50% of the company’s total revenue derives from overseas sales. It reported a steady rise in sales of its specialised product by servitising it as a SaaS solution, which provides a long-term guaranteed return through monthly fees. This is appreciated by Beta’s clients for the fiscal benefits offered, compared to the cost of an up-front one-off licence. With 60 employees, Gamma is a software services company. The firm has a strong software engineering ethos believing that software is too mission critical not to merit careful estimation and scoping before beginning to design and build it. Half Gamma’s revenue is from software services and a limited amount of software products exported to foreign markets in Europe, the British Isles, North Africa and Middle-East, and North America. Specialising in two key vertical markets, one of which a high-tech sector, Gamma’s strength is its flexibility to adopt the technology tools, support tools, software development lifecycles and project management methodologies used by its clients. All three firms collaborate with foreign partners in varying measures to support with pre- and post-sales support, and to facilitate market entry in their respective markets. But more importantly all three are good case studies that could answer some of the questions raised by Teece (2010) on how new value is transferred to customers after transformation of the firm’s business model by the innovation in which they have specialised.

5. Discussion What are the main patterns of entrepreneurial activity and organisational behaviour that lead to export orientation among internationalising IT SMEs based in Malta? Maltese IT entrepreneurs have inherited a worldview, of thrift and inventiveness that stems from the realities of living in an insular environment where historically resources are scarce (Briguglio, 1995), and where innovations have to be externally sourced (Punnett, 2009). That has made them successful enough to negotiate the challenge of securing sufficient “trust” from their first overseas client – and after that, repeat business. Echoing Cooper & Edgett (2010), this is achieved through sensible decision-making on the technologies and methodologies to use, the innovations to adopt, the resources to recruit, the strategies to pursue, and especially the focus on which market to target. Rather than pursuing a single holistic strategy, IT SMEs follow different strategies on the basis of that “precise spot” being targeted in the competitive landscape. They appear to support the notion of a “transient competitive advantage” (McGrath, 2013), which suggests that where competitive advantage can be short-lived, the pursuit of sustainable competitive advantage through a monolithic resource-based medium-to-long term strategy, is superseded. The firms studied are doing exactly that: formulating informal ad hoc transient strategies that are flexible, customer-focused and less sectorial, and therefore suitable to pursue the competitive advantage identified at that particular moment in time. What are the implications and presumed utility of the European Union’s regional smart specialisation concept for Maltese IT SMEs? Evidence from the field suggests that if firms such as the ones studied have been successful in their endeavours of entrepreneurial discovery as to what their country “does best in terms of R&D and innovation” (Foray et al., 2011, p. 7), in Malta’s case much merit goes to twenty years of ad hoc policy-making intent on consistently supporting the industry (MITA, 2009; Restall & Cordina, 2010). This has focused on incentives for students to


Alexander Borg and Christopher Middup take up ICT, free or cheap software sourced through strategic alliances with top ICT companies, and incentive programmes for SMEs. This happened without any smart specialisation policy being in place. Having a smart specialisation policy to help IT entrepreneurs “discover” what R&I they can harness to their respective areas of specialisation is no doubt beneficial. However, it would appear to be of greater interest to tech start-ups that have not yet settled for a specific vertical niche market in which to specialise or even a location where to operate from, what Onetti et al. (2012) term holistically “location decisions”. The firms investigated expressed lukewarm support for ERDF funding. In fact, only the two more established ones, Beta and Gamma, were positive about ERDF funding, as long as this was used to support internationalisation cost reimbursements or tax incentives for R&D activity, rather than individual projects focusing on any of the identified areas of specialisation in Malta’s RIS3. What is the IT firms’ outlook towards the potential of specialisation as a means of achieving an increased competitive advantage through differentiation? All three firms recognised that there is a higher return on R&D investment in software products in terms of both profitability and market value of the firm; and that it is a way of attributing uniqueness and inimitability to the product, and therefore attaining a competitive advantage through specialisation. However, what ultimately generates the product is knowledge – that synthesis of “unique learning experiences and organisational learning” of the firm which are hard to imitate and replace (Claver-Cortés et al., 2007, p. 45). It may therefore be reductive to conclude that a competitive advantage can only be attained by specialising in software products, especially if services such as custom projects may lead to products. Teece (2010), while distinguishing between product and service, emphasises that the business model itself, innovated by the input of new technologies and the discovery of new markets, represents a new opportunity for the firm to transfer new value to its customers, and therefore another form of competitive advantage, if the new business model is difficult to imitate. Rajala & Westerlund (2012) moreover posit that a focus on technology alone is ill-advised. They claim that the disruptive patterns caused by increased service-orientation (e.g. cloud computing) is pushing firms towards “inter-organisational collaborations” (p.1534), and therefore open innovation, which has become a new way of seeking a competitive advantage. They also claim that open innovation has led to a significant rise in the use of open source software. Magdaleno et al. (2011) discovered that the wider availability of open source software and the collaborative nature of open source communities are actually a stimulus to innovation. However, in the case study, little use of open source software is made by the mainly Microsoft-driven IT industry in Malta. Another effect of service-orientation through the cloud, is the increasingly blurred distinction between product and service. Cusumano (2008) argues the need to “productise” services to deliver them more efficiently, but recommends the need to “servitise” products to generate new revenue and offset the dwindling returns from software products, which is effectively another way of seeking a competitive advantage through specialisation in services. What hypothetical model of Maltese IT SMEs’ entrepreneurial activity can be developed for better policymaking and funding support? Figure 6 represents the theoretical model of the Maltese specialising IT firm as it emerged from the findings. The red circled zones indicate weaknesses or even strengths that could merit ad hoc policy intervention co-funded through the ERDF and other funding programmes such as the European Social Fund. Convergence between product-orientation and service-orientation through cloud delivery models is a key feature of the model. It epitomises the tension between these two modes of perceiving software caused by the disruptiveness of the cloud. It also represents an opportunity to improve financial performance of the firm without diminishing the value of IP if at the core of the service there is a product (Cusumano, 2008). In doing so the firm would be improving its value proposition to its clients through the avoidance of up-front licence-fees, rapid provisioning, flexibility and scalability of the service (Zissis & Lekkas, 2012; Subashini & Kavitha, 2011). Figure 7 models the process of entrepreneurial discovery that occurs within the firm as it has been observed and analysed in the case study.


Alexander Borg and Christopher Middup

Figure 6: The emergent model of the Maltese specialising IT SME showing the main zones of potential policy intervention

Figure 7: A hypothesised model of “entrepreneurial discovery” within the specialising Maltese IT SME


Alexander Borg and Christopher Middup The top half of the model reflects a complex stage during which the firm endeavours to make sense of the environment, identifying opportunities of various forms and then taking decisions on how to address them through the selection of resources and the avoidance of risk. The outcome of this discovery process is newer and richer creative insights used to decide whether a sales lead could be satisfied through a custom project (therefore a service charged at time and material), or could eventually lead to the creation of IP through some investment in R&D (or simply innovation) to develop a new or enhanced software product. The bottom half of the model represents an abstraction of that part of the cycle where specialisation takes place. Regardless of whether it would lead to either a software service or software product, it is another complex stage that entails knowledge build-up and potentially an enhancement of the firm’s competitive advantage in an existing niche or new emerging area of specialisation.

6. Concluding comments Even if smart specialisation is firmly grounded on the notion of rationally planned R&D investments that exploit critical masses of knowledge and expertise (hardly possible in Malta), and therefore by implication a bias towards software products, the study has revealed that island status and the absence of a marketable hinterland are not insurmountable obstacles for software service firms that wish to discover new areas in which to specialise, productise and eventually internationalise. This was revealed in the way owner-managers use custom projects that service a local client, to specialise and gain a reference for further business. It is plausible to conclude that when this happens the project constitutes a testing ground for the firm to ideate, productise and, if the conditions are right, internationalise. The latter would follow a strategy and evolve into a business model of its own involving ad hoc collaborations with partners in the target market. If by smart specialisation, the EU means an interconnected funding framework which creates the right conditions for owner-managers to discover new specialisations to enter new markets, this research has revealed that the firms investigated still succeeded in their venture without RIS3 being yet in place. It therefore remains to be seen whether implementation of smart specialisation in micro countries or regions would present additional or alternative strategic options for young and new technology companies, particularly in today’s globalised context where concentrations in a conventional geographical sense are starting to become superseded. It is then ultimately up to the interpretive capability and willingness of regions and Member States to convey a cross-boundary and pan-European dimension to smart specialisation which can make all the difference (European Commission, 2014). This then will not only matter to software SMEs, but also to other technology firms.

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Inter-Organizational Network Management in an Innovation Context: Combining ego and Whole Network Perspective Jan-Patrick Cap1, Erik Blaich1, Holger Kohl2, Ariane von Raesfeld3, Rainer Harms3 and Markus Will1 1Fraunhofer Institute for Production Systems and Design Technology, Germany 2Technical University of Berlin, Germany 3University of Twente, The Netherlands [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Abstract: Although there is growing interest into the research field of inter-organizational innovation networks, few attempts have been made to develop systematic methods for the active management of such networks. This is especially true for approaches combining the view of single actors and the network as a whole. In response to this gap, this research presents a new method for the management of inter-organizational networks that can help to increase innovation outcome. The introduced approach accomplishes two goals. Firstly, it provides guidance for the measurement of the current collaboration status of a network, its optimal future collaboration status and the gap between them. Secondly, it provides systematics for the development of clear network management strategies for each network actor for closing this collaboration gap. As a result, better exploitation of existing collaboration potential is expected to increase innovation output. The method builds upon work by Kohl et al. (2015) who approached network management on a whole network level providing a solution for the management of entire networks and Ojasalo (2004) who suggested a network management method taking the perspective of a single network actor on the so called ego level. The novelty value of the presented method lies in the demonstration of how these different levels of network management can be combined. The two levels of analysis are linked through reliance on the same data set. The developed method is demonstrated through a case study. The analysis builds upon a questionnaire asking network actors for an estimation of the current collaboration status and a future collaboration potential amongst them. Social network analysis software was used to calculate network measures such as the level of density and to visualize the network graphically. As a result customized strategies for improving collaboration within the investigated network are presented. Keywords: innovation networks, network management, network assessment, ego network perspective, whole network perspective

1. Introduction There is increasing consensus amongst scholars that collaboration in inter-organizational networks has a very significant and positive influence on innovation (Coleman 1988; Burt 1992; Powell et al. 1996; Rowley et al. 2000; Ahuja 2000; Baum et al. 2000; Reagans and Zuckerman 2001; Tsai 2001; Owen-Smith and Powell 2004; Schilling and Phelps 2007; Raesfeld et al. 2012). Hence, it appears worthwhile to investigate in what way and under what conditions collaboration in networks is beneficial to innovation and how this can be fostered. Interorganizational networks and their impact on innovation has been well researched already, which is documented by a variety of literature reviews dedicated to networks (Borgatti and Foster 2003; Brass et al. 2004; Provan et al. 2007; Ozman 2009; Zaheer et al. 2010; Phelps et al. 2012). The research field of network management on the other hand is relatively young. A first literature review has been published by Huuskonen and Kourula (2012). They note a strong, recent increase in publications concerned with the topic of network management. Still, they conclude that only a very small share of publications has developed concrete methods of network management. In response to this scarcity, the authors of this research have previously presented a network management approach that facilitates the definition of an optimal future collaboration status for inter-organizational networks (Kohl et al. 2014, Kohl et al. 2015a, 2015b). Following, this method will be referred to as Network Collaboration Improvement Method. A gap between the current collaboration status of the network and a potentially optimal future status can be identified via this method. While managers are encouraged to intensify collaboration according to the provided analysis, so far the approach did not provide a detailed strategy on how to reach the defined goal. The current paper suggests how this limitation can be overcome by combining the method with a second network management approach by Ojasalo (2004) labeled Key Network Management.


Jan-Patrick Cap et al. The Network Collaboration Improvement Method addresses network management on a whole network level, meaning that it is concerned with the entire inter-organizational network and outcomes on the whole network level (Zaheer et al. 2010). Key Network Management as introduced by Ojasalo (2004) discusses how single actors can manage their individual network and thus addresses network management on the so called ego level. Building on these two approaches to network management, the paper at hand discusses the possibility of setting goals for future collaboration in networks on the whole network level, while providing strategies for working towards this goal on the ego level. Thus, the main contribution of this work lies in illustrating how network assessment on a whole network level and network management on an ego level can be integrated. The approach is demonstrated by the means of a case study.

2. Network management Network management is a young research field, which developed during the last three decades. The term ‘network management’ has been increasingly used since a publication by Thorelli 1986 on networks as a form of organizing between markets and hierarchies (Huuskonen and Kourula 2012). Network management may be described as a managerial approach for designing and managing networks (Huuskonen and Kourula 2012). This has also been studied explicitly in the context of innovation networks (Dhanaraj and Parkhe 2006). Huuskonen and Kourula (2012) identify in their literature review six dimensions of network management: (1) management functions, (2) network and management strategies, (3) management tasks, (4) management structures(5) network and management roles, and (6) management capabilities. The paper at hand focuses on the dimensions management functions in terms of identifying partners for networking and forming networks and on network and management strategies in terms of providing guidelines for strategic choices on networking. Its novelty value lies especially in connecting the ego and whole network perspective of network management. Following, the approaches to network management by Kohl et al. (2014, 2015a, 2015b) and Ojasalo (2004) are presented and discussed in the context of these two perspectives. The Network Collaboration Improvement Method as described by Kohl et al. (2014, 2015a, 2015b) suggests a three step process for defining a future target status for inter-organizational networks: !

Assessment of the current collaboration status of the respective network as perceived by its actors.


Assessment of a potential future collaboration status in five years according to collaboration potential perceived by the network actors.


Definition of the collaboration gap, meaning the difference between the current collaboration status and the potential future status of fully leveraged collaboration potential.

The result of this three step process is an overview over the network that provides a clear image of how network actors see the current collaboration status of the network, how much they believe collaboration could be extended towards an optimal future status and the difference between these two states. The approach is valuable for goal setting and draws a clear picture of what whole networks and their actors should aspire to. Figure 1 summarizes the approach. Each step is described in more detail as part of a combined approach in section 3.

Figure 1: Network management according to Kohl et al. (2015a, 2015b) on the whole network level


Jan-Patrick Cap et al. Despite knowing their goal, individual network actors cannot derive strategies from this analysis on how to overcome the identified collaboration gap. In order to provide such strategies, an extension of the method is necessary. A potential candidate for such an extension may be Key Network Management (Ojasalo 2004). Key Network Management as introduced by Ojasalo (2004) suggests a three step process of how single actors can develop strategies for managing their individual networks: !

The focal actor selects other actors to build a so called key network in order collaborate on an identified opportunity.


One of four basic strategies that recommend different intensities of collaboration is selected for managing each actor of the key network.


On the operational level methods for managing the actors of the key network are developed and applied.

As a result of the three step process an actor obtains strategies for managing their network contacts. It can be inferred whether to intensify, maintain or abandon certain connections in order to optimize the collaboration within the network. Figure 2 summarizes Key Network Management.

Figure 2: Network management according to Ojasalo (2004) on the ego network level Key Network Management provides a guideline for individual actors on how to manage a key network. It is therefore valuable for network management on the ego level. What it cannot provide is a strategy for setting goals on a whole network level or for managing a whole network.

3. Combining the network collaboration improvement method with key network management: Two level network management The network management approaches by Kohl et al. (2015a, 2015b) and Ojasalo (2004) may be viewed as complementary. The approach by Kohl et al. (2015a, 2015b) describes how collaboration goals can be set on the overarching whole network level, but it is limited in the sense that it does not provide a strategy for reaching this goal. Ojasalo (2004) describes how network actors can take decisions on the individual ego level on how to reach a better collaboration status, but the approach is limited by the fact that it does not consider the impact of the taken decisions on the whole network level. This research suggests combining both to a method that sets goals on the whole network level and provides strategies for reaching it on the ego level. Following, the method will be referred to as Two Level Network Management. The following describes a way in which the two approaches may be integrated and applied jointly. The Two Level Network Management method that results from this combination is constituted by six steps. Each is based on either a single step of the Network Collaboration Improvement Method or Key Network Management respectively or integrates elements from both. While the first three steps rely solely on the Network Collaboration Improvement Method, the consecutive steps rather build on Key Network Management but rely on data gathered in step one to three. Step 1: In a first step the current collaboration status is assessed. This happens on three different collaboration levels. Namely customer collaboration, research collaboration and resource collaboration as defined by Kohl et al. (2014). Customer collaboration is characterized by two or more organizations that target the same customers through joint activities and/or jointly deliver projects to the same customer. Research collaboration is defined by two or more organizations that combine their knowledge and technologies to work together on a research


Jan-Patrick Cap et al. topic a single organization could not master on its own. Resource collaboration describes two or more organizations that share the same resources (e.g. machinery, human resources, analytics). This classification follows a definition of innovation activities provided by the OECD (2005) which highlights scientific, technological and commercial steps as important elements of the innovation process. Scientific activities are interpreted to take place on the research level, technological activities on the resource level and commercial activities on the customer level. Figure 3 illustrates the three different collaboration levels.

Figure 3: The three collaboration levels according to Kohl et al. (2014) Via a questionnaire the network actors are asked to estimate the collaboration status with every other actor on a scale from 0-10. A value of 0 indicating no collaboration intensity, a value around 5 indicating medium collaboration intensity and a value near to 10 indicating high collaboration intensity. Figure 4 illustrates this. The data obtained from the questionnaire is then interpreted in terms of network density, defined as the percentage of potential ties within the network that have actually been established (Ahuja 2000), and tie strength, defined by the collaboration intensity that two actors perceive between them (Kohl et al. 2015a, 2015b). Ties with a collaboration potential of 3-5 are defined as weak ties, while a collaboration potential of above 5 implies a strong tie. Ties with a collaboration potential of 2 or less are neglected because of being too weak.

Figure 4: Scale of collaboration intensity Step 2: Step 2 basically repeats step 1 but asks for an estimation of future collaboration potential in five years. This step is the basis for the projection of a future collaboration status. Step 3: In a third step the collaboration gap is defined as the difference between the future collaboration potential and the current collaboration status. By assessing both situations as suggested in terms of strength of ties and network density, the collaboration gap can be expressed as the difference between the respective values. Step 4: In the fourth step the key networks of each actor are defined. The Network Collaboration Improvement Method assesses networks on the three different Collaboration Levels customer, resource and research


Jan-Patrick Cap et al. collaboration. Key Network Management considers different collaboration opportunities. This research suggests combining both by interpreting the Collaboration Levels of the Network Collaboration Improvement Method as collaboration opportunities in the sense of Key Network Management. Thus, one may speak of the collaboration opportunity of resource exchange for example. Key Network Management suggests to rate whether the capabilities of an actor to contribute to a key network are high or low. This is not very specific, since this scale does not allow for intermediate values and no exact criteria are defined of how to assign a potential partner to one of the categories. The 0-10 scale provided by the Network Collaboration Improvement Method is rather suitable for providing a more detailed assessment of the collaboration potential between two partners. Here, a network tie is defined as disposing of a collaboration potential between two actors of above 2 on a scale 1-10. While the Network Collaboration Improvement Method infers tie strength from collaboration potential, the same method may be applied in order to infer an actor’s capability to contribute to a key network. Thus, the Collaboration Assessment Scale can be used as orientation for choosing the actors for a key network. Since a collaboration potential of above 2 on the scale 1-10 was defined as a threshold for defining ties, this can serve as a selection criterion for key networks as displayed in table 1. Table 1: Selection criteria for key networks Opportunity Resource Collaboration Customer Collaboration Research Collaboration

Actor Selection Criteria Mutual future Resource Collaboration Potential > 2 Mutual future Customer Collaboration Potential > 2 Mutual future Research Collaboration Potential > 2

Step 5: In a fifth step strategies are defined for each actor of the considered key network. Here again the combined method relies on data gathered according to the Network Collaboration Improvement Method and on evaluation according to Key Network Management. The assessment of network connections which was used for the selection of actors also serves as a basis for their categorization. Four categories are defined according to the 2-on-2 matrix suggested by Key Network Management (see figure 5).


Grow/ Invest

Develop/ Selectively Invest


Maintain/ Manage for Earnings

Abandon/ Manage for Cash



Collaboration Potential the focal actor perceives regarding the partnering actor

Collaboration Potential the partnering actor perceives regarding the focal actor

Figure 5: Strategies for the management of key network actors The vertical axis displays values of the focal actor’s perception regarding the collaboration potential with the partnering actor, while the horizontal axis reversely displays values of the partnering actor’s perception regarding the collaboration potential with the focal actor. This is not exactly in line with Key Network Management as introduced by Ojasalo (2004), who suggested rather an evaluation of the match between an actor and a key network, than an evaluation of the match between two actors. The Network Collaboration Improvement Method does not assess the capability of a Key Network to contribute towards the goals of a certain actor. Neither did Ojasalo (2004) define clear measures of how to evaluate this. Instead, this research suggests replacing the value for “capability of a key network to contribute to an actor’s goal” through the collaboration potential that the respective actor perceives regarding another actor. In other words, the vertical


Jan-Patrick Cap et al. axis still maps the values for the capability of an actor to contribute to the focal actor’s goals (its collaboration potential perceived by the focal actor), while the horizontal axis maps the values for the capability of the focal actor to contribute to the respective other actor’s goals (its collaboration potential perceived by the other actor). Building on Ojasalo (2004) Two Level Network Management suggests that when both sides perceive collaboration potential to be high (values 6-10), a grow/ invest strategy should be followed by the focal actor. When the focal actor sees high collaboration potential in a partner (6-10), while the partner does not reciprocate this estimation and rates the focal actor’s collaboration potential rather low (3-5), the focal actor is recommended a develop/ selectively invest strategy. In the reverse case, when the focal actors sees low collaboration potential (3-5) and the partner rather high collaboration potential (6-10), a maintain/ manage for earnings strategy is recommended according to the model. When both sides assume collaboration potential to be low (3-5), the most suitable strategy for the focal actor is to abandon the connection or to manage it for cash. Step 6: The last step calls for the development and implementation of operational level methods for managing the actors of a key network according to Key Network Management. Since this is highly case specific (Ojasalo 2004), no general recommendations can be given. The actors may consider the areas suggested by Key Network Management: products and services, organizational structure, information exchange, and individuals and take decisions appropriate to the situation. Figure 6 summarizes the Two Level Network Management Method.

Figure 6: Two level network management method

4. Case Study In order to demonstrate the method, an innovation network of 20 research institutes has been analyzed. The collaboration status and potential was rated according to the Network Collaboration Improvement Method. For this purpose questionnaires were sent out to the institute directors. The participants were asked to rate the current collaboration status and future collaboration potential on the described scale from 0-10. Due to a partnership between the investigated innovation network and the Fraunhofer institute -to which three coauthors of this work are affiliated- a response rate of 100% could be reached. The results have been anonymized in order to assure data protection.


Jan-Patrick Cap et al. Step 1: Assessment of the current Collaboration Status In a first step the current collaboration status is assessed according to the Network Collaboration Improvement Method as described by Kohl et al. (2015a, 2015b) through an evaluation of the questionnaire results. For the current network on an aggregate level the result is a level of density of 9%, constituted by 15 strong and 50 weak ties resulting in a strong ties / weak ties ratio of 0.28. Table 2 provides an overview over the network measures, including the individual values of the respective key networks of customer, research and resource collaboration. Data provided for the overall network has been summarized on an accumulated level. The values of the key networks therefore do not add up to the summary values. Table 2: Current collaboration status Level of Collaboration

Current Status Density 8% 8% 12% 9%

Customer Level Research Level Resource Level Summary

Strong Ties/ Weak Ties 14/50 = 0.28 14/51 = 0.27 19/70 = 0.28 15/50 = 0.28

Step 2: Assessment of the future Collaboration Status The assessment of the future collaboration potential follows the methodology of step one. On an aggregate level the potential future network reaches a level of density of 46% and a strong ties / weak ties ratio of 1.39, constituted by 152 strong and 109 weak ties. Table 3 provides an overview over the potential future network, including the key networks. Table 3: Future collaboration status Level of Collaboration Density 47% 46% 45% 46%

Customer Level Research Level Resource Level Summary

Future Potential Strong Ties/ Weak Ties 131/146 = 0.9 140/127 = 1.1 122/141 = 0.87 152/109 = 1.39

Step 3: Definition of the Collaboration Gap When comparing the two network structures the differences are striking. While the current network is relatively sparse and characterized by a high share of weak ties, the opposite is true for the potential future network. Moreover, an evolution of the networks becomes obvious. While the level of density develops very similarly for all three levels of collaboration, the strong ties / weak ties ratio differs across levels in the future network. The ratio took almost perfectly equal values for the current status but the future projection displays a significantly higher share of strong ties for the research collaboration level compared to the resource and customer level. This shows that although the three levels of collaboration seem to be tightly connected, there is still value in observing a network on different levels, since collaboration can evolve with a different intensity according to the area of collaboration. The Collaboration Gap shows the tremendous unleveraged collaboration potential of the investigated network. Strengthening existing ties and establishing new ones according to the analysis must be the goal for the whole network in order to increase innovation outcome. Table 4 displays the collaboration gap in numbers. For example in the customer collaboration network there is the potential for 117 more strong ties, 96 more weak ties and the potential to leverage additional 39% of the theoretically possible maximum network density. Table 4: The collaboration gap – comparing current and potential future collaboration status Level of Collaboration Customer Level Research Level Resource Level Summary

Strong Ties 131 - 14 = 117 140 - 14 = 126 122 - 19 = 103 152 - 15 = 137

Gap (comparing values of current and future status) Weak Ties 146-50= 96 127-51 = 76 141-70 = 71 109-50 = 59


Density 47% - 8% = 39% 46% - 8% = 38% 45% - 12% = 33% 46% - 9% = 37%

Jan-Patrick Cap et al. Figure 7 seven visualizes current status, target status and gap between them by the means of network graphs. The tool Gephi has been used to create the presented graphs (Bastian et al. 2009).

Figure 7: Network graphs illustrating the collaboration gap Step 4: Definition of Key Ego Networks on Each Collaboration Level Step 4 calls for a definition of the key networks for each actor and each collaboration level. For illustration purpose the example of the key networks of one single research institute will be discussed here. Being an interesting case in terms of diversity regarding the key networks, institute 2 was chosen. Table 5 shows the collaboration potential that institute 2 perceives regarding the other institutes of the network (the first value of each cell) and reversely the collaboration potential that the respective other actor perceives regarding institute 2 (the second value of each cell). Two Level Network Management suggests including actors in a key network with which a mutual Collaboration Potential of 3 or higher has been identified. Value pairs that qualify for integration into the respective Key Network by providing at least this minimum level of collaboration potential are marked light grey, while those that do not are marked dark grey. Table 5: Level of mutually perceived collaboration potential (light grey = sufficient, dark grey = not sufficient) Institute Nr. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

Resource Collaboration 8/9 x 0/0 2/5 3/5 7 / 10 8/0 7/8 0/0 5/4 4/7 4/9 0/5 0/7 8/3 0/0 3/8 0/5 8/3 0/7

Customer Collaboration 10 / 9 x 5/7 1/6 5/3 5/5 10 / 0 8/5 0/0 5/6 6/5 1/7 1/5 1/7 7/5 0 / 10 6/8 0/7 7/3 5/3

Research Collaboration 9/6 x 7/7 1/4 5/5 8/5 9/0 9/6 2/0 8/6 7/7 6/8 2/6 1/7 5/4 0/0 4/8 1/7 8/5 7/3

Based on an analysis of table 5 institute 2 should currently not include institute 4, 7, 9, 13, 14, 16 and 18 in its key networks, since at the moment there is not sufficient mutual collaboration potential for none of the three collaboration opportunities. Furthermore, institutes 3 and 20 should currently not be included in the resource collaboration key network. Institute 12 should not be considered for the customer collaboration key network. Exclusion from one of the three key networks does not mean that collaboration on the specific topic with a specific partner is out of the question. Especially since key networks need to be reevaluated frequently (Ojasalo 2004) and an excluded actor may be included again in the near future. It merely means that the focal actor


Jan-Patrick Cap et al. focuses primarily on different partners in the respective context. Following the evaluation of table 5 institute 2 may choose to collaborate in the respective Key Networks with the following actors as displayed in table 6.

Institute Nr.

Table 6: Actors of the key networks of institute 2 Resource Collaboration 1 5 6 8 10 11 12 15 17 19

Customer Collaboration 1 3 5 6 8 10 11 15 17 19 20

Research Collaboration 1 3 5 6 8 10 11 12 15 17 19 20

Step 5: Determination of Strategies for each Actor of the Key Ego Networks The choice of the correct strategy for managing each network actor is based upon the mutual evaluation of the two partners. Actors not included in table 6 have been excluded from the key networks of institute 2. The remaining actors are those that have been selected to be part of the key networks and now need to be managed. When looking for strategies, the matrix derived from Key Network Management is applied (see figure 5). Following the mutual collaboration potential displayed in table 5 and the strategy matrix presented in figure 5, institute 2 can be provided with strategies on how to manage each actor of their key networks. This can be illustrated for instance via collaboration portfolios as demonstrated for the case of resource collaboration in table 7. The partnering actors are represented by the numbers 1 to 20. Table 7: Resource collaboration portfolio

Collaboration potential the focal actor perceives regarding the partnering actor

1, 6, 8

15, 19

Grow / Invest

Develop / Selectively Invest

11, 12, 17

5, 10

Maintain / Manage for Earnings

Abandon / Manage for Cash





Collaboration potential the partnering actor perceives regarding the focal actor

Table 8 provides a complete overview over how institute 2 should manage its three key networks following the evaluation of table 5. Table 8: Strategies assigned to the management of the individual actors of the respective key networks

Grow / Invest Develop / Selectively invest Maintain / Manage for Earnings

Resource Collaboration Network 1, 6, 8

Customer Collaboration Network 1, 17

Research Collaboration Network 1, 3, 8, 10, 11, 12

15, 19

8, 11, 15, 19

6, 19, 20

11, 12, 17

3, 10



Jan-Patrick Cap et al.

Abandon / Manage for Cash

Resource Collaboration Network

Customer Collaboration Network

Research Collaboration Network

5, 10

5, 20

5, 15

Step 6: Developing and applying operational Level Methods for managing the Actors of the Key Networks Step six is highly case specific and refers to the operational level (Ojasalo 2004). This is where collaboration is executed on a daily basis. It opens up a whole new topic which is too complex to be included in this model in detail.

5. Discussion and conclusion As the impact of networking on innovation has widely been recognized, there is an emerging and hugely unsaturated demand for methods of managing (innovation) networks. This paper presented a new method of network management as way of increasing innovation output. So far network management approaches that set goals for the overall network and provide guidelines to individual actors on how to contribute to those at the same time had been missing. The research at hand suggested bridging this gap by combining two methods that are respectively limited to one of those levels. In conjunction they can add to each other in a way that compensates those limitations. The presented approach connects to a former model of innovation network management by Dhanaraj and Parkhe (2006), who also stressed the role of network structure and the importance of selecting the right actors for innovation networks. Other scholars have likewise suggested methods for rating the actors of a network portfolio that finally can be used for deriving networking strategies (Jüttner and Schlange 1996). This again links to the introduced method and furthermore to the concept of network pictures by Ford et al. (2002), which states that there is no objective network but only different perceptions of it held by its actors. Rating network connections may be viewed as a way of quantifying those network pictures. While the concept of assessing the potential future state of a network numerically is new, the idea of anticipating future network structure and planning accordingly has previously been discussed by other scholars (see Möller and Halinen 1999 and Tikkanen and Renko 2006). Furthermore, the development of specific management strategies for individual network actors has been suggested by previous research, too (Jüttner and Schlange 1996). The discussed case study demonstrated how the two combined methods can indeed work hand in hand, being integrated to a new approach labeled Two Level Network Management. While the presented case has shown how strategies for reaching networking goals can be developed, it is limited in the sense that it cannot provide guidelines on how to implement those on an operational level. This is also true for guidelines for the identification of collaboration opportunities. Further, no measurement of innovation outcome has been considered for controlling for the effectiveness of the suggested innovation network management approach. This calls for further research. Especially practitioners could profit from further elaborating on the operational level of the method. Further, longitudinal research will be necessary to validate whether the developed network management method eventually accomplishes its goal of leading to an improved collaboration status and an increase in innovation outcome.

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How Responsible Innovation Strategies Emerge in Very Small Enterprises: The Case of a Small Wine-Growers’ Cooperative Valérie Ceccaldi Montpellier Research Management, Montpellier University, France [email protected]

Abstract: Studying strategy development processes organically in Very Small Enterprises (VSEs) allows us to consider the thoughts and visions of entrepreneurs, as well as to understand the role entrepreneurs play in each of the development phases. In a context where chance plays a key role, how new projects intertwine is proof that every decision and every leader’s act has an impact on how an organization evolves. Even if this strategic spiral follows a predefined plan, its realization is surprising given the importance attributed to initiatives and learning. In these conditions, is it possible to envisage innovative and responsible entrepreneurship? It all depends on what projects managers imagine, and on how motivated they are to extend the framework for accomplishing them. The case of the small cellar of Beaucaire1 gives an original managerial exemple of responsible innovation strategy. Indeed, this company, hundred-year-old, atypical by its governance mode since 1960, compound of seven employees, managed to revitalize over a long period (twenty three years) an innovative strategy being, certain times, same, precursory on the vitiviniculture sector in Languedoc-Roussillon2. This light industry specialized in the manufacturing of a table wine " vrac ", managed to develop a sale " in bottle ", directly to the private individual, and to make continue its activity in spite of the successive and deep transform met by this business sector, since 1970. Keywords: strategy, innovation, sustainable development, very small enterprise, entrepreneurship, learning

1. Introduction In order to understand the concept of “responsible innovation” we suggest examining the strategic aspect. We believe that it is by studying how strategies are developed that the formative elements of this concept will emerge. Since the end of the 21st century, it has been confronted more with economic key players who are clients and civil society, and thus players who are more involved in commercialization. This is why business strategies increasingly take into accounts the opinions and remarks of all the key players present. The single circle of decision-makers and suppliers is now broken by a chain of commercial participations and environmental events to which it will be necessary to refer in the future. It is in this context that the “persistent creator” is now found. Today, for entrepreneurs as individuals, implementing innovation means being obliged to engage “their” responsibility (Pavie, 2012) at all strategic levels. To understand the main stages of the radical processing of this small cooperative cellar, we shall be interested at first in the theoretical foundations of the innovation on the VSEs field. We shall explain then the methodology designed specifically for this object-research. Next, we shall approach the strategic peculiarities developed by this light industry, before making their analysis. The observation of the cellar of Beaucaire, allowed us to detail the context of an innovative strategy in very small company, and to seize the impact of leader role during the emergence of each phase of its realization process.

1.1 Sustainable innovation strategies in VSEs: understanding the concept As observed by Pavie (2012), innovation is inherent to humankind. For him, this is not a simple reflection, but well and truly a postulate: man is, by nature, innovative. It thus seems that the characteristics of entrepreneurs as previously described by Verstraete (1999) are reinforced by this last analysis. Sustainable innovation, yes, but for what purpose, and in what manner, also need to be specified. This is why, in this first section, we will cover the theoretical conception of sustainable innovation strategy, before describing the main triggering factors. Observing how a responsible innovation strategy is constructed in VSEs necessarily leads us to take an interest in the history (past and present) of the organization, the nature and visions (present and future) of the key players present, as well as the acts of the directors. This is why we have retained the “crafting” theory of strategy, 1 2

Beaucaire is a small town in the south of France. Languedoc-Roussillon is a french region.


Valérie Ceccaldi in Mintzberg’s sense of the term (1987, 2004). This approach makes it possible to detail each of the stages because it is a question, in this context, of phase “modeling”. The modeling is carried out in adequation with acquisitions, as well as with all the projected desires of the director. In this way, the modifications or organizational changes that need to be undertaken emerge, and the dynamics of innovation are brought back on track. The concept of “responsibility” will thus be found associated with this major protagonist by the fact that he himself is involved in both public and professional civil society. As Pavie (2012) reminds us, being responsible means “accounting for one’s actions”. However, it is not easy to account for one’s actions when one is not entirely free... The private realm is so completely intertwined with the public realm that individuals find it hard to commit in relation to their values or beliefs without, at some point, being subjected to the consequences. This is why, still according to the same author, “responsibility” must be completely attributed to those who innovate, because we need to be concerned by protection and the well-being of others. According to this principle, and for managers, innovation thus becomes a lever that can trigger “responsibility” (ibid.). In the food industry, between 1998 and 2012, this conception of “responsibility” came into focus when “sustainable development” was implemented as an innovative framework (Temri et al., 2012; Domergue et al., 2012; Touzard, 2008). At that time, Aubertin had already observed the need to combine performance and responsibility as recommended by Pavie (2012), thanks to the paths proposed by sustainable development. “The promoters of sustainable development identified in the figure of the farmer (from his position on site, in situation, in the field so to speak) a natural resource manager who had, or has, reconciled (or should do so) the three essential elements of sustainable development: continuing economic growth, preserving the environment, and promoting social aspects.” (Aubertin, 2006). This theoretical path then led us to consider the definition of managerial innovation, as proposed by Birkinshaw et al. (2008, 2006). Their viewpoint effectively makes it possible to study innovation in terms of a “process”, and to integrate into the analysis the role and impact of the behavior of the directors. But as soon as it was a question of individuals and innovation, the role played by learning seemed, for these entrepreneurs, to be the means for acquiring new information, knowledge and know-how. The final theoretical element taken into consideration lies in the form of the strategy analyzed. To understand this type of formulation, we have returned to the “whirlwind” model developed by Akrich, Callon and Latour (1988) which interprets innovation not in a linear manner but in successive loops. According to these authors, these loops depend on each other as they correspond as closely as possible to the actions of the craftsmanentrepreneur. However, in this entrepreneurial context, innovation cannot take shape without the culture, ethics, values and sense of responsibility of the director. Responsible innovation, as described by Schmid (2012) or Pavie (2012), thus positions the concept of “sustainable development” as a paradigm that structures this research. It represents both strategic opportunity and a long-term investment (Bouvier-Patron, 2011), as well as being the main lever behind entrepreneurial innovation (Berger-Douce, 2011; Aggeri, 2011) in the food industry field (Ceccaldi, 2014; Temri et al. 2012). Innovation, yes, but in what spirit, and what manner? Studying how strategies are developed in the field of entrepreneurial companies’ renders considerably easier understanding of how each stage is modeled. This is for at least two reasons. First, this configuration makes it possible to formulate the strategic vision prior to the action that the director constructs in the course of his reasoning, and, second reason, to dissect the combination of the different stages in the action so as to succeed in defining the process through which he acquired the necessary knowledge (Julien and Marchesnay, 2011; Verstraete, 1999). In this context, the main emergence criteria find themselves mixed up with the decisions of the key player and his behavior in the face of learning.


Valérie Ceccaldi


The concept of sustainable developpement (Bruntland, 1987) 2

Mintzberg’s craftman strategy theory (1987, 2004)

Concept of





Approach through the

The definition of managerial innovation by Birkinshaw et al (2006,2008) 4

The concept of responsible innovation (Pavie, 2012)

Circumstances of

Profile and role of its

Principle of





The wirlwind model for innovation by Akrich, Callon and Latour (1988) Nature and functioning

Wirlwind conception of

of a VSE


Figure 1: The theoretical path

2. Methodology This research project started with pre-exploration, the subject of which was strategic use International Organization for Standardization (ISO) standards and sustainable development by Small and Medium Enterprises (SMEs) and VSEs in the agricultural sector. After going back and forth between the three structures examined and the corresponding literature, we gradually focused our work on the innovation-related issues that arise following standardization, and the tools associated with them (Quality Management Systems (QMS), Environment System Management (EMS), or the invented ones, quality charter, labels, etc.). It was in this context, and because of its particularity, that we chose one of the three companies.

2.1 Selecting the subject of the study In the Languedoc-Roussillon region, wine-growing is a tradition that dates back two thousand years and is one of the region’s main economic activities (verbatims, French Environment Agency (ADEME), Chamber of commerce and industry, 2010-2011; Gavinaud-Fontaine, 2008). Cooperative wineries were created in reaction to a difficult economic situation, and a political environment that encouraged different professions to work together. This case stands out not only because of the complex, traditional milieu from which it originates, but also because of the fact that it is representative of a strategic issue that has persisted over time (Baxter and Jack, 2008). For the elected representatives and both local and regional key players, this case is unique. Its originality lies in the axes of the policies developed, and the energy brought into play to maintain a production activity in the long term in a market context undergoing fundamental change (verbatims, Town council of Nîmes, 2011). First of all, we were struck by their mode of governance. A CEO who manages the activities and employees of a cooperative on a daily basis is not common in the département or even the region. This particular operating method is the result of several internal conflicts which ultimately led to an atypical operating mode for the company itself, but also for the cooperative world (verbatims, Regional Federation of Cooperatives (FRCC), 2011).


Valérie Ceccaldi Next, the quality management system, in place for twelve years, revealed a strategy based essentially on the search for, and implementation of, innovative, responsible actions of the time, and this, despite the small size. For the experts in the cooperative sector, FRCC, Regional Federation of wine-growing Cooperative Wineries (FRCCV) and Cooperative Institute for Wine (ICV, in french) and the certifying authority AFNOR, this winery is the only cooperative to have used the qualitative method (ISO 9000) over twelve consecutive years. It is also the first to have implemented it, in 1994, in the wine sector (verbatims, Consultant, 2010; ICV, 2013). As for the traditional aspect of the profession, it was enhanced thanks to the polymorphous and polyvalent behavior of the director. This individual, who is very involved in a large number of professional networks, has succeeded in bringing renown to this modest regional activity. The approach of this small industry was formed very quickly as a textbook case. On the one hand, because of its cooperative nature and, on the other, because of the unstable environment in which it has constantly adapted since it was founded, in 1913. From a scientific point of view, and according to the recommendations of Yin (2009), it appears that studying this case may bolster approaches focusing on the strategic and organizational operating of VSEs, all in a context of responsible innovation.

2.2 The data collection protocol The nature of the field, and its research question, made a qualitative exploration process a priority. “The case study method”, to use the term developed by Hlady-Rispall (2002), was chosen for the plurality of the analysis tools and techniques that it recommends. Once formed, this ensemble has helped to transpose the thoughts of the key players, and to understand the past, present and future strategic visions of their organization. Studying this case required more than eighty interviews, based on open-ended and structured questionnaire forms, staggered between 2011 and 2013, and three observations, that we named “accompanying”, based on observational study. One part of these interviews was carried out within the winery itself, and the other with the professional federations, institutions, experts and other establishments with the same activity. Internally, the interviews were carried out with four of the pivotal figures, as previously defined through the key role they play in the operations of a cooperative winery, and their existence prior to 1988. The interviews were also done with employees or members of the cooperative that participate regularly in the activities of the winery. With the help of the pivotal figures, “sociograms” (Mathis, 2003) and “mind or heuristic maps” (Marsollier, 2011, Gueben-Venière, 2011) were designed. The former qualify the nature of the relations between the internal key players, the latter communicate a functional vision of the organization and its future projection. This interpretation process rendered intelligible “the reflection and beliefs of a subject so as to give them their full meaning” (Chabin, 2001). Furthermore, the “historic” approach used in accordance with the simplified method of Smith and Lux (1993) for the period 1988 to 2011 made it possible to understand present actions and to analyze the decisions made once “…the dust has settled on events…” (Begin and Chabaud, 2010). Externally, the interviews were carried out regularly to make it possible to “multi-angulate” all the primary data. Subsequently, all the fundamental elements were once again enhanced by the research done in the archives of the company: the minutes of general assemblies, account books, “quality” reports. These large quantities of qualitative data were content-analized. We mobilized, here, the thechnology by Thiétart et al. (2007), who offer making small thematic categories to analize the contents. In this way, we refined the coding scheme. Finally, observation of the context was based on works on the contemporary history of cooperative wineries in the Languedoc-Roussillon region, initiated by Geneviève Gavignaud-Fontaine (2008), the inventory of the heritage carried out by the Languedoc-Roussillon region (2008) and the doctoral thesis by Julien Granata (2010) on collective strategies in wine-sector SMEs.

3. Emergence of a responsible innovation strategy: Details of how it is implemented Examining the specific history of the regional French cooperative system (in Languedoc-Roussillon) provides a definition and understanding of the particularities of this aspect of the agricultural sector. The elements


Valérie Ceccaldi collected in this way have revealed different contextual factors which make it possible to analyze the strategies implemented. This is how, for example, the concept of innovation appeared as a reality, in 1976, following dramatic events that occurred in the Aude département. In the 1980s, the need to question and modify both practices and mentalities thus became a necessary act for these professionals aiming for a global market, as reported in the archives and verbatim reports collected during our exploratory stage. Now, the presidents and directors of wine-growing cooperatives must also be entrepreneurs in the sense give to the term by Schumpeter (1999). In addition, these cooperative entities are composed of human beings who manage their respective farms. This study thus reveals that directors of cooperatives must be versatile, that is, as at ease in the field of enology as in accounting, marketing or public relations, etc. In light of the results, to develop a responsible innovation strategy and maintain it in the wine-growing sector, it is necessary for directors to have an “atypical” profile. On the one hand, they must have an entrepreneurial spirit and behavior and, on the other, enjoy the legitimacy of their peers and the admiration of their entourage.

3.1 The directors’ learning process as a determining factor in responsible innovation The research thus revealed, on the basis of the character traits and aptitudes of the director, that it is also his moral values and personal history that play a part in the “modeling” of each stage in the strategy (which is thus deliberately designed). The future vision that he has forged for the company has been structured in relation to his beliefs, as well as on an audit that he carried out personally prior to taking up his position. In the economic situation of 1988-90, this director, who is both president and director, believed that only an innovation strategy would be beneficial for the development of the winery. Furthermore, he specified that “to make the activity of a (wine) cooperative sustainable, it was necessary to be the first to innovate”. Conscious of the investment that this represented for the company and the employees, and the responsibility that he must take on in the name of the members of the cooperative, he decided to implement within the company, “a quality management system” (the foundation of sustainable development). This managerial tool thus helped him to encourage transparency with regard to the strategy developed, and provoked a wide range of ideas and projects from all the key players involved. As for the “quality” axis, it highlighted the desire of this director to take into account on the one hand the needs and requests of the clients, suppliers or other partners and, on the other, to make the activity of the winery a regional example, particularly based on environment-friendly practices such as ISO 14000 and solar panels. Managing this type of strategy means that the director must organize surveillance, via information networks, that help him to look for and find any ideas or means that can answer his questions or solve his problems. To do so, “you have to know how to build up a network of contacts,” stresses the director, because “if you stay in your winery, if you don’t have a network, if you don’t go out and look for information, you’re dead,” he insists. It is through this search for solutions and because he “observes a lot, listens attentively to others and asks lots of questions…” that he was able to create the opportunities needed for his business project, his “vision”, to evolve. This quest for knowledge obliged the director to learn. His learning came through the intermediary of professional and personal networks, and supported him from 1988 to 2011 (the duration of his mandate). The results observed qualified his path as “learning through ideas and actions”, essentially because of his character (“I have a new idea every day”), and observation of the successive projects deployed. He thus brought dynamism to both the search for an idea and the obligation to act in order to find the best solution. Each action thus needs the appropriate learning process. Fourteen phases were identified in the course of the 23 years under his governance. These phases naturally corresponded to the operating characteristics of a cooperative winery in this sector of activity, but the chronology noted was in relation to the strategic decisions made one by one by the director. Although here it is a question of a cooperative system, the development of the strategy depended essentially on the learning phases of its director. In this case, it became the strategic driving force for the responsible innovation, and each project to be designed was thus “modeled” in relation to who he is – an entrepreneur who


Valérie Ceccaldi knows how to combine management of thoughts and actions. This strategic learning process played out in a non-linear manner, more in the form of successive loops. It effectively takes time to implement an idea. Ideas also need means, are acquired as different things are understood and experiments carried out, and are ultimately completed one after the other.

3.2 3.2Committed, responsible innovation in the form of whirlwind phases The individual strategic visions of three other pivotal players, those of the Cellar Master, the Consultant, and the Vice-President, confirmed the actions and polymorphous, versatile profile of the director. In the course of this long mandate, this character left no one indifferent with regard to his reflections and decisions. Some followed him without hesitation, such as the Cellar Master and the Consultant, whilst others were violently opposed, such as the Vice-President. But regardless of their personal positions, all four described a “common” opinion of the vision which, according to them, was the best suited to the situation of the winery. This situation must have as its foundation the centrality of the role of “President” (as they all call him), the quality of the products and manufacturing processes, the need to anticipate the actions for innovation at regular intervals, and the formalization of the work using management tools such as the ISO standards (14000, 22000, etc.). It is in the light of these last results, and whilst detailing the director’s learning process that the phases of the responsible innovation strategy emerged. Using the fourteen pedagogical phases, 8 radical and incremental innovations for the winery and the sector of activity were identified. Since 1980 Quality and globalization, the keywords for economic development in the wine industry From 1984 to 2000

Since 2000

Modernization of the activities of the cooperative 1988 "


Restructuring for internationalization purposes























Radical commercial innovation


Radical environmental innovation 8








1. Local Partnerships + ministerial authorization

5. Implementation of the ISO 14001




6. Creation of a new brand promoting the site

for the grape variety Cabernet Sauvignon 2. Creation of the sales tool promoting the local terroir

7. New commercial referencing of the products

3. ISO 9002 certification

8. Installation of solar panels

Figure 2: The emergence of responsible strategic innovation loops The schematization of the 8 innovation loops aims to transpose the “spiral” dynamics followed by this “achieved” strategy. This process, with its “whirlwind” style, indicates that each of the phases – or loops – could only be completed once the other actions had been completed successfully beforehand. One example: the rosé wine, “des dames” (loop n°7). It could only be produced in 2008, once the trade name had been registered (loop n°6), or the packaging specific to the winery had been organized (loop n°4), or once the ISO 9002, 14001 or


Valérie Ceccaldi 22000 standards had been implemented, thus producing a quality wine that respects the environment (loops n°3 and 5), etc. The dynamic of this responsible innovation strategy lies in the link and repeated succession between the many projects and their multiple actions, whether they have been completed or not. Although the strategy was outlined broadly, and thus “thought out”, it was also put together, step by step, in an “emerging” manner, following the evolution in each of the objectives envisaged. Over the course of all these years, the only aim of this small company seemed to be the survival of the activity, and its main driving force was the pigheaded desire of the director to “always be the first to innovate”. Using a quality management system (ISO 9001), implementing the framework standards (14000, 22000), and installing solar panels prove that this director is concerned about the evolution of the organization, and that he listens to his clients and suppliers. It also shows that he is concerned about the environment. He feels “responsible” because, he says, his “motivation lies in satisfying the general interest”. By retaining the originality of the managerial operating mode of this small structure, the research responded to some of the questions evoked by Domergue et al. (2012), on the subject of the reality of the director’s role in innovation. The research also showed that it was indeed the official determining factor for innovation in these small establishments. Only, to maintain the emergence dynamics of innovation – that is, ensure that the loops repeat and renew themselves – there must necessarily be permanence in this virtuous context. This work discovered that to stimulate this whirlwind movement, it must be composed of five major parameters. The first is a director with a visionary nature (Julien and Marchesnay, 2011; Verstraete, 1999) and a broad sense of responsibility (Pavie, 2012). He is both the trigger for, and driving force behind, innovation. The second focuses on the involvement of all the key players, whether they are in agreement or not. The third specifies that the protagonists must create and activate professional networks. The fourth encourages the implementation of modifying projects that perpetually generate oppositions and contestations. Finally, the fifth parameter reminds us that both individual and organizational learning must be present continually. The method designed and used authorizes another scientific approach to studying responsible innovation strategy. It thus proposes a new observation angle, giving innovators themselves the chance to speak out.

4. Conclusion The theoretical part drew the context of a VSE in innovative situation and positioned the role of the leader as determiner at several levels of the process. It allowed to organize the empirical work, mainly, around the actions of the leader … of its reflections. Studying the conception of a strategy in VSEs gives a precise idea of the management style that is used within the organization. It is true that their small size makes exchanges between the key players easier, and this has often led people to believe that VSEs do not really have a management system. The case presented proves on the contrary that even a small company composed of just 7 people knows how to organize itself, and can anticipate the future by being strategically inventive. It is certain that it is the director’s profile that provides the impetus and spirit of the entity. It is also true that depending on his past experiences and values, he will feel more or less committed, more or less responsible, for coordinating a policy that is both in harmony with, and respectful of, the general interest. The main limit which can be glimpsed in this work, lives in the generalization of its results. Can we from a single studied case, in a qualitative way, put new scientific foundations? Apparently and for its age (100 years old), this cooperative gave an atypical example of functioning, by being, sometimes, even, precursory on its regional business sector. It is still true that this research has identified several phenomena. First, it has provided details regarding the nature of a VSE’s capacities. It has also shown how a small business model manages to structure this virtuous framework for responsible innovation. Finally, our research has described managerial dynamics that help make a business sustainable. By allowing the main key players to express themselves, the various reflections and visions emerged in the course of the interviews. And it was by studying their representations and comments that the strategy was composed. This new input of knowledge makes it possible to envisage innovation from a responsible point of view at the level of entrepreneurship. It can also propose a strategic model for small organizations that hope to implement innovative projects.


Valérie Ceccaldi

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Cooperation vs. Firm-Based Innovation: A Sectoral Comparison in Portugal Marisa Cesário1, Sílvia Fernandes1 and José Barata2 1Faculty of Economics, University of Algarve, Portugal 2School of Economics and Management (ISEG), University of Lisbon, Portugal [email protected] [email protected] [email protected]

Abstract: In today’s knowledge-intensive economies, the enterprises can have a strong economic and social influence as “market protagonists”. Facing today’s economic instability they ought to provide a constant stream of innovations to clients. Researchers suggest that firms can reshape the market through their innovations, for which can contribute some external expert knowledge. The process of developing an innovation may imply three types of approach: make; buy or cooperate with other agents to acquire specific competences or knowledge. This last occurs when the firms’ internal knowledge or skill-base is not sufficient or effective and is conveniently complemented with external sources. Firms’ cooperation, among them or with clients or other stakeholders, and its potential for innovation is not new. In this paper, our aim is to identify the sectors more willing to engage in cooperation initiatives in order to accomplish innovation. Thus, this paper is structured as follows: Introduction; 1. Literature Review (Innovation and its assets; Disclosing the process of innovation; Open innovation; Cooperation for innovation); 2. Research Design (The CIS instrument; Sampling); 3. Results (The nature of the innovation process by sector: cooperation-based vs. firm-based; The scale and scope of cooperation); Concluding Remarks. Using descriptive statistics, the first step will be to identify the sectors more willing to engage in cooperation initiatives in order to accomplish innovation. Secondly, for those sectors a more detailed analysis on the scale and scope of cooperation is developed. For this study a secondary dataset was used from the CIS-2012 (DGEEC, 2014). The CIS, operation acronym in the Eurostat for Community Innovation Survey, is the main statistical survey (mandatory for EU member states) on innovation in companies. The universe contemplates Portuguese companies with 10 or more employees belonging to the NACE codes. The INITIAL sample consisted of 9423 companies. 6840 valid answers were considered. Keywords: process of innovation, open innovation, cooperation for innovation

1. Introduction The process of developing an innovation may imply three types of approach: make; buy; or cooperate with other agents to acquire specific competences or knowledge. This last occurs when the firms’ internal knowledge or skill-base is not sufficient or effective and is conveniently complemented with external sources. Several studies on innovation support that firm’s boundaries require porosity in order to absorb knowledge and capabilities from the external environment. This can provide an extensive variety of ideas, opportunities, sharing of costs and resources. In this paper, our aim is to identify the sectors more willing to engage in cooperation initiatives in order to accomplish innovation. In Portugal, due to the crisis and other factors such as a weak institutional supporting structure (‘InnoStruct’ - Filippetti and Archibugi, 2011), it is more difficult for enterprises to maintain a competitive advantage only through internal R&D. Given the dynamism and complexity of the environment, enterprises need to complement their internal resources and capabilities with ideas from outside interacting with a wide range of actors. This contribution to internal R&D can give enterprises access to complementary assets, needed to turn an invention into a successful product or service (Teece, 1986). Thus, many firms seek external expert knowledge in order to compete in a dynamic and fast changing market and achieve business success. Regarding these initiatives, it is interesting to analyse if Portuguese firms complement their internal R&D with external sources, and which ones, according to their sector of activity. Thus, this paper is structured as follows: Introduction; 1. Literature Review (Innovation and its assets; Disclosing the process of innovation; Open innovation; Cooperation for innovation); 2. Research Design (The CIS instrument; Sampling); 3. Results (The nature of the innovation process by sector: cooperation-based vs. firm-based; The scale and scope of cooperation); Concluding Remarks.

2. Literature review 2.1 Innovation and its assets Innovation and its external vs. internal assets are the main subject of this research (cooperation vs. firm-based innovation and sectoral patterns). Innovation is a theme of interest for researchers in different business and


Marisa Cesário, Sílvia Fernandes and José Barata management disciplines such as strategy, information technology, marketing, operations management, entrepreneurship or even engineering and product design. A definition of innovation common to all of these areas is not easy. As Damanpour and Schneider (2006) state, “innovation is studied in many disciplines and has been defined from different perspectives” (p. 216). Addressing this ambiguity, due to a high number and diversity of innovation definitions, Baregheh et al. (2009) proposed both a diagrammatic model and a simple textual definition which mutually acts as a foundation for summarizing the meaning of innovation: “Innovation is the multi-stage process whereby organizations transform ideas into new/ improved products, services or processes, in order to advance, compete and differentiate themselves successfully in their marketplace” (p. 1334). It is important to mention that it can only be considered an innovation when the enterprise develops an invention that is introduced in the market and is commercialized bringing economic return to the firm (Kuznets, 1962).

2.2 Cooperation for innovation In the process of developing new products/services it becomes essential to perceive the significance wielded by external agents as a source for innovation projects. Nowadays, firms cannot rely solely on their R&D departments as they need to balance internal resources and capabilities with ideas from beyond their boundaries, and interact with a large choice of players within the innovation system. This concept is the main support of the “open innovation” model (Chesbrough, 2003a,b). Open innovation is defined as: "…the use of purposive inflows and outflows of knowledge to accelerate internal innovation, and expand the market for external use of innovation, respectively" (Chesbrough et al., 2006: 2). The process of developing an innovation normally implies two types of strategy: generate knowledge in-house (make) or purchase it (buy) (Veugelers and Cassiman, 1999), nevertheless, in recent times theorists have detected a third strategy for acquiring knowledge – Cooperation in innovation with other agents (Navarro, 2002). Strategy authors have demonstrated that agents from outside the enterprise constitute a significant resource in actual competitive framework, especially in the development of new products and processes (Penrose, 1959; Teece, 1984; Barney, 1991; Peteraf, 1993). The enterprise’s intention to cooperate with other agents in innovation activities is impelled by the fact that it is an efficient way to improve the chances of success on the development of differential products or services (Becker and Dietz, 2004; Abramovsky et al., 2005, Sampson, 2007). Besides, enterprises that are highly internally focused, not opening themselves up to external networks and relationships may miss a lot of opportunities (Chesbrough, 2003a; Laursen and Salter, 2006). Hence, in the development of innovations the decision to cooperate with other agents is important (Mowery and Rosenberg, 1989) since it will enhance the enterprise’s learning capabilities. However, literature states that the enterprises performance depends on their ability to locate, absorb and exploit these sources in a productive way (Cohen and Levinthal, 1990). Several factors support the firm’s decision to cooperate considering that it allows to share expenses and uncertainty, exploit synergies, scope or recognize economies of scale, as well as to benefit from government support (Veugelers and Cassiman, 1999; Becker and Dietz, 2004). Given these advantages of cooperation, if the concept of innovation among firms has been introduced in an industry, non-participation will be acknowledged as a competitive disadvantage (Enkel et al., 2009). The innovation process may involve external sources from different origins, ranging from clients, suppliers, universities, to competitors as well as other agents (von Hippel, 1988, 2005; Powell et al., 1996). Essentially, innovation sources are divided in two types: internal and external. Table 1 shows a more detailed picture of these sources. The internal type comprises the innovation activities carried out within the enterprise: R&D, marketing and production departments. The external are related to: (1) market sources such as customers and users, suppliers (materials, equipment, software, etc.) competitors, consultants and experts, other sources such as commercial laboratories or technological parks, (2) educational and research sources (universities and research institutes) and (3) public available information (conferences, fairs/exhibitions, journal and magazines and patents). Table 1: Sources of innovation Internal


R&D Department

(1)Market Customers and users Suppliers


Marisa Cesário, Sílvia Fernandes and José Barata Internal


Competitors Consultants and experts Others (2) Educational/Research Universities Research institutes

Marketing Department

Production Department

(3) Public available information Conferences Fairs /Exhibitions Journals, Magazines Patents

Source: Own elaboration It is clear that enterprises have at their disposal a wide range of agents to cooperate in their innovatory effort, yet, decide which one(s) to cooperate with, depend on the ability to identify the type of agent that can better satisfy their internal needs and improve their competitive advantage. 2.2.1 Customers Customers can be the cooperation agent with greatest impact on the intensity of innovation activities, somewhat because, just like the suppliers, it is vertical or non-competitive cooperation. The success of product innovations in public sector institutions is also highly related to cooperation with customers (Freel and Harrison, 2006). This external partner is an important source of knowledge because its inputs help firms to identify new ideas about products and solutions (Urban and Von Hippel, 1988), comprehend customers’ needs, and identify new market trends in advance (Li and Calantone, 1998). For example high-tech industries benefit from customers contribution particularly to learn about technological trends and develop superior products. (Atuahene-Gima and Ko, 2001; Brettel and Cleven, 2011). Some firms invite customers to participate in the innovation process, most frequently in the design of the next new product, for example, the online Lego DesignbyMe tool (von Hippel, 2005). Regarding complex technologies and / or products this external source provides particularly valuable information (Tether, 2002). The similar principle applies when the product presents a high level of novelty (Amara and Landry, 2005). 2.2.2 Suppliers The relationship between suppliers is normally considered as vertical or non-competitive cooperation. It is a fact that enterprises have increased their relationships with their suppliers from the eighties onwards mainly because of Japanese car and electronics success relationship in the innovation development (Bidault et al., 1998). According to Håkansson and Eriksson (1993), suppliers are base factors of business. These players can be a source of innovative ideas and critical technologies considering that suppliers have specific knowledge and competencies not to mention that they are always interested in improving relationships with their clients. In countries like the United Kingdom and the United States, large enterprises that choose to downsize and concentrate on core competences, have increased their collaboration with these agents to guarantee a supply of quality inputs. The high degree of efficiency attained is one of the main reasons for cooperating with suppliers in terms of innovation in new products or processes (Tether 2002; Santamaría and Rialp 2007). Suppliers are also the partners of choice when the enterprise’s objectives have a commercial nature, such as entering new markets or internationalization (Santamaría and Rialp, 2007). These agents, just like customers, assist not only the development of products and processes, quality improvement and market adaptation, but also productivity and flexibility (Chung and Kim 2003). Reduction of production cost is another reason to cooperate with suppliers (Atallah 2002), likewise costs and risks involved in new product development (Chung and Kim 2003). 2.2.3 Competitors Establishing a relationship with competitors is normally referred horizontal cooperation which is not an unusual type of cooperation. Competitors are an external source that can be involved in the innovation process (von


Marisa Cesário, Sílvia Fernandes and José Barata Hippel, 1988, 2005). The knowledge generated by these agents can easily be accessed and exploited by firms that do not hold a high level of internal technological competence (Cohen and Levinthal, 1990). This type of relationship is quite appealing, considering that it contributes to intensify international competitiveness in enterprises, industries and countries and to solve issues associated to market failures and its technological deficiencies (Harabi, 2002). Relationships with competitors involve, on the one hand a reduction in investment risk and market uncertainty, and on the other, sharing of costs when enterprises initiate their R&D activities (Harabi, 2002). According to Von Hippel, enterprises copy and improve products and processes by learning from their competitors, and through know-how exchange as well (Von Hippel, 1988). 2.2.4 Consultants and experts Enterprises tend to seek alternative sources of knowledge and information when the development of innovations is affected, in particular when it is not going as fast as needed or does not correspond to the enterprise expectations. In this context, consultants and experts are a suitable solution (Tether, 2002). These agents are a source of specialized knowledge and skills that provide a wide range of valuable inputs for innovation development. Consultants and experts render possible experience sharing, concerning the definition and articulation of specific innovation needs, offer ideas on new needs and solutions, or even idea transfer among enterprises (Bessant and Rush, 1995). Besides, these agents can bring to the enterprise different points of view, as they are not familiar to the enterprises products and processes, since the enterprise staff can sometimes be an obstacle to new ideas. Thus, the contributions brought by these types of agents encourage a growth in the number of effective innovative ideas (Bruce and Morris, 1998). 2.2.5 Universities and research institutes The most common form of partnership is cooperation with scientific agents particularly in science-based firms (Castro and Fernández, 2006). Universities and research institutes have a main role in the development of technological innovations contributing to new scientific and technological knowledge (Drejer and Jørgensen, 2005). This type of collaboration does not bring any type of commercial risk, unlike cooperation with competitors, inasmuch as these agents are focused in generating R&D knowledge of a basic or generic nature, and not introducing it in the market (Miotti and Sachwald, 2003). Cooperation with Universities is a way of sharing costs and exploit knowledge which is available to public (Veugelers and Cassiman, 2005). Universities as well as their research institutes are constantly creating and developing scientific knowledge, thus, as research in firms intensifies and becomes very expensive, specialized academic knowledge is brought to balance and complement the firm’s R&D in order to gain access to rising technologies (Tidd and Trewhella, 2002) and achieve technological discovers that lead to viable commercial products (Spencer, 2003). Probably, one of the reasons why enterprises chose this source may be to benefit from public funds destined to research (Davenport et al., 1999; Cassiman and Veugelers, 2002; Miotti and Sachwald, 2003; Fontana et al., 2006). It is quite usual for policy-makers the encouragement of the relationship between enterprises and research institutes as a mandatory requisite to subsidize projects with public funds. Although cooperation with these agents is very important, enterprises must have an important in-house R&D capability in order to absorb scientific knowledge generated (Cohen and Levinthal, 1990).

3. Research design 3.1 The CIS instrument and sampling For this study a secondary dataset was used from the CIS-2012 (DGEEC, 2014). The CIS, operation acronym in the Eurostat for Community Innovation Survey, is the main statistical survey (mandatory for EU member states) on innovation in companies. European Union employs this main statistical instrument to monitor Europe’s progress in the area of innovation, which is conducted by national statistical offices. In Portugal, following the methodological recommendations of Eurostat, the CIS aims to directly collect information on innovation (product, process, marketing, and organizational) in companies based in Portugal. Data collection,


Marisa Cesário, Sílvia Fernandes and José Barata corresponding to the period of 2010-2012, was performed between June 3 and March 14, 2014 through an online electronic platform. The universe contemplates Portuguese companies with 10 or more employees belonging to the NACE codes (economic activities, see Table 2). The sample consisted of 9423 companies, based on census combination (for companies with 250 or more persons employed) and random sampling for other companies. Of the 7995 companies of the corrected sample, 6840 valid answers were considered, corresponding to a response rate of 86%. The CIS instrument provides useful information on how firms interrelated with its surrounding external environment in order to access information considered important for the development of new innovation projects or the completion of existing ones. Firms may use external agents as information sources or engage in more formal cooperation activities, meaning their active participation with other enterprises or institutions on innovation accomplishments. Table 2 gives the sample distribution by sector in CIS 2012 instrument. Table 2: Sample distribution by sector NACE REV3 7–9 10 – 12 13 – 18 19 – 25 26 – 27 28 – 33 35 – 39 42 – 43 46 – 53 58 – 63 64 – 75 86


Number of firms


Mining and quarrying Food, beverages, tobacco Textiles, wearing, leather, wood, paper, printing Coke, chemicals, non-metal, metal products Computer, electrical equipment, optical product Machinery, transport equip, furniture Electricity, gas, water supply, sewerage, waste Construction Wholesale, retail trade, transportation, storage Information, communication Financial, insurance, legal, accounting, others Health Total

73 323 889 1436 144 808 284 36 1642 376 735 94 6840

1,1 4,7 13,0 21,0 2,1 11,8 4,2 ,5 24,0 5,5 10,7 1,4 100,0

Source: Own elaboration based on CIS 2012 data

3.2 Conceptualisation and research questions 3.2.1 Product (good or service) innovation The CIS instrument considers that product innovation occurs when a firm introduces to the market a new or significantly improved good or service with respect to its capabilities, technical specifications user friendliness, components or sub-systems. Improved good or service does not need to be new to the market; however it must be new to the firm and it should not matter if it was originally developed by the firm or by other external partners. It is considered that product innovation occurs if the firm answered positively to one of those two questions in Table 3. In consequence these two variables were transformed into a single variable named product/service innovation (INOV_PRD_SRV) with a 0="No";1="Yes" codification. Table 3: Variables for product/service innovation Product/Service Innovation Survey Questions Variable INPDGD INPDSV

Description During the reference period, did your firm introduce new or significantly improved goods? During the reference period, did your firm introduce new or significantly improved services?

Source: Own elaboration based on CIS 2012 data


Codification 0 = "No";1 = "Yes"; 0 = "No";1 = "Yes";

Marisa Cesário, Sílvia Fernandes and José Barata 3.2.2 Process innovation Process innovation occurs when a firm implements a new or significantly improved production process, or new and significantly improved methods of supplying services, or supporting activity (in Table 4). Purely organizational or managerial changes are excluded. This innovation does not need to be new to market; however, it must be new to the firm not mattering if it was originally developed by the firm or by other external partners. Table 4: Variables for process innovation Process Innovation Survey Questions Variable




Did the firm introduce new or significantly improve methods of manufacturing or producing goods or services?

0 = "No";1 = "Yes";

Did the firm introduce new or significantly improve logistics, delivery or distribution methods for your inputs, goods or services? Did the firm introduce new or significantly improve supporting activities for your processes, such as maintenance systems or operations for purchasing, accounting, or computing?

0 = "No";1 = "Yes";


0 = "No";1 = "Yes";

Source: Own elaboration based on CIS 2012 data It was considered that the firm really implemented a process innovation if it answered positively to one of those three questions. Therefore, these three variables were transformed into a single variable named process innovation (INOV_PROC) with a 0="No";1="Yes" codification. Innovation rates are given by the ratio between the number of innovative firms (the ones implementing a product or process innovation) and the total number of sample firms.

3.3 The nature of the innovation process Firms were asked about the way product and process innovations have been developed. To the question: “Who developed the innovation”, four possible answers were available: (1) The firm; (2) The firm in cooperation with other firms or institutions; (3) The firm adopting or modifying goods or services originally developed by other firms or institutions; (4) Other firms or institutions. In this paper, our aim is to identify the sectors more willing to engage in cooperation initiatives in order to accomplish innovation, so we distinguish between “Cooperationbased innovators” (firms responding 2) and “Firm-based innovators” (firms responding 1 or 3). Table 5 gives the frequencies for these variables (with a 0="No"; 1="Yes" codification). The percentages indicate the proportion of firms with positive answers. Table 5: Who developed the innovation? Product Innovation Goods Services

Who developed the innovation: (1) The firm (2) The firm in cooperation with other firms or institutions (3) The firm adopting or modifying goods or services originally developed by other firms or institutions (4) Other firms or institutions

Process Innovation













Source: Own elaboration based CIS 2012 data Table 6: Cooperation-based vs firm-based innovation Innovation rate

Coop-based innovation

Firm-based innovation

Product Innovation




Process Innovation




Source: Own elaboration based on CIS 2012 data


Marisa Cesário, Sílvia Fernandes and José Barata In relative terms, we note a slight tendency for process innovation rely more on cooperation (but the association is not significant according to the chi square test). The review of the literature suggests the importance of external linkages, recognizing that small firms are frequently fragments of extended networks with different possible partners and geographic scales. By accessing other markets, assets and economic agents, firms not only release themselves from the limits of local and internal competences, but are also aware of new and more demanding market conditions that constitute a stimulus to innovation. In the scope of the present paper, a sample of Portuguese firms from CIS 2012 was used. Firms’ cooperation dynamics were assessed by observing their behaviour regarding the use of partners of cooperation for the development of innovative activities. According to these considerations, the following research questions were addressed in this paper: RQ1: Which sectors are more willing to engage in cooperation initiatives in order to accomplish innovation? RQ2: Which is the scale and scope of the cooperation developed?

4. Results: A synopsis 4.1 The nature of the innovation process by sector: cooperation-based vs. firm-based Based on the previous conceptual framework, the following figures provide a visual diagnosis on the nature of the innovation process, by sector. Besides identifying the sectors more willing to engage in cooperation initiatives in order to innovate, these graphics also allow to compare the nature of the innovation process (firmbased or cooperation-based) by sector and the nature of innovation (product or process). Regarding product innovation (Figure 1) the results show a slightly inferior incidence of cooperation-based innovation when compared to firm-based innovation, regardless the sector. Firms tend to be more cautious and reluctant to cooperate when it concerns the exposure of potentially profitable new products (Tether, 2002).

Figure 1: Product innovation: cooperation vs. firm-based innovation by sector Bubble size based on product innovation rate Source: Own elaboration based on CIS 2012 data A slightly different sectoral behavior is observed when considering process innovation (Figure 2). The health sector is, in this case, the one with a higher incidence of cooperation-based innovation, but contrarily to what happens with product innovation, in the case of process innovation this sector presents slightly more innovative initiatives based on cooperation than firm-based ones. This pattern applies, in minor degree, to construction industry. Firms tend to be more open to collaborate with others when there is no new product involved (Tether, 2002; Cassiman and Veugelers, 2002).


Marisa Cesário, Sílvia Fernandes and José Barata

4.2 The scale and scope of cooperation A higher sectoral desegregation level allows us a better understanding of different sectoral behaviours across the sample. The results show that computer, civil engineering, retail trade, insurance, R&D and human health stand out as the sectors more willing to cooperate when innovating (Table 7). According to the design of CIS, firms may cooperate with different partners: Other firms from the group; Suppliers; Customers; Competitors; Consulters; Universities and R&D Labs. Also, the geographical scale of cooperation may vary, as cooperation can be developed with Portuguese partners, European partners, USA, China/India or others. In general, these selected sectors cooperate especially with universities, R & D Labs, private suppliers and customers. We must, however, refer to the primacy given by “Computer, electrical equipment, optical products” sector to R & D Labs, the “Civil Engineering” sector to Universities, the “Retail” sector to other group companies, the “Insurance” sector to competitors (possibly within business associations). The R&D sector shows a pattern very similar to the Computer sector. The “Health” sector is a supplier dominated sector, with an inherent opening to the public sector as well as a higher propensity to academic collaboration.

Figure 2: Process innovation: cooperation vs. firm-based innovation by sector Bubble size based on process innovation rate Source: Own elaboration based on CIS 2012 data Table 7: Cooperation-based vs. firm-based innovation by sector

NACE code 26 42 47 65 72 86 62

Sector Computer manufacturing, electronic and optical products Civil engineering Retail trade, except motor vehicles and motorcycles Insurance, reinsurance and pension funding, except compulsory social security Scientific research and development Human health activities Consultancy, computer programming and related activities

Product Innov

Process Innov

Prod Innov Coop based











































Source: Own elaboration based on CIS 2012 data


Proc Innov Coop based

Prod Innov Firm based

Proc Innov Firm based

Marisa Cesário, Sílvia Fernandes and José Barata

5. Brief review of findings The first research question was to identify the sectors more willing to engage in cooperation initiatives in order to accomplish innovation. Regarding product innovation the data reveal an inferior incidence of cooperationbased innovation (when compared to firm-based), regardless the sector. Firms tend to be more cautious and reluctant when it concerns the exposure of core ideas and projects (Tether, 2002). In process innovation, the health sector has higher incidence of cooperation-based innovation, followed by construction. Often, process innovation is confused with incremental innovation, a reason why these firms tend to be more open to share or interact with external partners. The second research question referred to the scale and scope of that cooperation. The R&D, Computer and more scientific sectors cooperate with universities and labs. The Retail sector with other firm group, and the Insurance with competitors. And the Health sector is a supplier dominated sector. We acknowledge a traditional set of cooperation partners according the major sector’s dependences for core activities. Some innovation trends are emerging from combinatory innovations, among which are the inter-sectoral creations. Portugal is less mature on this kind of innovation, thus its cooperation patterns are more inner-sectoral.

6. Concluding remarks The theoretical framework of this paper clarified the current and future importance of cooperation for innovation, implemented at the level of customers, suppliers, competitors, consultants and experts, universities and research institutions. The brief presentation of some results for the Portuguese economy served primarily to show the interest of this type of analysis, namely, in establishing a diagnosis that may support innovation public policies. An introduction of analytical data analysis methods (like factor analysis, structural equations and CHAID analysis) to assess the influence of the external environment (information sources and cooperation agents) on the two different types of innovation (product/service and process), will help disclosing further economic, financial, managerial and organisational distinctive innovation aspects. That is the purpose of the current and upcoming work. This paper is financed by National Funds provided by FCT- Foundation for Science and Technology through project UID/SOC/04020/2013.

References Atallah, G. (2002) “Vertical R&D spillovers, cooperation, market structure and innovation”, Economics of Innovation and New Technology, 11, (3), 179–209. Baregheh, A., Rowley, J., & Sambrook, S. (2009) “Towards a multidisciplinary definition of innovation”, Management Decision, 47, 1323–1339. Bessant, J. & Rush, H. (1995) “Building bridges for innovation: the role of consultants in technology transfer”, Research Policy, 24, 97–114. Bruce, M. & Morris, B. (1998) “In house, outsourced or a mixed approach to design”, in: Bruce, M. & Jevnaker, B. (eds.) Management of design alliances: Sustaining competitive advantage, Wiley, Chichester. Cassiman, B. & Veugelers, R. (2002) “R&D Cooperation and Spillovers: some empirical evidence from Belgium”, American Economic Review, 92, (4), 1169-1184. Castro, E. & Fernández, I. (2006) “La I+D empresarial y sus relaciones con la investigación pública Española”, in J. Sebastián and E. Muñoz (eds), Radiografía de la investigación pública en España, Madrid, Biblioteca Nueva. Chesbrough, H. (2003a) “The era of open innovation”, Sloan Management Review, Summer, 35-41. Chesbrough, H. (2003b) Open Innovation: The New Imperative for Creating and Profiting from Technology, Boston, MA, Harvard School Press. Chesbrough, H., Vanhaverbeke, W. & West, J. (2006) Open Innovation: Researching a New Paradigm, London, Oxford University Press. Chung, S. & Kim G. (2003) “Performance effects of partnership between manufacturers and suppliers for new product development: the supplier’s standpoint”, Research Policy, 32, 587–603. Cohen, W. & Levinthal D. (1990) “Absorptive capacity: A new perspective on learning and innovation”, Administrative Science Quarterly, 35, 128–152. Damanpour, F. & Schneider, M. (2006) “Phases of the adoption of innovation in organizations: Effects of environment, organization, and top managers” British Journal of Management, 17, 215–36.


Marisa Cesário, Sílvia Fernandes and José Barata Drejer, I. & Jørgensen, B.H. (2005) “The dynamic creation of knowledge: analysing public–private collaborations”, Technovation, 25, 83–94. Filippetti, A. & Archibugi, D. (2011) “Innovation in times of crisis: National system of innovation, structure and demand”, Research Policy, 40, (2), 179-192. Fontana R., Geuna, A., & Matt, M. (2006) “Factors affecting university –industry R&D projects: The importance of searching, screening and signalling”, Research Policy, 35, 309–323. Harabi, N. (2002) “The impact of vertical R&D cooperation on firm innovation: an empirical investigation”, Economics of Innovation and New Technology, 11, (2), 93–108. Kuznets, S. (1962) “Inventive activity: Problem of definition and measurement”, in National Bureau of Economic Research (eds.), The rate and direction of inventive activity: Economic and social factors, Princeton, Princeton University Press, 19-42. Laursen, K. & Salter A. (2006) “Open for Innovation: the role of openness in explaining innovation performance among UK manufacturing firms”, Strategic Management Journal, 27, (2), 131-150. Miotti, L. & Sachwald F. (2003) “Co-operative R&D,why and with whom? An integrated framework of analysis”, Research Policy, 32, 1481-1499. Mowery, D. & Rosenberg, N. (1989) Technology and the Pursuit of Economic Growth, Cambridge, Cambridge University Press. Santamaría, L. & Rialp, J. (2007) “Determinantes de la elección del socio tecnológico: especificidades sectoriales y de tamaño”, Cuadernos Económicos del ICE, 73, 37-64. Teece, D. (1984) “Economic analysis and strategic management”, California Management Review, 26, (3), 87-110. Teece, D. J. 1986. “Profiting from technological innovation–implications for integration, collaboration, licensing and publicpolicy”, Research Policy, 15(6): 285–305. Tether, B.S. (2002) “Who co-operate for innovation, and why. An empirical analysis”, Research Policy, 31, 947-967. Veugelers, R. & Cassiman, B. (1999) “Make and buy in innovation strategies: Evidence from Belgian manufacturing firms”, Research Policy, 28, 63–80. Veugelers, R. (1997) “Internal R&D expenditures and external technology sourcing”, Research Policy, 26, (3), 303-315. Veugelers, R., & Cassiman, B. (2005) “R&D cooperation between firms and universities. Some empirical evidence from Belgian manufacturing”, International Journal of Industrial Organization, 23, (5–6), 355–379. Von Hippel, E. (1988) The Sources of Innovation, New York, Oxford University Press. Von Hippel, E. (2005) Democratizing Innovation, Cambridge, MA, Ed. MIT Press.


She is the Founder: Who is the Emotional Leader? Francesca Maria Cesaroni and Annalisa Sentuti Department of Economics, Society and Politics, University of Urbino Carlo Bo, Italy [email protected] [email protected]

Abstract: In FB research some studies have investigated the position of women involved as successors in the succession process, but very few studies have analysed women as incumbents. Until a few years ago, this issue would have been considered of little importance, given the very small number of women-owned businesses involved in a succession process. However, the increasing quantity of female firms raises questions about the specificities of a succession process from mother to son. This kind of process could indeed be a recurring one in the coming years. Apart from a few exceptions, in analyses of the succession process, women have often been described as mediators between family members, patient wives, mothers responsible for bringing up the future heir, or women living in the shadow of their husbands, fathers, sons, or brothers. An important role in transmitting family and business values to the children has been recognised by women. Women in this role have been defined as "chief emotional officer" (Jimenez, 2009), being that they hold the emotional leadership of the FB. But what happens when a woman, especially a mother, is the main actor of the succession process? Can she also act as emotional leader? Which behaviours reveal that she is acting as an emotional leader? And how does this role affect the outcome of the succession process? To answer these research questions, this paper presents an eight-year longitudinal case study (Yin, 2013). The main character is a woman who founded and ran a business and recently passed the leadership to her son. Results show that even if she was the founder, owner and leader of the business, she never lost her role as emotional leader. This behaviour has proven to be very beneficial for the succession process and business survival. Keywords: family business, women-owned family businesses, women entrepreneurs, succession, mother-son succession

1. Introduction Succession is one of the main research topics in family business (FBs) studies (Sharma, 2004) and most of the research has focused on the traditional succession father-son (Hadler, 1994; Harveston et al., 1997). However, the number of female-owned businesses has slowly but progressively been increasing for several decades in many economies and the binomial “women entrepreneurs and succession” is becoming extremely relevant. For this reason, a new perspective of analysis is deemed necessary. Apart from a few exceptions, women involved in the succession process have often been described as an invisible but crucial character, often without a formal position in the FB, not directly involved in the succession process (Gillis-Donovan and Moynihan-Bradt, 1990). Women often act as a third actor, and play an important role as a mediator, informal coach and consultant (Hollander and Bukowitz, 1990). They manage conflicts, take responsibility for peace and harmony in the family and the firm, and play an important role in transmitting family and business values to the children, teaching them “to love the company” (Jimenez, 2009). To describe this role, some authors introduced the term emotional leader (EL) (Jimenez, 2009) and underlined its relevance during the succession process, because of often difficult relationships between the incumbent and successor and between family members (Fox et al., 1996; Morris et al., 1997; Davis and Harveston, 1999). In this context, women may favour succession by taking care of family’s dynamics. As stated above, in more recent years the number of companies founded and managed by women has been increasing. This means that an increasing number of women are, or will be, involved as the main character of the succession process. For this reason, it is important to wonder if a woman who is passing the leadership to her children can also act as an EL. It’s also important to understand which behaviours reveal that she is acting as an EL and how this role can affect succession process outcomes. To answer these questions, this paper presents an eight-year longitudinal case study (Yin, 2013) of a motherson succession. The paper is structured in four parts. Firstly, the main literature on women’s involvement in FB succession is presented. Following, methodology used in the empirical research and the case study are described. Finally, key results are discussed and main conclusions are drawn.


Francesca Maria Cesaroni and Annalisa Sentuti

2. Literature review In the last few decades many authors have studied FB succession (Sharma, 2004), but most of them have ignored gender issues. Female entrepreneur passing “the baton” (Dyck et al., 2002) has received little attention by both the literature on female entrepreneurship and FB succession. In studies on female firms, most attention has been devoted to business early stages and to factors influencing business growth. These studies mainly examine female firms in the entrepreneurial phase, before entering in the family phase (Cadieux et al. 2002), and so succession is not studied. Research on FB succession generally considers incumbents neutral from the gender perspective, even if they are described with clear male characteristics. Women have not been considered as business founders for a very long time, and female entrepreneurs have been overlooked or tacitly assimilated into the male model. From this point of view, a few exceptions exist. Some authors discuss specific cases of mother-children succession and focus their attention on interactions and dynamics between mother and son (Kaslow, 1998), how succession unfolds when the incumbent is a woman (Cadieux et al., 2002), and differences between father– daughter and mother–daughter successions (Vera and Dean, 2005). Other authors argue that women's characteristics (such as loyalty to the company, concern for other family members, sensitivity to the needs of others, and collegial decision-making processes) are fundamental for a positive outcome of succession (Salganicoff, 1990; Dubini and Songini, 2002). Apart from these exceptions, women involved in FBs have often been described as mediators between family members, patient wives, mothers responsible for bringing up the future heir, or women living in the shadow of their husbands, fathers, sons, or brothers. Hollander and Bukowitz (1990) underline that women are often the third, “uninvolved” leg of a triangle that involves the wife-mother, the founder-father and the son or daughtersuccessor. They act as an informal coach and consultant, resolve frictions and conflicts and take care of the emotional side of the family. As noted by Jimenez (2009), “the most important traditional role that women play in the family has been to take responsibility for peace and harmony in the family and in the firm and to avoid the appearance of conflicts between the relatives who work together in the firm – particularly, the founder and his son”. Women have also been given an important role in transmitting family and business values to the children, teaching them “to love the company” (Jimenez, 2009). In this perspective, women act as external and invisible but crucial actors, namely without a formal position in the FB but with a key role in managing relationships and maintaining the family unit (Gillis-Donovan and Moynihan-Bradt, 1990). Precisely because of this central role, some authors have defined women’s role as "chief emotional officer" or EL (Jimenez, 2009), being that they bear the emotional leadership in the FB (Ward, 2004) by favouring communication and ensuring compassion between family members. This role is even more crucial during the succession process. Difficult relationships and conflicts between the incumbent and successor or between family members (Fox et al., 1996; Morris et al., 1997; Davis and Harveston, 1999) and lack of shared values between old and new generations (Tàpies and Fernández Moya, 2012) are some of the main factors that may undermine the positive outcome of succession. In this context, women may favour the succession process by taking care of the family’s dynamics and relationships. In conclusion, studies on succession considering women as founders, owners and leaders of FBs are very few. Some research has been realised from the end of the Nineties until now, but analyses on this topic are sporadic and very limited. In the studies mentioned above women have been described as a minor character, who only participate from the outside of the succession process. Women are indeed involved as third actors, and despite the importance of the role of chief emotional officer, they are not protagonists, as this role is left to incumbent and successor, typically identified as father and son. But what happens when a woman, especially a mother, is the main actor of the succession process? Can a woman, who is passing the leadership to her son/daughter, also act as an EL? Which behaviours reveal that she is acting as an EL? And how does this role affect the outcome of the succession process? To answer these research questions, in the next part, an eight-year longitudinal case study is presented and discussed (Yin, 2013).


Francesca Maria Cesaroni and Annalisa Sentuti

3. Methodology 3.1 Case selection and data collection Despite the growing interest in the involvement of women in the FB succession process, it’s difficult to obtain a high number of mother-to-son succession cases to use for sample surveys. Precisely because of the low number of female enterprises in the succession phase, succession from mother to son is a little-known phenomenon. This is why, in this paper, we opted for a qualitative analysis based on a single case study (Eisenhardt and Graebner, 2007; Miles et al., 2014). It allows us to investigate this phenomenon by giving voice to those living an experience – in this case mother and son involved in the succession process. The main character is Maria Toni, an Italian woman who founded a small business 50 years ago and recently passed the leadership role to one of her sons. Therefore, this case is particularly suited for the analysis of this little known phenomenon, not only in Italy, since it is a very rare example of a succession process with a woman in the role of incumbent. Other reasons to explain why we selected this case are (De Massis and Kotlar, 2014): 1) the case deals with a successfully completed succession process, while other studies analysed ongoing processes (Cadieux et al., 2002); 2) authors had easy access to the firm and were able to interview the two main characters of the succession process – the mother and her successor; 3) authors were able to follow the evolution of the case over a period of eight years (2008-2016), starting from the joint management phase to the definitive leadership transition. Information has been collected from different sources, in order to support and triangulate the findings: direct interviews with incumbent and successor, business documentation and website, newspaper articles and online news. Interviews were the primary source of data, while other sources allowed us to gather contextual information about the business. We also collected field notes in order to take note of interviewees’ attitude and behaviour and remember the context and conditions of the interviews. In-depth, face-to-face, semi-structured interviews with the incumbent and successor were carried out, in order to encourage a flexible and informal dialogue (Fontana and Frey, 1994; Pettigrew, 1997; Stake, 2000; Qu and Dumay, 2011). Interviews took place in two rounds: in 2008 and in 2016. In 2008 the succession process was in a joint management phase. Thus both the mother and the son were interviewed, separately and together. This allowed us to compare their perspectives and avoided bias caused by retrospective sense-making and impression management (Eisenhardt and Graebner, 2007). In 2016 only the son was interviewed, as the mother’s had absolutely retired and the son had taken over the leadership of the company. Interviews took place at the company site and varied in length from 2 to 4 hours. In the first round, respondents were individually asked to freely introduce themselves and describe their family, their company and their succession process. The joint interview mainly focused on mother and son roles, behaviours and interactions during the succession process. In the second round, the successor was primarily asked to provide updated information about the company. All interviews were recorded and later transcribed verbatim for further analysis.

3.2 Data analysis As suggested by Miles et al. (2014), data analysis was an on-going process. Available data was iteratively analysed in order to allow a progressive elaboration of a general interpretative framework. In the first step of data analysis, we created a rich description of the case, putting together all available materials. Authors read the empirical material independently and categorised the stream of words into meaningful categories, related to the research question. Patterns of meaning associated to each category were then identified and tentatively labelled. In the second step, we cycled through multiple readings of the data. In cases of disagreement in coding between the authors, the material was jointly re-analysed and codes were discussed to reach consensus. This process permitted the identification of a number of definitive categories, obtained by grouping data from interviews and empirical material. These categories were labelled and a data structure was designed, as shown in Section 5.


Francesca Maria Cesaroni and Annalisa Sentuti

4. Case study Toma s.r.l. was founded in 1965 by Maria Toni, in central Italy. It produces professional uniforms and work clothes for several sectors (hotels, restaurants, health care, beauty treatment and industry). Maria worked very hard, with tremendous tenacity and great effort in order to realise her independence and dreams, dreams that are still continuing thanks to her son Gianni (second child). The start-up was not simple: Maria was very young, without capital or experience and above all a mother of a two-year-old son (Giorgio, firstborn son and Gianni’s brother). Her father saw her passion and aptitude for business and decided to help her by loaning her the necessary capital to start the business. In 1968, Gianni was born and Maria began to really feel the pressure of family commitments and realised that she had to make a choice. “Working in the fashion industry was taking me a long way away from home and with two children I realised that I couldn’t continue that way. I gave up the fashion industry and continued producing only work clothing”. The firm began to grow. By the early 1970s, the company employed 65 people (all of them were women and Maria called them "my girls”), producing about 1,200 work clothes a day and for very important customers (Ferrari, Tod’s, Fiat, Barilla and Poltrona Frau). Maria established with her employees a working relationship based on communication and shared responsibility. To favour a good working environment and a confidential relationship between the entrepreneur and the collaborators, one time a month, Maria had lunch with all of her "girls" in the meeting room: each one used to bring something to eat and they spent some time together. The mid-1970's recession forced Maria to drastically downsize the business, cut the staff and outsource the production process. Meanwhile the family was changing: Maria got divorced and her children were grown up. She had involved them in the business from an early age. When they were 6 years old, she started by familiarising them with the business: “Every month I spent half an hour telling them about the business. I don’t know how much they actually understood but I kept doing it. I talked to them about the business and I kept them up-to-date about what was happening. We even did the accounts together so that they would get used to understanding our exact income and expenses”. As soon as high school had finished, Giorgio went straight to work in the business but immediately realised that this was not what he wanted to do and left. Gianni also finished school with his diploma and after a year and a half in England, learning the language, he began working in the business. He decided to join the business because he was captivated by the firm and was moved by the passion he obtained as a baby, "The work fascinated me... I remember, when I was young I played with the fabrics... I remember the smell of the fabric, I remember those big giant rolls and saw how the fabric became professional clothing, a jacket, trousers, something for work. I was fascinated by this transformation, as well as by the smell of the fabric that I still love.” In the first two years, he worked in each area of the company: warehouse, sales and marketing, information systems, finance. Maria recounted, “My grandmother always said to me that to be a leader you have to know how to do everything! My son has unloaded the fabrics, printed labels and uniforms, cut and sewn the garments. These were all areas of the business that he had to know and understand. Otherwise, how could he assess the employees’ work and understand if they were making mistakes?” At the end of his on-the-job training, Gianni decided to set foot into the business and began a phase of joint management. Maria started to transfer her knowledge and experience to Gianni and encouraged him to take courses in management. Gianni began to assume his first responsibilities, looking to balance his mother’s ideas with his own. As the years passed, Maria saw in Gianni the right person to succeed her (“He is a thoughtful man, he isn’t impulsive and that makes him good for the business.”) and she understood that the time had come to make her


Francesca Maria Cesaroni and Annalisa Sentuti son’s position official. She equally divided the company ownership between her children but Giorgio preferred not be involved in the business and refused his share. Maria explained, “I would have preferred that both of my sons worked in the company but I know that they have very different characters.” After the transfer of the ownership, thanks to Gianni, the company started exporting throughout Europe, Russia and Dubai. Maria continued to be involved in the business, supporting her son in all of the main management activities and remaining a point of reference for the personnel. The last few years of co-existence between Gianni and his mother were directed towards the development of the business and the mutual role adjustment between incumbent and successor. In 2010, the company had 15 employees, 25 external workers and a turnover of 5 million euros. At the time of the last interview, Maria was 75 years old and had retired from the business in 2011 due to health reasons. Gianni said, “I would have continued to collaborate with my mother, I didn’t changed anything and I never wanted to change it sincerely”. Nevertheless, Gianni continued to inform his mother of his main decision related to the business and he's still carrying on several practices and traditions that he learned from his mother, such as the periodical lunch with “the girls”.

5. Findings and discussion In line with the research questions, the available material was analysed in order to understand how Maria Toni behaved during the succession process and to identify behaviours consistent with the role of EL. The following themes resulted from this analysis: !

avoid and mitigate conflicts;


transmit values;


teach her son to love the company;


keep family and company harmony.

In the following section, these themes are described and discussed.

5.1 Avoid and mitigate conflicts The relationship between Maria and Gianni during the joint management phase was characterised by a great harmony. This doesn't mean that conflicts were totally absent, but Maria was able to defuse and resolve conflicts, which mainly arose from different views of the business or temperamental differences. Maria stated: “If I disagree with my son I tell him my opinion and sometimes we get angry as well”. And Gianni confirmed, “It was not easy to work with her! She is a dynamic woman with a very strong character, so it was not easy at all. We have had several confrontations, convincing her was not easy and disagreements were frequent”. Nevertheless, Maria was able to dissolve each conflict limiting exasperation and negative interactions: “It’s useless to argue when it comes to the business. One has an opinion, and the other has another opinion, but it’s useless to argue. If there is something that seems wrong to me, I let him know and at times we get annoyed with each other. But before going home I hug him … a little kiss and a goodbye”. Above all, she taught her son that a conflict is not a personal issue but an opportunity to learn and find solutions. In fact, Gianni added: “Any confrontation or discussion always brought something positive. My mother taught this to me, it was great! We clashed many times, but that's what made me grow". Furthermore, conflicts were never characterised by competition. Gianni said: “We had contrasts and threads, but rivalry, envy, jealousy ... no, never!” According to Maria, “a lot of patience was necessary. A woman is also a mother and understands that she can’t impose herself on her child or let her child keep making mistakes beyond a certain point…well, we are a bit over protective because there is always the umbilical cord! Maternal instinct always remains. I am always trying to help him learn and help him understand things. Men do not always have this patience. At times, they want to be better than their son and compete against him. I have never competed against my son”. In Maria’s opinion, women’s sensitivity makes mother-son succession less conflictual and more successful than the traditional father-son succession.


Francesca Maria Cesaroni and Annalisa Sentuti Thanks to this attitude, in this case, it was not necessary to involve another actor to manage conflicts. Even if Maria was responsible in running the business and managing the succession process, she never forgot her role as a mother and she always avoid conflicts with her son.

5.2 Transmit values Both Maria and Gianni mentioned values referred to the family and the business several times during the interviews. And it’s clear that Maria was the key actor in the transmission of values. Maria suggested that her son find a balance between family and business: "If you have enough money to go out to dinner, travel and buy something you like, what else is necessary? Enjoy your life, your family and your child!" She also decided to focus the business only on professional clothing in order to have more time with her family and to take care of her children. She taught her son the value of money since he was very young, discussing the family budget together and then dealing with the business's financial needs. Gianni really appreciated his mother's approach and affirmed that he will do the same with his daughter. Secondly, Maria taught Gianni the meaning of sacrifice and hard work. It’s representative his involvement in each business area, including working in the warehouse as a packer. Thirdly, Maria educated her son to take care of employees and collaborators. It's emblematic that both the mother and the son use the same term to refer to their employees (the "girls"), that Gianni maintained the same tradition of having some time at lunch all together at the headquarters and that the employee turnover is equal to zero. Gianni stated, “We have people who have worked with us for a lifetime. All of them have grown up here. People who have joined the business have always remained”. Finally, Maria passed down “the reliability of one’s word” to her son. This typical Italian expression means be a person of his word, maintaining promises and being serious, timely and accurate even if there is only an informal accord without other warranties. Maria was proud that Toma’s main stakeholders (e.g., customers, suppliers, banks) appreciated the earnestness of the company: "For me this is worth more than a few million". And Gianni absorbed this value: "She passed on me the seriousness of one's word. When you give your word, you shouldn’t go back on it”. During the interview, no one else was cited as a subject devoted to transferring values to the incumbent. Maria was the only one accountable for transmitting values to her son.

5.3 Teach her son to love the company Love for the firm emerged very often from the statements of the mother and son. Maria declared, “I am completely in love with my company and for me Toma is like another son. It really hasn’t been an easy process to detach myself from it”. Nevertheless, she was able to pass the baton to her son and taught him to love the company. This process was very natural, without impositions, and respecting Gianni’s feelings and path of growth. Gianni said: "with lightness". He stated, “She was a wonderful teacher because she made me work, not as a job, but as a way to know, to see, to understand. She made me, with fun, love what I saw. One beautiful thing that she always said to me was, "working yes, but with fun". And he added, “I often jokingly say to my mother: You made me fall in love with this work and when you fall in love with a job you do not leave! Absolutely. So I tell her that she has totally screwed me, really! She unleashed my passion and made me fall in love with what I do. I do not mind what I do. It was an extremely soft succession”. Also with regard to this aspect, Maria still maintains her central role as educator, transmitting love and passion toward the business.

5.4 Keep family and company harmony Harmony in the family and the firm may be pursued in different ways. In this case, the attention of the entrepreneur was mainly devoted to respecting both the sons' needs, propensity and wills. And this attention resulted in an extensive harmony between mother and sons, with positive consequences for the business. Maria always put her children first, both when they were babies and when the moment to make choices arrived. In the first phase, she preferred limiting the potentiality of her business instead of delegating taking care of her children: “I could not do fashion, I should have left the family, but I had two children and I was like a mother hen. […] I saw that I couldn’t take care of my children, I didn't like it. For me, family is very important, it's too precious.” It was fundamental for Maria to maintain her role as a mother and her choices were oriented toward this goal.


Francesca Maria Cesaroni and Annalisa Sentuti The children grew up without bad feelings towards their mother and – especially Gianni – developed a special relationship with her. In the second phase, Maria left her children to make their own choices. She never forced Gianni’s brother to enter the business and encouraged Gianni to feel free to choose what he wanted to do. Maria stated, “I tried to make it clear to him that he was not obligated to work in the business”. In this manner, both the sons followed their own paths and developed a good relationship with their mother and between themselves. At the same time, this good relationship between mother and son-incumbent was transposed into a business relationship with a positive effect on the succession process. And the good relationship between the two brothers avoided conflicts between family members during ownership transfer. Most likely choosing to commit more time to her family when the children were young permitted limited business growth but, in the long term, Maria was rewarded when Gianni chose to enter the business and carry on his mother's dream.

6. Conclusions This paper offers an important contribution to the knowledge of FB succession analysing the transition from mother to son. Based on a case study, results show that even if Maria acted as the founder and leader of the business, she never lost her role as an EL. In fact, even though Maria was completely involved in the succession process as a main actor, she maintained the traditional woman’s role as the EL. Maria was the main figure who took care of the harmony within the family and the business, assured the transmission of values of both the family and the firm to her son, taught her child to love the company and managed potential conflicts by transforming them into learning opportunities. Neither the father nor other family or non-family members was cited as possible EL. For Maria, the role of chief EL was added to the entrepreneurial role. We think that this behaviour was an important advantage in managing the succession process because it favoured a positive interaction between incumbent and successor and also ensured a much smoother transition. Furthermore, Maria had a virtuous behaviour, positive for both the company and its survival. However, maintaining the role of EL requires relationships between the incumbent and successor to be strong and steady over time. In this perspective, Maria always tried to develop and preserve a positive interaction with them, since they were kids. This research presents a number of limitations. The main one is its generalisation, as this research is based on only one case. It may be considered a pilot case and could be followed by empirical studies. This is an overlooked research area and further investigations are needed to better identify factors affecting the overlap of an EL and a business leader in the same person and the consequences for succession outcome. For instance, Jimenez (2009) stated, “the role of the EL is much more difficult to replace than that of the CEO”. What happens if two roles coincide in the same person? Furthermore, a comparison from different countries might highlight how cultural factors may affect transition from mother to son. Finally, differences between mother-son and motherdaughter succession can be analysed.

References Cadieux, L., Lorrain, J. and Hugron, P. (2002), “Succession in Women-Owned Family Businesses: A Case study”, Family Business Review, Vol. 15, No. 1, pp 17-30. Davis P.S. and Harveston P.D. (1998), “The influence of family on the family business succession process: a multigenerational perspective”, Entrepreneurship. Theory and Practice, Vol. 22, No. 3, pp 31-53. De Massis A. and Kotlar J. (2014), The Case Study Method in Family Business Research: Guidelines for Qualitative Scholarship, Journal of Family Business Strategy, 5, pp. 15-29. Dubini P. and Songini L. (2002), I rapporti famiglia-impresa: il ruolo delle donne nelle aziende familiari, SDA Bocconi, Milano. Dyck B., Mauws M., Starke F.A. and Mischke G.A. (2002), “Passing the baton: The importance of sequence, timing, technique and communication in executive succession”, Journal of Business Venturing, Vol. 17, No. 2, pp 143-162. Eisenhardt, K. M. and Graebner, M. E. (2007), “Theory Building from Cases: Opportunities and Challenges”, Academy of Management Journal, Vol. 50, No. 1, pp 25-32. Fontana, A. and Frey, J.H. (1994), “Interviewing: The Art of Science”, in Denzin, N.K. and Lincoln, Y.S. Handbook of Qualitative Research, Sage Publications: Thousands Oaks. Fox M., Nilakant V. and Hamilton R.T. (1996), “Managing Success in Family-Owned Business”, International Small Business Journal, Vol. 15, No. 1, pp 15-26. Gillis-Donovan, J. and Moynihan-Bradt, C. (1990), “The power of invisible women in the family business”, Family Business Review, Vol. 3, No. 2, pp 153-167.


Francesca Maria Cesaroni and Annalisa Sentuti Handler, W. C. (1994), “Succession in family business: A review of the research”, Family Business Review, Vol. 7, No. 2, pp 133-157. Harveston P.D., Davis P.S. and Lyden, J.A. (1997), “Succession Planning in Family Business: the Impact of Owner Gender”, Family Business Review, Vol. 10, No. 4, pp 373-396. Hollander, B.S., and Bukowitz, W. R. (1990), “Women, family culture, and family business”, Family Business Review, Vol. 3, No. 2, pp 139-151. Jimenez R. M. (2009), “Research on Women in Family Firms: Current Status and Future Directions”, Family Business Review, Vol. 22; No. 1, pp 53-64. Kaslow, F.W. (1998), “Handling Transitions from Mother to Son in the Family Business: the Knotty Issues”, Family Business Review, Vol. 11, No. 3, pp 229-238. Miles, M. B., Huberman, A. M., Saldana, J. (2014), Qualitative data analysis. A Methods Sourcebook. Sage Publications: California. Morris M.H., Williams R.O., Allen J.A. and Avila R.A. (1997), “Correlates of success in family business transition”, Journal of Business Venturing, Vol. 12, No. 5, pp 385-401. Pettigrew, M. (1997), “What is a Processual Analysis?”, Scandinavian Journal of Management, Vol. 13, No. 4, pp 337-348. Qu S.D., Dumay J. (2011), “The qualitative research interview”, Qualitative Research in Accounting & Management, Vol. 8, No. 3, pp 238-264. Salganicoff, M. (1990), “Women in family businesses: Challenges and opportunities”, Family Business Review, Vol. 3, No. 2, pp 125-137. Sharma, P. (2004), “An overview of the field of family business studies: Current status and directions for the future”, Family Business Review, Vol. 17, No. 1, pp 1-36. Stake, R.E. (2000), Case Studies, in Denzin, N.K. & Lincoln, Y.S. (eds.) Handbook of Qualitative Research. (2nd ed.), Thousands Oaks: Sage. Tàpies, J. and Fernández Moya, M. (2012), “Values and Longevity in Family Business: Evidence from a Cross-Cultural Analysis”, Journal of Family Business Management, Vol. 2, No. 2, pp 130-146. Vera C.F. and Dean M.A. (2005), “An Examination of the Challenges Daughters Face in Family Business Succession”, Family Business Review, Vol. 18, No. 4, pp 321-345. Ward J.L. (2004), Perpetuating the Family Business. 50 Lessons Learned from Long-Lasting, Successful Families in Business, Palgrave Macmillan, New York. Yin, R. K. (2013), Case study research: Design and methods. Fifth edition. Sage.


FDI, Environmental Regulation, Innovation Performance of China’s Enterprises: Moderating Effect of Urbanization Yan Chen, Ye Han, Hongbing Li and Yi Li School of Economics and Management, Beijing University of Posts and Telecommunications, China [email protected] [email protected] [email protected] [email protected]

Abstract: Innovation in the process of new-type urbanization is a major strategic choice for the inflows of foreign capital and economic development. Based on Chinese Industrial Statistics Database of 2004-2007 and data at province-level, this research investigates the effect of urbanization, FDI and environmental regulation on enterprises’ innovation performance. It is found that the FDI from U.S. and environmental regulation will hinder the creativity of Chinese industry by the decrease of R&D. However, the FDI from U.S. enhances the domestic enterprises’ ability to attain compensation from innovation following the environmental regulation. Meanwhile, we confirm that environmental regulation can contribute to the innovation spillover of FDI from the United States. In addition, the effects of FDI from EU and Japan are further examined. Unlike the FDI from U.S., the FDI from EU and Japan both have the positive innovation spillover effect but through the same way as the former. Further analysis based on "innovation-driven effect" of urbanization is developed, and we find that urbanization has innovation-driven effect on environmental regulation and FDI’s innovation spillover. The moderating effects of FDI from the United States and the European Union outperform that from Japan at a restrained degree. This research is developed from the dimension of urbanization, FDI, environmental regulation and innovation performance, investigating the role of FDI in environmental regulation, environmental regulation in FDI, their relations with innovation performance, and also the effects of urbanization, aiming at demonstrating innovation, innovation-driven and innovation-compensation effects of FDI and environmental regulation under the background of new urbanization. According to the empirical results, China is suggested to extend the channels of foreign investment, encourage environmental-friendly FDI, motivate enterprises to upgrade the core technology and facilities of energy conservation and environment protection, improve domestic enterprises’ ability to handle with environment regulation, inspire technological entrepreneurship, thus to achieve the growth of national economy. Keywords: FDI, environmental regulations, innovation performance, innovation-driven

1. Introduction In China, with the opening and internal reforms the expansion of cross-border investment and urbanization have been accelerated, domestic enterprises’ innovation level has been enhancing. According to Global Investment Trends Report of 2014, China outperformed the U.S. and has become the world's largest destination country for foreign investment since 2003. Foreign direct investment is expected to have different effects on improving the innovation of China's enterprises, which scholars have studies in different views, including "Restraining Theory", "Promoting Theory" and "Dual-effect Theory". On the other hand, with the worsening of the environmental quality, the fear is that China will become "pollution haven" of the multinational company. For example, China Public Environmental Research Center (IPE) 2006 – 2009 shows among 13,000 records of corporate irregularities, the majority come from state-owned enterprises, however, quite a number of the rest come from foreign companies. At the same time, government has enhanced the environmental protection while the development of Chinese economy is further upgraded, such as "2014 - 2015 annual energy saving and emission reduction of low-carbon development action plan", "Corporate Environmental Credit Evaluation (Trial)" and other regulations. Is there a possibility that the environmental regulation can enhance corporate environmental performance at the same time improve their economic performance through the promotion of innovation? In the July 6, 2014, IBM reached an agreement with the Beijing Municipal Government, using the company's advanced weather forecasting and cloud computing technology to help solve the haze problem. So is FDI a negative environmental externality or a positive one? In addition, studies have shown that multinationals prefer areas with more stringent environmental policy (Jorge Rivera, 2013; Di, 2007), and FDI enterprises generally adopt environment friendly production technologies and pollution solution technologies more than local businesses (Harrison, 2003), and these technologies have the potential to urge domestic enterprises to adopt cleaner production through


Yan Chen et al. FDI overflow channels. Thus FDI may enhance the "innovation compensation effect" of domestic enterprises under environmental regulation. Also, concerning the impact of FDI spillovers and FDI location, environmental regulation could be an institution factor influencing FDI’s innovation spillover effects. Furthermore, with acceleration of urbanization in recent years, it is difficult to distinguish the "people's urbanization" between "scale urbanization", which leads to irrational exploitation and complementary problems such as the damage to ecological environment and pollution. Our understanding about the effect of foreign investments’ entry has become complicated, due to the cross effect of the listed problems and foreign investment, R&D and innovation. The current research hasn’t given a clear answer. Therefore, under China’s “New Normal” innovation-driven economy, how to better understand the roles of FDI and environmental regulation in enterprises’ innovation and make practical policies targeted for new urbanization can be an important strategic issue.

2. Literature review Combing the related literature of FDI and "Pollution Haven" hypothesis (Copeland Taylor, 1997) of, it is found that most scholars argue that FDI would induce the technological progress effects having a positive environmental effect (Grossman, 1995; Panayotou, 2000; Sheng and Lu, 2012; Huang, 2010; Yu and Qi, 2007). Whether FDI will ultimately benefit host countries’ environments depends on the comparison of the positive environmental effects caused by FDI’s technological progress effects and the negative environmental effects caused by FDI stock generating the expansion effects of economic scale and changes in the economic structure bringing structural effects. Increasing the pollution tax rate in host countries would force companies to apply more resources to pollution reduction. The relation between FDI and environmental pollution in host countries presents a U-shaped curve. Regardless of what the overall effects are, there’s no doubt that the technological progress effects induced by FDI bring positive environmental effects. According to the relevant literature of FDI’s technological diffusion, the technological progress effects promote domestic companies’ innovation through the demonstration effect, competition effect, linkage effect and human capital effect. However, the existence of spillover effects depends largely on domestic companies’ absorptive capacity (Zhang, 2012), on the basis of the literature of the two faces of R&D (Cohen and Levinthal, 1989), R&D investments not only generate new knowledge and information, but also enhance the ability of enterprises to absorb the existing knowledge and information and promote the spillovers of knowledge and technology, including the “two faces”: the improvement of innovation capability and absorptive capacity (Zhang, 2005), also for the explanation of firms’ productivity growth process, the impact of R&D absorption capacity is larger than innovative capacity’s (Yuko Kinoshita, 2000) or they’re equal (Redding, Reenen, 2000). Since Potter and Van der Linde (1995) completed Porter Hypothesis and explained the mechanism of environmental protection through innovation enhancing competitive strength, many scholars have been studying the relation between the intensity of environmental regulation and enterprise’ innovation or technological progress based on different hypothesis. The impact of environmental regulations on enterprises’ technological innovation depends on the comparison between "compliance costs" caused by R&D input reduction maintaining profit rates and "innovative compensation" caused by technological innovation internalizing environmental costs. Jiang and Lu (2011) stated that environmental regulation hinders innovation and encourages it, the ultimate impact is determined by the comparison of the two effects. Environmental regulation promoting innovation is basically achieved by enterprises’ R&D input increase internalizing environmental costs. For instance, Mitsutsugu and Hamamoto (2005) found that strict environmental regulation improves the Japan’s domestic enterprises’ R&D. Chih-Hai Yang (2012) found that strict environmental regulation promotes enterprises’ development in Taiwan and induces the improvement of productivity. Song Wenfei (2014) studied the threshold effect of environmental regulation on R&D dual-link efficiency. With the threshold conditions of FDI, trade liberalization and marketization level, the impact of environmental regulation on R&D conversion efficiency has the U-shaped feature, while the impact on R&D transformation efficiency has the inverted U-shaped feature. Jiang Wei (2015) found that environmental regulation not only encourages China’s manufacturing enterprises to increase R&D input, but also helps enhance their product innovation and production processes. Those studies show that environmental regulation would force enterprises to increase R&D input to get “innovation compensation”, even though there are “compliance costs”.


Yan Chen et al. Therefore, based on technological progress effect of the positive environmental performance induced by FDI, the interaction between FDI and R&D input adjusting “innovative compensation” of environmental regulation on enterprises is analysed. In addition, environmental regulation adds the cost of enterprises, forces domestic enterprises to learn from foreign enterprises of upgrading technological innovation and increase R&D input. Corporate R&D input can improve both enterprises’ innovation capability and absorptive capacity. From this point, environmental regulation is likely to enhance the spillover effect of FDI as an institutional factor. The early studies of FDI’s technological progress effects affecting enterprises’ innovative compensation indicate, the interaction of environmental regulation and R&D input adjusting the spillover effect of FDI needs to be discussed, and the existence of such a spillover mechanism is to be identified. Studies of the relation between FDI and environment are usually focused on whether FDI is a way of developed countries in transferring polluting industries, there is little scholarly attention on the role of FDI in environmental regulation after entering host countries. The contributions this article will possibly provide include: (1) It is a detailed study of the role of FDI after entering host countries in environmental regulation influencing enterprise’ innovation, in a perspective of FDI’s environmental performance distinguished from "pollution heaven" hypothesis, expanding the studies of FDI’s externality. (2) It explains the mechanism of environmental regulation affecting FDI technology spillovers, and deeply discusses the role of environmental regulation in FDI innovation spillovers. (3) By referring to regulatory mechanism of new urbanization, we discuss about the innovation-driven effects of urbanization’s regulatory FDI and environmental regulation, and examine the above-mentioned mechanism in terms of different sources of FDI (US, Japan, EU), on the basis of previous studies about FDI and environmental regulation’s innovative compensation effect.

3. Modelling and data collection The panel data empirical research is applied, the data of Chinese industrial enterprises in 29 provinces from 2005 to 2007 are from 2004-2008 "China Industry Economy Statistical Yearbook", "China Statistical Yearbook on Environment" and National Bureau of Statistics of the People's Republic of China. In this research, the three-step method (Baron and Kenny, 1986) is applied, the model is as follows.

lrd " + 0 * +1lfdi * + 2lpollutearn * +i # control * , ˄1˅

lnpv " lrd * + 0 * +1lfdi * + 2lpollutearn * +i # control * , ˄2˅ Based on the model as following, it tests the spillover effect of R&D investment on U.S. FDI, regulating the impact of environment regulation’s intensity on enterprises' innovation performance, interaction between R&D investment and FDI, and t interaction between R&D investment and environment regulation’s intensity on U.S. FDI spillovers.

lnpv " + 0 * +1 x * +i # control * + j moderate * x * , ˄3˅ The framework of this research is as following:

Figure 1: Analysis framework


Yan Chen et al. The innovation ability of domestic enterprise is measured by logarithms of output values of current new products (Wang, Cheng, 2009). Three independent variables, including lfdi, lefdi and ljfdi, are the logarithms of FDI in every province from U.S., EU and Japan. Lpollutearn is the logarithm of income from pollution discharge in each province (Liao Xianchun, 2015), to measure the intensity of environmental regulation. Ird, which is the logarithm of R&D input of existing enterprises, represents the intermediary variable and control variable. The descriptive statistics of core variables are as following: Table1: Descriptive statistics Variable name afdi2004 afdi2005 afdi2006 efdi2004 efdi2005 efdi2006 jfdi2004 jfdi2005 jfdi2006 pollute~2004 pollute~2005 pollute~2006 npv rd

Observed numbers 28 28 28 27 29 30 28 28 28 31 31 31 22209 22209

Mean value 1627199 1968387 2549494 1220026 2313843 2961599 2268023 3470445 4115036 30382.13 39728.61 46982.05 158354.1 5497.192

Standard deviation 2557774 2992072 3529875 2001666 4618685 6482898 3969691 5586095 6657013 24707.13 32998.19 39594.47 801690 78834.68

Least value 820 891 3200 5080 9000 9000 1000 3639 9153 384.2 577.3 797.8 1 -15717

Crest value 1.05e+07 1.26e+07 1.48e+07 9711225 2.04e+07 2.96e+07 1.82e+07 2.05e+07 2.55e+07 87221.6 119201.2 155917.5 2.69e+07 7142497

Control variables at corporate level: The scale of enterprises is measured by the number of employees (limply) (Ahuja, 2000). The export intensity of enterprises is measured by the export value (lexedly) (Jiang, 2006). Tangible resources of enterprises are measured by the total fixed assets (lcptast). Prfratio is the corporate profitability. The logarithms of the variables are applied in the modelling except for those that have been claimed in the ratio format. Control variables at regional level: According to the theory of FDI regional choice, the factors include labour cost, market size, regional degree of openness, human capital, infrastructure level and urbanization rate. The factors influencing the environmental regulation of economic performance include regional economic development level (Shen and Liu, 2012), regional exoteric extent (Li and Mu, 2013) and human capital (Jiang and Lu, 2011). Although the variables of regional GDP can be accessed, this variable is omitted concerning the co-linearity in modelling. The regional market size is measured by lpolula, regional resident population (Liao, 2015). The degree of openness is measured by lextrade, the regional import and export delivery value to measure (Zhou, 2014). Human capital is measured by lustaff, the total number of college staffs (Yu,2014). The infrastructure level is measured by the regional highway mileage (Wang, 2010). The level of urbanization is measured by urbanatio, the ratio of urban population and regional population. The logarithms of the variables are applied in the modelling except for those that have been claimed in the ratio format.

4. Based on the perspective of urbanization innovation-driven effect further inspection This empirical research develops a systematic test to the mediation mechanism of research input in FDI and environmental regulation which affects enterprises’ innovation performance, and identifies the innovation compensation effect and spillover effect. An important issue needs to be concerned: both FDI and environmental regulation on enterprise innovation are usually affected by the urbanization level and degree of openness. The acceleration of urbanization, the unbalanced structure of foreign investment and the environmental problems in China are highly concerned. As a matter of fact, experience from the U.S. urbanization shows that 20% of the land area in the 1990s urbanization area are taken by 3/4 of the population, with 92% of patents granted (Carlino et al., 2001; Cheng, 2010). On the basis of measurement model (3), the variables of regulation of urbanization are imported, relevant enterprises and regional variables are controlled, and the moderation of urbanization in effects of FDI and environmental regulation on innovation performance measurement equation is tested as following:


Yan Chen et al.

lnpv " - 0 * -1urbanatio * - 2urbanatio * rd * +i # control * , ˄4˅ lnpv " - 0 * -1urbanatio * - 2urbanatio * rd * pollutearn * - 3 pollutearn * +i # control * , ˄5˅ lnpv " - 0 * -1lfdi * - 2urbanatio * rd * fdi * - 3urbanatio * +i # control * , ˄6˅ In the equations above, variables are defined as the previous ones. The equation (4) and (5) examines the effect of interaction between urbanization and R&D investment on the environmental regulation. Equation (6) analyses the effect of interaction between urbanization and R&D investment on innovation performance by different country origins of foreign investment (the United States, Japan and the EU). The regression results in Table 2 show that urbanization promotes environmental regulation’s innovation-driven effect. The coefficient of urbanization and R&D input is positive, which indicates that the improvement of urbanization level increases corporate R&D input, and promotes innovation performance. On one hand, as the improvement of urbanization speeds up the accumulation of human capital, knowledge spillover makes knowledge and technology in more urbanized areas more likely to be spread and absorbed. Thus, the higher the level of urbanization is, the higher the level of education is and the stronger the innovation capacity is (Glaeser, 1999). On the other hand, a higher level of urbanization usually implies a higher level of economic development and a stronger comprehensive strength, which improves the motivation and capabilities of enterprises to promote technical innovation by enhancing R&D investment. And it is also helpful to shorten the distance of culture and values, to improve the communication and cooperation, and thus motivates the innovation activities. Further, we find the regression coefficient between urbanization and the R&D investment on environmental regulation is positive, and the interaction of urbanization and research input will improve the innovation performance. The "Environment Kuznets Curve" (EKC curve) hypothesis, in the first place, is expected to exist in an inverted U-shaped relationship (Tamazian, 2010) between the city's economic development and environmental pollution, although it is questioned by a number of scholars. Urbanization is usually accompanied by a large amount of energy consumption, unreasonable land development and complementary environmental problems such as ecological destruction. At the same time, for developing countries, urbanization development, improvement of FDI entry and trade freedom can affect urban environment and bring the risk of "pollution haven" (Managi, 2004). Therefore, urbanization will significantly influence the urban environment strengthening environmental regulation. Secondly, as it is stated ahead, environmental regulation will have a positive impact on enterprise innovation performance, the classic Porter Hypothesis supports that well-developed environmental protection policy will enhance innovation and net income, improving the international competitive advantage of enterprises while not increasing the cost. The evidence from U.S., Japan and Germany in 1980s also confirms that pollution control spending presents positive correlation with the environment patents, patent number increasing with the growth of pollution control spending (Lanjouw and Mody, 1996). Based on the mutual influence between variables, the interaction between urbanization and R&D investment moderates the mechanism of environmental regulation in affecting innovation performance, namely mutual reinforcement of urbanization and R&D promotes the innovation-driven effect of the environmental regulation, enhancing enterprise's innovation performance. Because a higher regional urbanization level means more solid strength of increasing investment in R&D, which also provides the technology and fund guarantee for environmental regulation, attracting the environmental protection enterprises and encouraging the existing enterprises’ R&D in clean technology. The improvement of enterprise's R&D and innovation performance will adversely promote the urbanization and environment, thus forms a new type of urbanization of virtuous interaction and coordinated development. Table2: Urbanization promotes environmental regulation innovation-driven effect test

urbanatio urbanatio _rd


















-0.0494* (-1.88)


Yan Chen et al. (1)






urbanatio _rd_pollutearn

0.0060*** (10.78)


0.3430*** (24.03)

























































Constant term

Note: Regression method for the random effects model; The standard deviation of regression coefficient in parentheses: ***, **and*respectively 1%, 5% and 10% significance level. Table3: Urbanization promotes innovation-driven effect of FDI spillover (1)








lnpv lfdi



















urbanatio _rd

0.0632*** 0.0042***



(10.60) urbanatio _rd_fdi lcptast lexedly lwage lpopula





































Yan Chen et al. (1)























































Constant term





















Note: Regression method for the random effects model; The standard deviation of regression coefficient in parentheses; ***, **and*respectively 1%, 5% and 10% significance level. Table 3 shows the test of innovation driven effect of urbanization in promoting FDI spillover. We find that urbanization and R&D investment has a positive relationship with the innovation spillover effect of FDI inflows from U.S., EU and Japan, which is consistent to the moderation effect of environmental regulation discussed ahead. Therefore, the improvement of urbanization not only benefits the development of human capital, specialization diversity and communication network, but also structures a platform of innovation incubation and technology diffusion. From the perspective of hierarchical space differences, innovation is usually started in the big cities with high-level urbanization, then spread to secondary cities around, finally spread to small and medium-sized cities and rural areas, until the diffusion process is complete. In areas with high-level urbanization, as a new technology is adopted, or using a new method of production improves efficiency, it will have spillover effects within the industry related enterprises, promoting the overall productivity and innovative ability (Cheng, 2010). FDI inflows also facilitate more advanced management concept and production technology, and have spillover effects on domestic enterprises. Of course, highly specialized enterprises, high-quality human resources, broad consumption markets, free-sharing specific labour markets, and the advantages of the internal contact information which is formed by the aggregation of urbanization, are also important factors to attract FDI inflows. Therefore, the interaction between urbanization and R&D investment builds the innovation platform and foundation of innovation environment, and also promotes FDI inflows, releasing its spillover effects and enhancing innovation performance by offering a positive circumstance. Referring to the differences at country level, the interaction between urbanization and R&D investment on innovation-driven effect is not identical. The moderating effects of FDI from U.S. and EU, barely outperform that from Japan. Similar to the analysis above, the FDI from U.S. and EU is more of capital and technology intensive investment, the principal of investment during the urbanization of China is "exchanging market with technology", which gradually cultivates the huge urban market for foreign advanced technology. To some extent, technology spillovers motivate the innovation activities of domestic enterprises, and promote enterprises’ innovation performance. For a long period, the investment from Japan to China is featured by efficiency-seeking orientation. According to the theory of FDI, in the different production stages international enterprises would launch productions around the world due to differences of factor endowments. The investment from Japan primarily targets at the lower labour cost, therefore offers limited contributions to innovation-driven effect for Chinese enterprises.

5. Conclusion The management of FDI, environmental regulation and the innovation-driven effect are important strategic issues during the new type of urbanization, the study of which would benefit China’s innovation-driven economic


Yan Chen et al. growth. This research integrates FDI and environmental regulation in perspective of innovation in domestic enterprises with the background of urbanization, investigating the influences of FDI, environmental regulation and the effective channels of interactions between these two factors on innovation performance of domestic enterprises, and further explores the moderating effect of urbanization. There are several findings in the research: Firstly, the positive effect of FDI inflows on technology upgrading is demonstrated, by improving domestic enterprises’ ability of gaining “innovation compensation” when facing environmental regulation. But referring to the economic performance, the U.S. FDI in China is more marketseeking, and makes the reverse flow of production elements into U.S., its contribution to China’s enterprises’ innovation is limited. Secondly, this research examined the economic performance of environmental regulation, suggesting that environmental regulation improves the innovation spillover of domestic enterprises. At the current stage, the cost of environmental regulation is greater than innovation compensation” in China, which impedes enterprises’ innovation. The result is consistent at country level, but the FDI from EU and Japan, which are technology-intensive and capital-intensive, provides positive innovation spillovers to China’s enterprises. Finally, by studying the effects of environmental regulation and innovation-driven spillover on urbanization, we find that the interaction between urbanization and R&D investment positively moderates the effect of environmental regulation in improving innovation performance, positively related to innovation spillover of FDI from U.S., EU and Japan. Also the moderating effects of FDI from U.S. and EU barely outperform Japan. The analysis above has important policy implications in how to manage the relations between environmental protection and urbanization. Due to the fact that FDI has been the basic strength in economic and technology progress in China, FDI is an important issue in the way to achieve green production and convert to green economy. Furthermore, the technology spillover of FDI relies heavily on the absorbing ability of enterprises, which is evaluated by R&D investment. For example, Huawei's high R&D investment enables it to integrate ARM's instruction system and COTEX TSMC 16nm chip production process so as to develop Qilin mobile phone processor. To make good use of the technology spillover of FDI, entrepreneurship needs to be promoted to reach its full potential. The protection of environmental intellectual property rights also should be concerned, as a way to enhance technological cooperation. Enterprises can be encouraged to exchange technology and patent, and domestic enterprises can adopt a clean and environment-friendly production by a demonstration effect. On the other hand, the enhancement of environmental regulation will increase the cost of domestic enterprises, and motivate domestic enterprises to learn from the foreign companies that are involved in the same case but take a leading position in technical transformation and promotion, so that the innovation spillover of FDI can be developed. That also gives opportunities to technological entrepreneurship with new vision. While the environmental regulation policies are formulated, market-based tools (eg: emission trading, environmental subsidy) can be applied, corresponding to regional and industrial characteristics, in that way the market will play a conclusive role in promoting the spillover of green-mode production and domestic enterprises’ independent green technology upgrading. Also control-command regulation tools should be avoided to the greatest extent, such as discharge quota, environmental standards. Finally, the negative influence that the pollution industries bring to cities’ development and enterprises’ innovation should be considered. As a result, China is suggested to carry out rigorous environmental regulation, lead FDI to an effective direction, introduce clean industries, increase R&D input and innovation incentives in existing industries, encourage innovation and entrepreneurship, with well-developed management of the FDI and environmental regulation’s innovation-driven effects and urbanization.

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Implementation of Crowdsourcing Into Firm’s Innovation Strategies: The Case of B2B Crowdsourcing Sylvia Dimitrova Department of Management and Engineering, University of Padua, Italy [email protected]

Abstract: Crowdsourcing is a Web-based model of innovation and collaboration that provides businesses with the opportunity to receive more inflow from the firms’ internal and external environment compared to traditional “closed” innovative and collaborative practices. Crowdsourcing gives firms multiple advantages, notably work force scalability, diversity of crowd workers, a variety of novel ideas, and rapid solutions. Moreover, crowdsourcing can result in impressive cost savings for businesses using this model. Firms also benefit from the additional publicity involved. In addition, because crowdsourcing provides firms with access to future customers, they can make more accurate market predictions and adjust their strategies to crowd expectations. Because the existing literature on crowdsourcing was sparse with respect to empirical evidence of the impact of crowdsourcing on firms' business and innovation strategies, the general objective of this study was to assess the impact of implementing crowdsourcing into the business and innovation strategies of a company. The literature review revealed also that crowdsourcing is used mostly by firms representing B2C industries. Therefore, this research was particularly aimed to study the implementation of crowdsourcing in a firm representing a B2B industry, such as railway manufacturing. The intention was to examine whether or not crowdsourcing can change a firm's innovation culture, to identify obstacles to crowdsourcing implementation, and to understand the limitations of the crowdsourcing model in B2B setting. Based on the research goals and the extent of the current knowledge on crowdsourcing, a qualitative, exploratory, and descriptive case study was deemed an appropriate research strategy. Keywords: crowdsourcing, B2B, innovation, collaboration, case study

1. Introduction Although crowdsourcing is a relatively new trend, it has already received attention in the literature. The preliminary researches under this study showed that crowdsourcing is used mostly in the B2C industries, and past research works have already described such crowdsourcing applications. However, the current knowledge on crowdsourcing lacks extensive empirical research on the impact of crowdsourcing on firms’ business and innovation strategies. Therefore, this research was particularly aimed to study the implementation of crowdsourcing in a firm representing a B2B industry-a topic that has been underexplored to date and merit further investigation. The research objectives were to document real-life crowdsourcing initiatives in a B2B firm, to assess the impact of crowdsourcing on the firm business and innovation strategies, to identify obstacles to crowdsourcing implementation and to understand the limitations of the crowdsourcing model in B2B setting. The study aimed to examine also whether or not crowdsourcing can change a B2B firm’s innovation culture. The paper is structured as follows: the next section presents a concise review of the literature on crowdsourcing focusing on its use as a business model. The third section outlines the research methodology, while section four includes the case study findings. The fifth section discusses the research results and highlights the theoretical and managerial contributions of the study. Section six summarizes the research conclusions and the limitations of the study and suggests avenues for future research.

2. Crowdsourcing as a business model Crowdsourcing is a Web-based model of innovation and collaboration that provides businesses with the opportunity to receive more inflow from the firms’ internal and external environment compared to traditional “closed” innovative and collaborative practices. Crowdsourcing is a compound word that combines the words “crowd” and “outsourcing”. The uniqueness of the crowdsourcing model lies in the fact that it is not limited to communities or individuals with legal status or preselected contributors only. Generally speaking, anyone can participate. The term crowdsourcing was first coined by an anonymous user on an Internet forum (Schenk and Guittard, 2009). After it first appeared, the term was popularized by the journalist Jeff Howe in 2006 in his article in the online magazine Wired (Howe, 2006). In 2008, Howe (2008) gives the following, frequently cited by scholars, definition of crowdsourcing: “Crowdsourcing is the act of taking a job traditionally performed by a designated


Sylvia Dimitrova agent (usually an employee) and outsourcing it to an undefined, generally large group of people in the form of an open call”. The modern forms of crowdsourcing usually include three components: a crowdsourcing Web platform, where the tasks outsourced to the crowd are posted; the companies that broadcast their tasks; and the crowd workers, who agree to participate, produce and submit solutions. These three components are described by various terms in the literature and on the Web (Felstiner, 2011). The first crowdsourcing platform was launched in 2001 by the American multinational pharmaceutical company Eli Lilly. The platform is called InnoCentive, and is dealing with problem-solving and innovation projects (Schenk and Guittard, 2009). The literature contains various taxonomies of the types of crowdsourcing. A more general taxonomy distinguishes between external and internal crowdsourcing. The external crowdsourcing initiatives source knowledge and ideas from organizations’ external environment. External crowdsourcing is addressed to the crowd as an open tender via an Internet Web platform, and generally allow anyone to participate. However, in some cases firms searching for crowd-generated content can use preselection criteria for participants (Howe, 2008, Felstiner, 2011). On the other hand, internal crowdsourcing is a form of crowdsourcing for problem-solving and innovation used on a corporate level, allowing collaboration across firm divisions, hierarchical structures, and geographic boundaries (Villarroel and Reis, 2010). Many other taxonomies of crowdsourcing can be found in the literature (Doan et al, 2011, Von Ahn et al, 2008, Von Ahn, 2006, Schenk and Guittard, 2009, Frei, 2009). Despite the various classifications of the different crowdsourcing models, they all share a common characteristic: they depend on contributions from the crowd (Felstiner, 2011). What differentiates them is the nature of these contributions, which can vary significantly across models (Howe, 2008). The expansion of crowdsourcing during the last decade is remarkable. As could be expected in an Internetdependent industry, crowdsourcing first appeared in the online-exclusive sectors of the economy, such as Web content creation, advertising, audio and video transcription, software development, database building, digitization, and market research. The first adopters of crowdsourcing were small firms with limited resources. Later, as crowdsourcing models developed, crowds grew, and crowdsourcing platforms became more sophisticated, medium and large firms also entered the industry (Felstiner, 2011). Crowdsourcing thrives thanks to the multiple advantages it offers to firms. The most significant are work force scalability and low labor costs, which can result in impressive cost savings for businesses. On-demand crowd labor allows the workforce to grow and shrink over time, depending on the company’s changing needs. Crowdsourcing also means little or no personnel administration costs or recruitment expenses, low transaction costs, and fewer logistics issues due to the anonymity of interactions and the Web-based work environment (Felstiner, 2011). Companies also benefit from the diversity of crowd workers, as crowdsourcing gives firms immediate access to crowds with widely varying backgrounds and skills, located literally all over the planet (Ipeirotis, 2010, Ross et al, 2010). Moreover, the openness of the firm-to-crowd relationship creates additional publicity for any business using this model. The fact that crowdsourcing gives firms access to their future clients allows better market predictions and adjustment of firm strategies according to the crowd’s expectations (Bartl et al, 2010, Bilgram et al, 2011). Crowdsourcing also reduces a firm’s dependence on its providers, because the tasks are not outsourced to a single or a limited number of subcontractors. By the same token, it minimizes the risk of not obtaining a solution to a given problem (Schenk and Guittard, 2009). Nevertheless, the implementation of crowdsourcing introduces significant changes to firms’ traditional closed innovation, collaboration, and R&D processes. These changes “rarely occur within an organization without some cultural resistance” (APQC, 2013). Past research has already investigated the impact of crowdsourcing on firms’ culture - an impact that varies depending on the type of crowdsourcing (e.g., internal, external, micro tasks, macro tasks) and the organization’s experience to collaborate with external innovation sources (APQC, 2013). Although businesses find crowdsourcing a profitable and inexpensive way to get the work done, employees usually consider crowdsourcing as a threat to their employment (Felstiner, 2011, Howe, 2008). Much of the literature review under this study was devoted to an analysis of firms that use crowdsourcing. The goal was to identify what kinds of firms use crowdsourcing today and for what reasons. The identified cases revealed that crowdsourcing is used mostly by firms in the B2C industries, and the three main purposes for


Sylvia Dimitrova crowdsourcing use were co-creation, gathering third-party proposals (licensing, cooperative development, acquisition), and brainstorming and/or targeting potential areas for innovation and new project ideas. Because the literature on crowdsourcing was sparse with respect to empirical evidence of the impact of crowdsourcing on firms’ business and innovation strategies, the general objective of this study was to assess the impact of implementing crowdsourcing into the business and innovation strategies of a company. The research was also particularly aimed to study the implementation of crowdsourcing in a firm representing a B2B industrya topic that has been underexplored to date. More specifically, the research objectives were: !

To document and describe real-life crowdsourcing initiatives in a B2B industry


To assess the impact of crowdsourcing on firm’s business and innovation strategies


To identify obstacles to crowdsourcing implementation and to understand its limitations in B2B setting.

Through these research objectives, this study aimed to examine whether or not crowdsourcing can change a B2B firm’s innovation culture and if there is indeed a tangible change in firm’s typical closed collaboration and innovation models resulting from the use of crowdsourcing.

3. Research methodology Based on the research goals and the extent of the current knowledge on crowdsourcing, qualitative, exploratory, and descriptive case study was considered an appropriate research strategy. A qualitative research approach was a suitable choice for this study because it aims to describe the context, processes, activities, and participants’ behaviors and motivations. It takes into account organizational and societal aspects and is associated with inductive theory building. Qualitative research also provides considerable flexibility: researchers can readily adjust the research direction, concepts, and data collection tools and methods according to the setting and as the understanding of the phenomenon evolves, which was particularly relevant when studying an underexplored business concept such as crowdsourcing in a B2B setting. In addition, the exploratory study approach allows clarifying, gaining a detailed understanding, and assessing an organizational (or societal) phenomenon such as crowdsourcing. Descriptive research provides a useful methodological complement and acts as a “forerunner” to the exploratory aspect of the study (Saunders et al, 2009). The case study is the main research method for this study. The motivation for this choice is supported by authors such as Yin (2013), who claims that “the case study is the preferred strategy when ‘how’ or ‘why’ questions are being posed, when the investigator has little control over events, and when the focus is on a contemporary phenomenon within some real-life context.” Furthermore, the case study approach provides universality. Thus, the case study approach is used to present three individual crowdsourcing cases as well as more broadly generalized case study findings. Various data collection techniques have been used. The semi-structured questionnaire was the primary data collection instrument. The interviews were conducted at Bombardier Transportation’s (BT) offices in Berlin and Henningsdorf, Germany in June 2013. The author had the opportunity to meet and interview three high-level BT managers who had multiple roles in planning, execution, assessment, and control of the three crowdsourcing initiatives at BT. The interviews lasted from 60 minutes to two hours each, and were conducted at their place of work, at their convenience. Table 1: Key professionals interviewed at BT and their participation in the organization of the three crowdsourcing initiatives


Sylvia Dimitrova In addition, online and offline firm’s documentation was examined to provide a more detailed understanding of the context of the crowdsourcing projects, the organizational structure, the firm’s processes and policies, and the project team structures and roles.

4. B2B crowdsourcing at Bombardier Transportation, Germany 4.1 The firm Bombardier Transportation, one of two subsidiaries of Bombardier Inc., is a world leading provider of rail equipment and solutions. Its sister company, Bombardier Aerospace, is a global leader in the design, manufacturing, and support of business, commercial, specialized, and amphibious aircrafts. Bombardier Inc. the only manufacturer in the world of both trains and aircrafts. Bombardier Inc. has shown steady development since its humble beginnings in 1941 in rural Quebec, Canada, when Joseph-Armand Bombardier founded the company L’Auto-Neige Bombardier in Valcourt, and started to produce snowmobiles for the Canadian market. After some turbulent periods in the 1950s and the 1960s, Bombardier learned to spread its risk, and since that time, it has placed strong emphasis on diversification and innovation. In 1971, the company acquired mass transit technologies and entered the rolling stock manufacturing business. In 1974 Bombardier won its first railway contract and delivered 423 cars to the city of Montreal subway system. Later, Bombardier continued to grow quickly, mainly through acquisitions (Bombardier Museum, 2008, MacDonald, 2002). Today, Bombardier Transportation is a global leader in the railway sector, with 64 production and engineering sites and 19 service centers in 26 countries and a global headquarters in Berlin, Germany. Bombardier Transportation has six divisions and 36,000 employees, and it generated revenues of $8.1 billion in 2012. The firm offers the broadest portfolio in the railway industry including rail vehicles, propulsion and controls, bogies, services, transportation systems and rail control solutions. The current decentralized structure of BT reflects the firm’s acquisition history. BT has six independent divisions (as of 2013) based on the firm’s product portfolio, headquartered in various European countries (except for BT North America, based in St. Bruno, Canada). A Berlin-based group headquarters includes central departments for each function (e.g., procurement, engineering) and governs and aligns the group of divisions to group-wide guidelines. Each BT division is “a small company” with its own budget and profit and loss responsibilities. BT’s group Innovation Management and Project Management headquartered in Berlin coordinates and defines the firm’s strategies, tools, and processes, and identifies new business opportunities and new technological trends related to innovation at the group level. Because BT Innovation Management aims to identify promising new business and innovation methods, crowdsourcing and the multiple benefits it brings to businesses rightly appeared to be a useful development. The following section presents BT’s three internal and external crowdsourcing initiatives.

4.2 Crowdsourcing at Bombardier Transportation: A look at three initiatives 4.2.1 Innovation Express Innovation Express is BT’s internal crowdsourcing Web platform for innovation, problem-solving, and collaboration. It is a full platform managing innovative ideas from the moment a proposal is submitted on the platform to the moment it is applied to an R&D project or is stored as an archive. The pilot phase of Innovation Express was introduced in 2009, and the platform was officially launched at the end of 2010. The platform has three main “focus areas” (Innovation Manager, 2013) in line with BT’s innovation strategies: simplicity, energy efficiency, and customer/user delight. Employees can submit ideas related to these three characteristics of products and internal processes. The focus areas are always open for submission of new proposals. Employees can post ideas and browse proposals posted by others; they can also create communities on the platform, which function like discussion and problem-solving forums. There is no clearly delegated responsibility for the moderation and community management of the focus areas - all BT’s innovation managers are moderators. Since currently not all BT employees have access to computers, the platform also allows submitting ideas on behalf of someone else by indicating the name of the person making the submission and the name of the author of the idea. This approach gives blue-collar workers access to the platform as well.


Sylvia Dimitrova Innovation Express also hosts more targeted ad-hoc problem-solving campaigns. Only BT’s innovation managers can initiate these campaigns. They are also responsible for moderating, filtering, and assessing the submissions on the platform. The campaigns usually last from four to six weeks, because BT’s experience shows that after this period, the participants’ interest drops and the quality of the input suffers. According to BT’s policy, Innovation Express can host up to three problem-solving campaigns simultaneously, because too many campaigns running at the same time would have a negative effect on the users’ attention and motivation to participate. Innovation Express does not offer monetary incentives to participants. The only incentive is recognition within the company. Since the official launch of Innovation Express in 2010, more than half of BT’s employees have been using the platform. On October 26, 2009, BT’s Innovation Management launched the first external crowdsourced contest with the theme “Your personal vision of modern transportation”. The YouRail design contest was addressed to anyone interested in the topic. The submitted proposals had to show the participants’ preferences about how the modern train interior should look, and what new features, in any aspect of the train’s interior, should be integrated in it. The participants were asked to develop interior design proposals in three categories: !

The Leisure Passenger: innovative design ideas targeting the needs of families and passengers travelling to recreational destinations


The Business Traveler: innovative train designs targeting passengers on their way to work or back home, including workplace essentials and a modern office space


The Everyday Passenger: new design ideas to attract passengers to use public transport by providing a comfortable, homey atmosphere

The designs could be submitted as freehand drawings, computer-generated illustrations, or simply written explanations of the ideas. In addition, the YouRail platform asked users to submit seat upholstery designs created with the help of a platform-embedded configuration tool. The online community could submit designs, evaluate others’ proposals by assigning points, or liking or disliking submissions. Participants could also comment on submissions, reply to comments, and leave public messages on other participants’ profiles on the platform. The winner selection process of YouRail included ranking by the online community on the platform, ranking by the internal BT expert jury, and final ranking by the design contest jury. The YouRail contest offered monetary prizes (from €200 to €2000) and netbooks to the winners. The winners were announced in March, 2010, and BT presented the results of the competition at the world’s leading trade fair for the rail industry, InnoTrans 2010, in Berlin, Germany. The YouRail design contest was a one-time event. It attracted 2,486 participants from 102 countries, who submitted 4,239 designs, 25,979 evaluations, 8,565 comments, and 3,445 messages. The YouRail competition also garnered significant media attention and coverage: more than 150 articles about the contest were published, not only in Germany but throughout the world. 4.2.2 YouCity multi-disciplinary innovation contest The YouCity urban mobility innovation contest was launched on March 1, 2012. The crowdsourced competition was open to anyone who wanted to share innovative ideas about the future of urban mobility in developed and emerging cities. BT selected three target cities that represented typical urban mobility markets: London, UK (mature market); Belo Horizonte, Brazil (BRIC market), and Vientiane, Laos (emerging market). The YouCity competition consisted of three tasks: the first asked participants to define current and upcoming issues related to urban mobility in their city of choice, analyze the situation, and develop solutions to the identified problems. The second task asked them to present a holistic proposal describing how their urban mobility solutions fit the global vision of the city of interest. The participants were expected to develop an urban mobility proposal that took into consideration engineering, business, and urban planning aspects of the idea. For each task, the participants were asked to submit via the Web platform a one-page document (with no restrictions on page layout) containing their answers. The community members could work individually or as a team of up to five people.


Sylvia Dimitrova Table 2: Innovation fields and streams of the YouCity contest

The third bonus task was an offline workshop called “Innovation Workcamp” held in September 2012 in Berlin, Germany for the three winning teams from each stream (engineering, business, and urban planning). In addition, during the online competition, the teams could produce two-minute videos on the topic “Your vision of tomorrows’ urban mobility”, upload them on YouTube and link them to the YouCity Web platform. Based on votes by viewers and experts, the teams could earn additional bonus points. The YouCity urban mobility innovation competition was a one-time event. It attracted 894 registered members who submitted 215 proposals. The contest attracted visitors from 129 countries and 2,000 cities, and participants from 74 countries. Thirteen finalists were selected and invited to the Innovation Workshop in Berlin. The results of the workshop were presented at Bombardier’s booth during the world’s leading trade fair for the rail industry InnoTrans2012 in Berlin, Germany.

4.3 Targeted business and innovation benefits The targeted business and innovation benefits for BT from the introduction of the internal crowdsourcing platform are recognition of the innovative potential of all BT employees, broader innovative input, and better firm collaboration for innovation. Through Innovation Express, BT recognizes the “sleeping innovative potential” (Innovation Manager, 2013) of all its employees. Thus, the internal crowdsourcing platform is the means to access all of them, regardless of their status within the company, field of expertise, or geographic location. Innovation Express acts as a collaboration enabler and helps BT employees solve professional problems more efficiently. Thanks to Innovation Express, BT benefits from the collective knowledge of its employees. Another compelling benefit from introducing the internal crowdsourcing tool is the fact that, for BT, the term “innovation” has a much broader meaning than just product innovation. Both the interviewed BT innovation manager and the CIO defined “innovation” also as process innovation, service model innovation, technology innovation, business model innovation, and more. Therefore, by launching Innovation Express, BT is trying to “kill the bias of the company, which is very engineering-oriented, and try to get a much broader input” (Innovation Manager, 2013). The YouRail train interior design contest was BT’s next step, after the launch of the Innovation Express platform, towards opening up the firm’s innovation processes, not only at the firm level but to the entire world. The targeted business and innovation benefits from the YouRail contest include new ideas for shaping a unique look for BT products and attractiveness as an employer of choice. BT’s motivation to launch the crowdsourced train interior design contest was to “understand what does a commute or a trip look like from a passenger perspective” (CIO, 2013). BT’s innovation managers acknowledge the fact that BT’s traditional design processes are strongly biased by the company’s engineering orientation, and especially by the fact that the railway design professionals’ creative thinking is limited by the their knowledge of the existing technological constraints. As explained by the CIO, the outcomes of any design workshop strongly depend on the kind of community being invited. At the same time, BT’s innovation managers were aware that the crowd-generated proposals could not provide a direct substitute for professional designs, as stated by the CIO: “This is not a blueprint for a one-to-one realization the next day; it is about what of those elements, what of those solutions can be done in a different way….” The designs collected from the YouRail contest provided not only multiple innovative and aesthetic ideas, but also plenty of ingenious detail solutions, which BT design professionals are using today as an inspiration when planning new trends and features to implement into BT’s products.


Sylvia Dimitrova In addition, the advertisement strategy of the YouRail competition was particularly targeted to attract design students from prestigious universities and design professionals from around the world. Therefore, another benefit includes increased awareness of BT as a future employer of choice and direct recruiting possibilities. One of the participants in the YouRail contest was hired on a freelance basis thanks to the contest. The YouRail competition also garnered significant media attention and coverage: more than 150 articles about the contest were published, not only in Germany but throughout the world. The targeted business and innovation benefits for BT from the YouCity contest include new business ideas and attractiveness as an employer of choice. Firstly, YouCity was a “business planning contest” (CIO, 2013) that provided BT with new business ideas considering the specific needs of different markets and the engineering, economic, and urban planning aspects of modern urban mobility development. BT’s need for innovative thinking about the mobility of the future derives from the expectation that by 2050, more than two-thirds of the world’s population will be living in cities. These environments will require new approaches to urban mobility development to ensure improved mobility and sustainable economic growth. The railway manufacturer wants to think holistically and to evolve its business strategies to consider all aspects of mobility development, including infrastructure, energy efficiency, and communication, and the YouCity crowdsourcing contest seemed a good way to acquire innovative ideas for future business development. In addition, the advertisement strategy of YouCity aimed to attract students from prestigious universities and professionals with a vision of urban mobility development. This is why the YouCity contest also increased the awareness of BT as a future employer of choice and led to potential recruiting possibilities based on the contest outcomes.

4.4 B2B crowdsourcing and firm culture BT’s innovation managers believe that there is enormous potential in crowdsourcing and the quality and quantity of the crowd-generated ideas under the two external crowdsourcing contests YouRail and YouCity far exceeded their initial expectations. Nevertheless, BT’s experience demonstrates that BT’s employees regarded crowd-generated input as additional work, and even as a threat to their employment. The reason for such reactions is that the external crowdsourcing initiatives “provided solutions for problems that the company had not yet identified” (Innovation Manager, 2013). According to BT’s innovation managers, only once the external crowdsourcing had provided solutions to the firm’s immediate problems did the crowd-generated content stop provoking the usual “not invented here” effects. Then the solutions would be appreciated and applied as real innovations. The acceptance of external ideas also depends on employees’ “habit to collaborate with external contributors” (Head of Industrial Design, 2013). A good example is BT’s Industrial Design Department, for them crowdsourcing was “just a different process and a different tool” for innovation, because BT’s design professionals routinely collaborate with external consultants and students (Head of Industrial Design, 2013). In contrast to the external crowdsourcing initiatives, BT’s innovation management was quite confident about the success of the internal crowdsourcing platform, because it was “answering a need” (Innovation Manager, 2013) within the company. Indeed, Innovation Express proved to be a very powerful tool for problem-solving and innovation. BT’s experience demonstrated that the major factors for employee acceptance and successful internal crowdsourcing initiatives are the careful specification of tasks, appropriate definition of participant focus groups, and clear communication about the campaigns. What BT’s innovation managers and the Head of the Industrial Design Department define as a necessary element for every internal or external crowdsourcing initiative is the managers’ commitment to provide feedback to participants about the outcomes of the initiatives and how their ideas are applied. This type of information increases participants’ motivation and creativity, and shows them what kinds of ideas the company is looking for.

5. Discussion The three crowdsourcing initiatives described above offered multiple advantages to BT. First, BT greatly benefited from the diversity of the crowd contributors in case of both internal and external crowdsourcing, in line with the research findings of Ross et al (2010) and Ipeirotis (2010). BT’s internal and external crowdsourcing also provided rapid solutions to firm’s problems and reduced the possibility of not obtaining a solution for a problem, thanks to the collective knowledge of a large number of contributors, as suggested by Felstiner (2011)


Sylvia Dimitrova and Schenk and Guittard (2009). In addition, the two external crowdsourced contests YouRail and YouCity had a significant positive marketing effect on BT and attracted important media attention. Moreover, the YouRail train interior design contest gave BT access to their trains’ passengers and allowed better adjustment of firm’s strategies according to the passengers’ expectations. Despite the fact that BT’s crowdsourcing experiences share some similarities with those documented in previous studies, BT’s cases of B2B crowdsourcing features important particularities. Based on the analysis of the case study findings, the following limitations and obstacles related to the use of crowdsourcing in B2B setting can be summarized. First, whereas crowdsourcing has gained popularity as a business approach mainly for its ability to provide lowcost solutions leading to impressive cost savings for firms using it (Felstiner, 2011, Howe, 2008), the case study findings clearly show that low labor costs and cost savings did not feature in the business and innovation benefits for BT. This can be explained by the fact that BT operates in a very mature and traditional B2B industry, such as railway manufacturing, where innovation requires substantial specialized R&D efforts, time, and investments. The study results show that BT’s external crowdsourcing initiatives collected ideas that could not be directly applied to future BT products without further detailed professional development. Thus, in BT’s case, the use of crowdsourcing did not lead to cost savings from the acquisition of cheap or even free crowd-generated solutions. For example, the crowd-produced designs collected under the YouRail design contest could not be applied “oneto-one” to real train designs, and they could be used only as inspiration for BT’s designers when they are looking for new trends and potential solutions. Therefore, BT’s cases of external crowdsourcing suggest that crowdsourcing cannot substitute in-house expertise for product innovation in a B2B industry such as railway manufacturing, nor it can be regarded as an employment threat to employees. In the same vein, BT’s external crowdsourcing also does not lead to “unlearning and brain drain” (Schenk and Guittard, 2009) for the firm, because it served simply as an addition to the creativity aspects of BT’s traditional R&D and innovation practices. Moreover, in BT’s case, the use of both internal and external crowdsourcing did not reduce the firm’s dependence on its providers, as suggested by Schenk and Guittard (2009). This is again due to the specifics of the railway manufacturing industry where crowdsourcing does not provide direct substitutes for the railway manufacturing production processes. Therefore, B2B crowdsourcing does not influence directly the role of the firm’s providers. Although businesses find crowdsourcing a profitable and inexpensive way to get the work done, employees usually consider crowdsourcing as a threat to their employment (Felstiner, 2011). The research findings also confirm this perception in BT’s employees regarding the firm’s external crowdsourcing initiatives YouRail and YouCity. Other examples of cultural resistance described in the literature and confirmed by the case study results include the “not invented here” attitude, where a firm’s employees do not accept external ideas and consider crowd-generated input as low-quality and non-professional; the “I don’t have time for this” effect, where a firm’s employees refuse to accept crowd-generated material and regard it as additional work; and the “pocket veto” (APQC, 2013) effect, where a firm’s innovation management identifies a need and a potential solution, but the firm’s other units are not interested in it because they have not yet identified the need (APQC, 2013). The acceptance of external ideas also depends on employees’ habit to collaborate with external contributors. In BT’s case, the firm’s external crowdsourcing provided solutions in advance to problems that the company had not yet identified. As a result, BT does not benefit from the full potential of its external crowdsourcing, since crowdgenerated input provoked the “not invented here” effect, and was regarded as additional work by BT’s employees.

6. Conclusions and limitations This study makes a substantial contribution to the theoretical knowledge on crowdsourcing by examining its use in a B2B industry such as railway manufacturing and by analyzing the real-life impact of both internal and external crowdsourcing on a firm’s business and innovation strategies. In practical terms, the study results can help managers identify successful practices for implementing both internal and external crowdsourcing as a firm innovation and collaboration catalyst. The results can also help managers identify, lessen, mitigate, or avoid the negative and non-constructive effects of inappropriate


Sylvia Dimitrova crowdsourcing use, and can help them achieve their innovation and collaboration goals more efficiently and effectively. Moreover, managers, especially those working in other or similar B2B industries, may be encouraged to give crowdsourcing a try, as they would be able to learn from the experience of a leading multinational organization, such as Bombardier Transportation. Nevertheless, the presented case study has the following limitations: First, the scope of the study was limited to analyzing the crowdsourcing initiatives of only one company. A multiple case study examining several B2B companies that use crowdsourcing would lead to a better understanding of the impacts of crowdsourcing on organizations’ innovation strategies and culture, and to a more reliable validation of the research findings. In addition, confidentiality issues limited the type and amount of presented information. Disclosing information, particularly concerning the internal crowdsourcing tool Innovation Express, would be considered a breach of confidentiality. Therefore, these data could not be discussed or published.

Acknowledgements This study was fully funded by the Canada Research Chair on Technology Project Management, Université de Montréal - École Polytechnique de Montréal, Canada

References APQC (2013) Open Innovation: Enhancing Idea Generation Through Collaboration (Best Practices Report), Houston, Texas, USA, APQC. Bartl, M., Jawecki, G. and Wiegandt, P. (2010) "Co-Creation in New Product Development: Conceptual Framework and Application in the Automotive Industry", R&D Management Conference–Information, Imagination and Intelligence, Manchester, UK, June. Bilgram, V., Bartl, M. and Biel, S. (2011) "Getting Closer to the Consumer–How Nivea Co-Creates New Products", Marketing Review St. Gallen, 28, 34-40. Bombardier Museum (2008) "J. Armand Bombardier", [online], Bombardier Museum, CIO (2013) Interview of Chief Innovation Officer of Bombarier Transportation, In: Dimitrova, S. Doan, A., Ramakrishnan, R. and Halevy, A. Y. (2011) "Crowdsourcing systems on the world-wide web", Communications of the ACM, 54, 86-96. Felstiner, A. L. (2011) "Working the crowd: employment and labor law in the crowdsourcing industry", Berkeley Journal of Employment and Labor Law, 32, 143-203. Frei, B. (2009) Paid Crowdsourcing Current State & Progress toward Mainstream Business Use, Smartsheet. com. Head of Industrial Design (2013) Interview Head of Industrial Design for the Division Rolling Stock Central & Northern Europe and Asia of Bombardier Transportation, In: Dimitrova, S. Howe, J. (2006) "The rise of crowdsourcing", Wired magazine, 14, 1-4. Howe, J. (2008) Crowdsourcing: How the power of the crowd is driving the future of business, Random House. Innovation Manager (2013) Interview Innovation Manager of Bombardier Transportation, In: Dimitrova, S. Ipeirotis, P. (2010) "Demographics of mechanical turk", Center for Digital Economy Research, NYU Stern School of Business, Working paper. MacDonald, L. (2002) The Bombardier story: planes, trains, and snowmobiles, Wiley. Ross, J., Irani, L., Silberman, M. S., Zaldivar, A. and Tomlinson, B. (2010) Who are the crowdworkers?: shifting demographics in mechanical turk, Conference on Human Factors in Computing Systems, Atlanta, Georgia, USA, ACM. Saunders, M., Lewis, P. and Thornhill, A. (2009) Research methods for business students, Pearson Education Schenk, E. and Guittard, C. (2009) "Crowdsourcing: What can be Outsourced to the Crowd, and Why?", Workshop on Open Source Innovation, Strasbourg, France. Villarroel, J. A. and Reis, F. (2010) "Intra-Corporate Crowdsourcing (ICC): Leveraging upon rank and site marginality for innovation", CrowdConference. Von Ahn, L. (2006) "Games with a purpose", Computer, 39, 92-94. Von Ahn, L., Maurer, B., McMillen, C., Abraham, D. and Blum, M. (2008) "recaptcha: Human-based character recognition via web security measures", Science, 321, 1465-1468. Yin, R. K. (2013) Case study research: Design and methods, Sage publications.


Managing Creative Innovation Team Composition: Diversity of Personalities and Innovative Outputs Vytaute Dlugoborskyte and Monika Petraite Kaunas University of Technology, Lithuania [email protected] [email protected]

Abstract: The importance of teams in the successful functioning of modern organization is widely recognized. So as innovativeness of the company is known as a main source for competitiveness in the global market nowadays. Since innovation process is closely linked with creativeness much attention was paid on creativity and innovation management in all the levels: individually, in a team, company, or even society. A dominant way of thinking about teams with respect to their capacity for creativity and innovation usually seems to be input-process-output models, in which variety of inputs combine to affect intra-group processes and, in turn, influence team outputs. In fact, most studies have been focusing on the input parameters as a context that surrounds a team or diversity of skills, competences, gender, professions when analyzing inputs from the individual perspective. Thus the personality composition of teams have been studied in order to understand combinations of team members’ individual characteristics, as reflected in team-level, which would enhance creativity and innovation. What is missing is an analysis of how diversity of personalities in team composition contribute to innovation at the project level. Thus the aim of this paper is to provide a conceptual model on composition and performance management of creative innovation teams. Constructed conceptual model that derives from literature review is empirically tested conducting a research on creative innovation students’ teams and their performance. The new methodological approach to study diversity is applied that comprises not only the mix of personalities, but either evaluates team roles taken by the members. Such analytic approach enables to investigate the importance of diversity in personalities and disclose possible performance patterns of creative innovation teams resulting different innovative outputs. Keywords: creative innovation team, team performance management, team composition, diversity of personalities, innovative output

1. Introduction Teams have increasingly become a basic building block in organizations (Katzenbach & Smith, 1993; Lawler, Mohrman, & Ledford, 1995). For this reason the mix of individuals in a team has become an important issue for management development professionals, even though the psychology of individuals is a complex enough subject (Partington, & Harris, 1999). As ability to innovate is vital to survival of modern organizations, a lot of attention is dedicated to innovation management. Much research has gone trying to understand the nature of innovation, and the ways to control it. These investigations enclosed the stages of innovation, revealing it to be non linear process and closely linked with creativity. Amabile (1996) defined creativity as the production of novel and useful ideas in any domain and innovation - as successful implementation of creative ideas within organization. Creativity by individuals and teams is a starting point for innovation (West, Sacramento & Fay, 2006; Amabile, 1996). In fact, creativity was found to be most evident in the early stages of innovation processes or cycles (West, 2002). Extensive research has studied factors enhancing creativity within organizations, creativity models were developed (Amabile, Barsade, Mueller, & Staw, 2005; Borghini, 2005; Ford, 1996; Woodman, & Schoenfeldt, 1989), much attention was devoted to individual and group creativity (Klijn, & Tomic, 2010). Descriptions of creative personality were refined and most of them now include attributes relevant to idea generation as well as idea implementation (Mathisen, Martinsen, & Einarsen, 2008). While team creativity is defined in the extent to which teams develop ideas about products, processes, or procedures that are both, novel and potentially useful (Amabile, 1996; West, 2002). A dominant way of thinking about teams with respect to their capacity for creativity and innovation usually seems to be input-process-output models, in which variety of inputs combine to affect intra-group processes and, in turn, influence team outputs (Mathisen et al., 2008). West (2002) have created a famous model on team innovation that covers group task characteristics and external demands. In fact, most studies have been focusing on the input parameters as a context that surrounds a team or diversity of skills, competences, gender, professions when analyzing inputs from the individual perspective. Thus the personality composition of teams have been studied (Baer, Oldham, Costa Jacobson, & Hollingshead, 2008; Mathisen et al., 2008) in order to understand combinations of team members’ individual characteristics, as reflected in team-level, which would


Vytaute Dlugoborskyte and Monika Petraite enhance creativity and innovation. The real challenge is to create sufficient diversity within team without threatening their shared view of their task and their ability to communicate and work effectively together (West, 2002). Thus most of the research have focused on Big Five personality factors and even after the number of studies the results seem to be too broad for a proper composition of a team. Therefore, the new ideas and methodologies for the further research need to be presented. Answering this call for new ideas a conceptual model will be presented. Accompanied by already existing and reliable measurements it could provide a new look to the management of creative innovation teams and their innovative performance from internal perspective.

2. Conceptual model on composition and performance management of creative innovation teams The demographic composition of a group and, more specifically, diversity of its members now is seen to be critical in driving creative processes in a group. By including people of diverse backgrounds and differing viewpoints, a combination of elaborate explanations, experiences, and expertise may ignite the creative spark within a group (Paulus & Brown, 2007, Bezrukova, & Uparna, 2009) and determine innovative results (Nemeth & Nemeth-Brown, 2003). However, studies prove there is a dark side of diversity. Creative teams have a greater potential for conflict and hence performance losses (Pelled, Eisenhardt, & Xin, 1999). Moreover, research suggests that very dissimilar people are unlikely to interact and share information, but are those, who are more likely to come up with radical ideas. Not surprisingly, such unfavorable findings have sparkled studies on how to overcome these obstacles. Ziebro and Northcraft (2009) proved that information exchanges between deep-level dissimilar group members are approximately 2.5 times more likely to occur when proximity is added. Although proximity by itself cannot completely overcome interaction patterns and information exchange barriers, it dramatically increase the potential for information exchanges. Therefore, due to the greater exposure of group members to diverse information the potential for radical creativity is much higher in these teams (Ziebro, & Northcraft, 2009). Hence, even though conflicts at some level are beneficial for the creativity in the team (Goncalo & Staw, 2006), it is important to understand that more diverse minds and thus creative teams may bear negative results for the team’s productivity (Bezrukova, & Uparna, 2009). Thus empirical studies provides grounding for possible team scenarios based on the diversity as an input (see Figure 1). These findings draw possible patterns on team processes and innovative outputs that are heavily determined by team composition and thus were based conceptual model on the performance of creative innovation teams (see Figure 2).

Figure 1: Empirical grounding for conceptual model on composition and performance management of creative innovation teams


Vytaute Dlugoborskyte and Monika Petraite

Figure 2: Conceptual model on composition and performance management of creative innovation teams The idea of diversity level in the conceptual model is accompanied by already existing and reliable measurements in terms of personalities and roles played in a team. One of these, Belbin’s team role model, is one of the most widely used methods in management practice and featured extensively in research on teams at work (Aritzeta, Swailes, & Senior, 2007; Partington, & Harris, 1999). Nine roles in a model were defined as a pattern of behavior characteristic of the way in which one team member interacts with another in order to facilitate the progress of the team as a whole. It measures behavior rather than personality and is not considered to be a psychometric test (those which measure attributes of personality). Rather, personality is considered to be one of many factors which can influence behavior. The test developed is based on four key factors: intelligence, dominance, extroversion/introversion, stability/anxiety (Hipple, Harde, Wilson, & Michalski, 2001). While the second instrument Myers-Briggs Type Indicator (MBTI) is considered to be one of the oldest, most reliable and valid personality instruments that has been tested on millions of people, has proved to be useful tool in understanding human dynamics of both at work and social level, and effective tool in team building, communication and career exploitation (Von Stamm, 2008). which identifies four individual preferences: extroverts versus introverts (E vs. I), sensers versus intuitives (S vs. N), thinkers versus feelers (T vs. F), judgers versus perceivers (J vs. P). The first three choices describe person’s orientation towards life, the last choice a person’s orientation to the outer world, resulting 16 possible types (Hipple et al., 2001).

3. Methodology The nature of the investigating topic determined the research to be entirely quantitative. In order to fulfil the objective to test the framework, creative innovation teams as unit of analysis were selected. In order to test the conceptual model on composition and performance management of creative innovation teams, data collected in a pivot research on creative innovation student teams. Following IPO model, the pivot research collected data on students’ personality types, team roles and a number of team characteristics on their processes and outputs (see Dlugoborskyte, Norvilaite &, Petraite 2015), and obtained enough information to rearrange into new variables to test the constructed conceptual model. The sample consisted of 39 undergraduate students (16 male, 23 female) from Technology Entrepreneurship course. Not initially acquainted with one another, participants were randomly assigned to teams, composing 11 teams with the size range from 2 to 6 members. Firstly participants completed two web-based surveys – MyersBriggs Type Indicator instrument and Belbin Self-Perception Inventory, and later for 4 months were working in teams to create an innovative idea and business plan for its implementation. In the end they were asked to complete a questionnaire evaluating team processes and output, answering the questions with a Leiter scale. Questionnaire-based tools and a separate questionnaire on team performance and output shows the survey research was set to answer the research question and thus represented a quantitative research, determined by the nature of a research topic and its objectives. As the tools for personality type and team role identification are already developed, in this study the relationships of variables (team composition and innovation output) are the most important to understand.


Vytaute Dlugoborskyte and Monika Petraite New variables for this study from the data pool were formed to represent constructs of conceptual model. A research framework for analyzing creative innovation teams was created, that reflects new variables and logic of a conceptual model (see Figure 3). Statistical analysis on SPSS was used to unify data for new variables and group cases in order to ground proposed relations.

Figure 3: Research framework for analyzing creative innovation teams

4. Results Belbin’s test revealed all 9 possible team roles in the group of students. The most common roles were Implementer, Resource investigator and Team worker. The rarest - Plants, Shapers and Specialists. Whereas Myers Briggs test identified only 10 from 16 possible MBTI types and relatively low number of Introverts. Moreover, a number of students were revealed to possess Judger’s characteristics and even 38,5% were found to be ENTJ type. ENFJ and ESFJ types were commonly found in a sample as well. Such repetitions and gaps in data hindered an opportunity to see all possible constructs of personalities and roles. Nevertheless, compositions of student groups enabled to look deeper into the diversity of personalities presented within a team and discover their relation with a success of teamwork processes and outputs. MBTI types, team roles and their combination within a team disclosed cases to be very diverse. The cases, where all the team members were possessing the same MBTI type or team role, were revealed. Teams with a mix of personality types or different team roles between members were formed as well. Finally, teams with all members in different MBTI types and roles were observed. Even given the small sample and the scope of possible combinations of personalities and team roles in a team, which cannot be presented in this study, the level of diversity was easily evaluated. The sample limited an ability to analyze differences between types of diversity (personalities or team roles), as well as to prove significant relations between all variables. Thus all of the cases were grouped according to the level of diversity in personalities and team roles within a team. 7 teams with diversity in MBTI types and team roles, even if there was a repetition between some of the members, were grouped together and marked as possessing high diversity. Whereas teams with all team members possessing the same MBTI type, team role or both, were grouped to represent low diversity teams. The latter group consisted of 4 teams. Table 1 represents the average scores of each team group and discloses the evaluations of teamwork characteristics – teamwork process, outputs, overall performance (combining evaluations of process and outputs). Three important characteristics are extracted from the overall process evaluation - ability to set and follow roles and functions in a team, quality of communication and conflict management. Two characteristics are extracted from the outputs – orientation towards innovation and idea generation. As it can be seen from the data, teams low diversity teams have better overall performance than the high diversity teams. However, when performance evaluations are extracted into process and outputs, low diversity teams are better evaluated only in the process and in outputs high diversity teams score more. These findings replicate the conceptual model of creative innovation teams, where low diversity teams have higher performance and smooth processes, but give in to high diversity teams considering outputs of a teamwork. Analyzing evaluations and going into details of process characteristics, these primary insights and either the


Vytaute Dlugoborskyte and Monika Petraite conceptual model are grounded even stronger. Average scores of low diversity teams show they are better in setting and following roles and functions within a team, have higher levels of communication, are able to manage conflicts more successfully than high diversity teams. These findings replicate the initial assumptions that were modeled on different patterns of a teamwork that is determined by team diversity in personalities. Hence it is interesting that the more diverse team composition with different roles within is, the more difficult is to set the roles and functions and to follow them during a teamwork. This finding shows that a number of different roles within a team do not assure more thoughtful processes and tasks to be done, contrary, this is much more hindering the functioning of a team. However, evaluations of the outputs of a teamwork show better results are achieved by high diversity of groups. Even though idea generation evaluation is slightly higher in low diversity teams, high diversity teams are way better in producing innovative outputs. That can lead to an assumption that the difference between idea generation in high and low diversity teams is not significant, yet the ideas of high diversity teams are more oriented towards innovation. Finally, the evaluations of high and low diversity teams replicate initial assumptions disclosed in the conceptual model, where high diversity in a team cause difficulties in performance, but in the end result more innovative outputs. Striving to empirically ground conceptual model, the patterns of communication in teams need to be examined in more details. Therefore teams were grouped according to their usual communication and meeting habits. There were 4 types of groups identified – those, which prefer live meetings (3 teams), live and virtual meetings (4 teams), only virtual meetings (2 teams), and those, which communicate poorly (2 teams). In Table 2 average evaluations on teamwork characteristics based on 4 different communication patterns followed by teams are provided. Scores disclose that teams which prefer live and virtual meetings outstrip all of other teams in most of analyzed characteristics. The data proves that more and better quality communication within a team leads to better overall performance of a team. Furthermore, interesting results were observed in the pattern of teams that prefer communicate virtually – those teams were evaluated only slightly lower than the primarily mentioned group in their performance and even higher in ability to set and follow roles and functions. Thus these findings show the importance of a member to understand and follow his role, which can later cause better performance of all the team. Unexpectedly, teams that prefer live meetings have fallen behind the ones that prefer live and virtual meetings, or virtual meetings. However, if the understanding of your role should be stressed, teams conducting live meetings scored lower in this characteristic. Such finding suggests that setting, understanding and following the right roles and functions can be essential for a team and its performance. Even though teams that were conducting live meetings and had a positive proximity characteristic, this did not help them to perform in a good quality. And since high diversity teams with a number of different roles score less in understanding their roles and functions, a good understanding of the roles and functions should be strived for as an essential one in the beginning of a teamwork. Nevertheless, the difference of teams that conducted live and virtual meetings or virtual meetings with the ones that conducted less meetings overall shows the importance to communicate within a team as well. Moreover, the difference of the results between teams conducting live and virtual meetings with the ones that prefer more virtual communication stress the importance of proximity. And even though this data does not allow to ground the proximity as a key of making a high diversity team more similar minded and thus performing smoother like it has been showed in a conceptual model, it is obvious that proximity plays a role in raising team performance. Finally, it is important to mention that even though less communicating teams were the poorest performers, they were still evaluated relatively high in idea generation. In the evaluations these teams were in line with teams conducting live and virtual meetings, or virtual meetings. However, the ability to generate ideas in less communicating teams was not followed by high innovativeness. As it is already noted in the field of team management and creativity, the team does not necessarily cause higher number of generated ideas. In fact, individually people are more productive in idea generation. This can explain the fact why less communication in a team did not affect idea generation in the sample. Finally, data from the research on student teams supports assumptions that led to construction of a conceptual model on composition and performance management of creative innovation teams. Analysis of team diversity and their performance evaluations proved high diversity of personalities to cause less smooth functioning of a team, but more innovative outcomes. The research enabled to investigate the possible relations of communication patterns in a team and their performance. The findings stressed the importance of communication to the success of processes in the team and innovative outcomes. Proximity was proved to increase overall performance of a team, even though the sample was too little to ground the importance of proximity in the way it is provided in a conceptual model. Moreover, the new factor, ability to set and follow roles and functions in a team, was discovered to be significant in all of the processes and outputs of a teamwork.


Vytaute Dlugoborskyte and Monika Petraite Consequently, the research on student teams enabled not only to reveal the change of processes and outcomes of a teamwork given the diversity level, but either to ground the conceptual model and show possible patterns of performance of high and low diversity teams. Continuing research and increasing the sample would enable to discover the relations between characteristics extracted in the conceptual model, as well as show their significance and, finally, empirically ground the conceptual model.

Idea generation

Orientation towards innovation

Conflict manageme nt

Communica tion

Ability to follow roles and











High diversity











Outputs Mean

Process Mean

Low diversity

Group of cases

Number of teams

Performanc e Mean

Table 1: Evaluations of teamwork characteristics in low and high diversity teams









































Idea generation

Orientation towards innovation




Ability to follow roles and functions


Performance Mean


Outputs Mean


Process Mean


Virtual meetings


Group of cases Live meetings Live and virtual meetings Virtual meetings Less meetings

Live meetings


Number of teams

Conflict management

Table 2: Evaluations of teamwork characteristics based on different communication patterns within teams

5. Conclusions With the aim to study, how diversity of personalities in team composition contribute to innovation at the innovative project level, the conceptual model on composition and performance management of creative innovation teams was provided. Such model invites taking a new look to possible ways of innovative performance management, focusing on internal team environment, specifically, personalities and the diversity in their composition, as the basis for innovative outcomes. It is suggested, that the level of diversity determine the smoothness of team’s performance. Finally, the model discloses two possible paths for a team and is expected to suggest an appropriate diversity level given the aim of outputs, as well as to show possible obstacles the manager will face in each of it. The pilot research on student teams and its data analysis supported the main propositions that were extracted in conceptual model and either disclosed other important factors that need to be considered while forming and managing a team. Tests on MBTI types and team roles revealed a number of different combinations present within teams, which were later grouped according to their level of diversity. Analysis of the performance of two distinct team groups proved high diversity in personalities to cause less smooth functioning of a team, but more innovative outcomes: !

Low diversity teams were better in setting and following roles and functions within a team, had higher levels of communication, were able to manage conflicts more successfully than high diversity teams;


Vytaute Dlugoborskyte and Monika Petraite !

A number of different roles within a team did not assure versatility, but was hindering the functioning of a team;


Idea generation in high and low diversity teams was not significantly different, yet the ideas of high diversity teams were more oriented towards innovation.

The research either enabled to identify different communication patterns in teams and investigate their relations to team performance. The data proved the quality of communication within a team and proximity to determine overall performance of a team: !

Teams that were conducting live and virtual meetings, hence had more proximity, performed better than the ones that were communicating virtually;


Less communicating teams were the poorest performers;


Communication intensity within a team did not determine its performance in generating ideas, yet the ability to generate ideas in less communicating teams was not followed by high innovativeness.

Even though this data does not allow to ground the proximity as a moderating factor transforming high diversity team to be more similar minded and thus to perform smoother, like it has been underlined in a conceptual model, it is obvious that proximity plays an important role in raising team performance. And above all, the research shows that setting, understanding and following the right roles and functions can be essential for a successful teamwork: !

Even proximity did not help the team to perform well if the team members had difficulties in understanding their roles and functions;


Since high diversity teams with a number of different roles suffers hardship in setting and following their roles and functions, it is important to overcome this challenge in early stages of a teamwork.

The study on student teams enabled to reveal the change of processes and outcomes of a teamwork given their diversity level in personalities either disclosing possible patterns of performance and innovative outputs of high and low diversity teams. It was proved that the expected linkages provided in the conceptual model can be found even in a relatively small sample. The correct sample should enable to find significant correlations between given team characteristics in the future research thus empirically grounding the model on composition and performance management of creative innovation teams.

Acknowledgements This research was funded by a grant (No. GER-001/2015) from the Research Council of Lithuania. The authors also want to express their appreciation to Master in Strategic Leadership (Kaunas University of Technology) Vaiva Norvilaite for a data collection.

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Vytaute Dlugoborskyte and Monika Petraite Katzenbach, J. R. and Smith, D. K. (1993) The wisdom of teams: Creating the high-performance organization, Harvard Business Press. Klijn, M. and Tomic, W. (2010) “A review of creativity within organizations from a psychological perspective”, Journal of Management Development, Vol. 29, No. 4, pp 322-343. Lawler, E. E., Mohrman, S. A. and Ledford, G. E. (1995) Creating high performance organizations: Practices and results of employee involvement and total quality management in Fortune 1000 companies, Jossey-Bass, San Francisco. Mathisen, G. E., Martinsen, O. and Einarsen, S. (2008) “The Relationship between Creative Personality Composition, Innovative Team Climate, and Team Innovativeness: An input – Process – Output Perspective”, Journal of Creative Behavior, Vol. 42, No. 1, pp 13-31. Nemeth, C. and Nemeth-Brown, B. (2003) “Better than individuals“, Group creativity: Innovation through collaboration, pp 63-84. Partington D. and Harris, H. (1999) “Team role balance and team performance: an empirical study”, The Journal of Management Development, Vol. 18, No. 8, pp 695-705. Paulus, P. B. and Brown, V. R. (2007) “Toward more creative and innovative group idea generation: a cognitive-socialmotivational perspective of brainstorming“, Social and Personality Psychology Compass, Vol. 1, No. 1, pp 248-265. Pelled, L. H., Eisenhardt, K. M. and Xin, K. R. (1999) “Exploring the black box: An analysis of work group diversity, conflict, and performance”, Administrative Science Quarterly, Vol. 44, No. 1, pp 1-28. Von Stamm, B. (2008) Managing Innovation, Design and Creativity, John Willey & Sons, Chichester. West, M. A. (2002) “Sparkling Fountains or Stagnant Ponds: An Integrative Model of Creativity and Innovation in Work Groups”, Applied Psychology: An International Review, Vol. 51, No. 3, pp 355-424. West, M. A., Sacramento, C. A. and Fay, D. (2006) “Creativity and innovation implementation in work groups: The paradoxical role of demands“, Creativity and innovation in organizational teams, pp 137-159. Woodman, R. W. and Schoenfeldt, L. F. (1989) “Individual differences in creativity: an internationalist perspective” in Handbook of Creativity, pp 77-91, Plenum Press, New York. Ziebro, M. and Northcraft, G. (2009) “Connecting the dots: network development, information flow, and creativity in groups” in E. A. Mannix, J. A. Goncalo and M. A. Neale (Eds.) Creativity in Groups, Research on Managing Groups and Teams, No. 12, pp 135-162, Emerald, Bingley, UK.


Can the Social Entrepreneur Save us? The Role of Government in the Social Entrepreneurship Equation: The Case of Afghanistan Jawad Ehsanyar, Christina Mullen and Sacha Joseph-Mathews Eberhardt School of Business, University of the Pacific, USA [email protected]

Abstract: In the last decade, social entrepreneurship has become a popular tool for communities in the developing world to address some of their most pressing social dilemmas. The premise of the social entrepreneur is that business cannot be separated from the social environment, from people or from nature (Preto et al. 2015). As traditional models of governmental aid and developed world intervention has proven unsuccessful in alleviating many of the global ills that plague developing communities. Individuals and the communities that surround them have looked to their own solutions to attack the issues that affect them the strongest. This is where the bulk of academic research has focused; defining the field and assessing impact. Yet despite a resolute determination to confront some of the biggest social challenges affecting the planet, social entrepreneurs are recognizing the tremendous and in some instances insurmountable blockades that exist where government systems are non-functioning and national security non-existent. The question is a pertinent one…Can social entrepreneurship thrive, despite a lack of security and without crucial government assistance? This is the research question this paper seeks to address, as we explore the role of government in creating a space for social entrepreneurs to thrive or fail. Following the work of Zhang and Swanson, (2014), we examine the impact of market, institutional and state failures in curtailing or facilitating the development of socially oriented business ventures. Over 400 students across three cities in Afghanistan were surveyed about their perceptions about social enterprises. Findings indicate that these potential entrepreneurs are optimistic about the future of Afghanistan and see social entrepreneurship as a valuable tool to address issues in their communities, generate jobs and create change. Keywords: social entrepreneurship, Afghanistan development, social entrepreneur, developing world business models, social innovation, non-functioning government

1. Introduction Since the late 1990s, social enterprise has become a widely debated topic. As budgets tighten and support for NGOs and donor-based organizations decline, philanthropic and donor organizations are beginning to see the impact of the social enterprise business model. The end result is an increased research agenda and a surge of interest in social enterprise as a viable solution to social ills (Kraus et al. 2014; Nandan, London & Bent-Goodley 2015). A second cause for the increase in interest in social enterprise is the globalization of economies, this has opened up additional research into entrepreneurial action as a means to address social problems (Zahra et al. 2008). This globalization has also increased the concept of market liberalization, which leaves global citizens unable to access products that they previously got at a low cost or for free as they are now being sold at fair market value (Zahra et al. 2008). There is the argument that a majority of social enterprises have made their impact at the “base of the pyramid” market segment, which consists of largely marginalized groups that have been ignored due to their low purchasing power and lack of proper infrastructure (Ghauri, Tasavori & Zaefarian 2012). Research across the developing world suggests that social enterprises could benefit economically depressed communities in a multitude of ways, such as increased literacy, financial freedom, employment, crime reduction, health & well being, and cultural appreciation (Prieto et al. 2015). This supports the theory that social enterprises are sitting at the forefront of social transformation, providing innovative solutions to previously unmet social needs (Sserwanga et al. 2014). It is at this intersection of need and benefit; that we find ourselves most intrigued. The question begs, can social enterprises thrive within the borders of a state or nation where the government has failed to provide all of the aforementioned securities (employment opportunities, crime reduction, access to health and education). More importantly, what is the impact on these ventures when a state fails to put the necessary support systems in place to facilitate the smooth functioning of a business? This study explores the question, where basic business facilitating agencies such as permit and license granting institutions, national security agencies, port facilities, infrastructure etc. are non-functioning or non-existent, can social enterprises still accomplish their goals? Following on the work of Zhang & Swanson, (2014), this study looks at the impact of the economic marketplace alongside institutional and state failures in curtailing or facilitating the development of socially oriented business ventures. The paper has four goals. First, we explore the role of government in the successful implementation


Jawad Ehsanyar, Christina Mullen and Sacha Joseph-Mathews and development of social enterprises. Second, we explore why, in some instances, governmental dysfunction can create a ripe environment for the development of social enterprise. Third, we examine how young Afghan university students view the field of social entrepreneurship and finally we will discuss how attractive this sector is for these potential entrepreneurs in the midst of a failed state.

2. Defining social entrepreneurship There is much debate in the body of literature as to an accepted definition of social entrepreneurship (SE). Historically SE has been referred to as “the third sector” or “the sector of civic society” (Petrovici 2013). Some definitions outline social entrepreneurship in terms of their goals, while others argue that social entrepreneurship moves towards enhancing “total wealth” a term encompassing both economic and social value (Zahra et al. 2008, Zahra et al. 2009). This concept is also explained through the common use of terms such as “double”, “triple” or “quadruple” bottom lines, where social enterprises effectuate change on a financial, social, environmental, and/or cultural level. Sserwanga et al. (2014) and Mort, Weerawardena & Carnegie (2003) argue that the social mission is a key-defining factor in the definition, presenting the idea that where a business firm creates economic value; a social enterprise creates social value (Sserwanga et al. 2014; Mort, Weerawardena & Carnegie 2003). Prieto et al. (2013) furthers this argument by suggesting that organizations cannot be separated from the social environment, people, or nature and that the social entrepreneur possesses similar traits to their business counterparts, but use their talents to address social problems on a local, national or even global scale. A third body of research suggests that it is not the goal or the mission, but rather the presence of innovation that matters. One definition frames social enterprise as “any new processes, products, or services that address and improve the quality of human life at the micro and/or macro levels,” suggesting that social entrepreneurship establishes initiatives which in turn spur social innovation (Nandan, London & Bent-Goodley 2015 ‘Introduction’ para. 3; Pol & Ville 2009). Despite the fragmented and confusing attempts to define social entrepreneurship, it can be asserted that most of the literature could reach a consensus in which a social enterprise consists of two key elements: an overarching social mission and entrepreneurial creativity; specifically, any organization that has adopted a social mission while using business means to sustain itself (Corner & Ho 2010; Hervieux, Gedajlovic & Turcotte 2010). For the purpose of this study we will be utilizing the definition provided by Wolk (2007). Social Entrepreneurship is defined as “the practice of responding to market failures with transformative, financially sustainable innovations aimed at solving social problems” (‘Synopsis’, para. 1).

3. The role of government in social enterprise development The aforementioned definition, which involved market failures, is critical to the purpose of this study. It is our belief that government intervention in market failure, combined with an eternal quest by many governments to provide more with less, often creates the perfect incubator for socially entrepreneurial thinking aimed at problem solving. Governments across the globe are constantly examining ways to improve the lives of their citizens and constituents while maximizing the use of tax revenue. This can sometimes prove to be an insurmountable task, as needs increase and the scope of government spending expands exponentially. The end result is often insufficient funding of critical programs for human development. As elected officials and government agency staff approach these tough choices, facing fewer and fewer options; more and more, they are recognizing that social entrepreneurs are potential partners. Globally, government officials are accepting the fact that social entrepreneurs are their allies as the two entities share an interest in “identifying efficient, effective, and sustainable ways to solve difficult social problems” (Wolk 2007, ‘Introduction: Social Entrepreneurship Enters the Public Eye’, para. 10). Yet, very little research has focused on the intersection between these two groups. The symbiotic relationship between governments and social entrepreneurs has yet to be fully explored and or understood in the literature. A new body of research is pointing to the potentially huge effect government intervention can have on social enterprises. Favorable governmental policies can potentially foster a positive environment for entrepreneurs allowing them to pursue business goals which otherwise may prove difficult or even impossible for governmental organizations to accomplish. Where governments choose to have a focused, defined strategy for institutional, financial and developmental support for social enterprises, the end result can be quite beneficial to long term economic impact and human development (Wolk 2007). Wolk (2007) makes the argument that social entrepreneurship brings about the best components of three worlds; government, non-profit and the private sector. He suggests; “Like business, social entrepreneurship utilizes markets to drive innovation and productivity.


Jawad Ehsanyar, Christina Mullen and Sacha Joseph-Mathews Like government, social entrepreneurship responds to market failures by providing public goods and services. Like nonprofits, social entrepreneurship engages individuals in action to achieve social goals” (‘Social Entrepreneurship Emerges at the Nexus’, para. 2). If an enterprise is perceived as friendly by the government, otherwise known as “socio-political legitimacy”, it will increase the probability that the enterprise will be perceived as friendly by the consumer market (Zhang & Swanson 2014; Sullivan 2007). But what happens to social entrepreneurship when there is a failed state? This study examines how the unique set of circumstances in Afghanistan impact the possible development of a thriving social entrepreneurship sector in that country. According to the 2016 Index of Economic Freedom “Afghanistan’s overall economic environment is undermined by ongoing political and security challenges, and the inability to deliver basic services on a reliable basis has severely eroded confidence in the government” (The Heritage Foundation 2016). The country is overwhelmed by a dysfunctional government, few social services, a barely operational education system alongside limited foreign direct investment. Unemployment is at a staggering 40% and communities have very little confidence that they can rely on anyone but themselves (Trading Economics 2016). Some researchers believe that this type of instability and dysfunction is exactly the type of environment that facilitates the growth of social entrepreneurs and the development of self-reliant entities (Zhang & Swanson 2014). It is becoming evident that social enterprises are far more commonplace in deprived regions where there are weak and or unstable institutions and governments (Nandan, London & Bent-Goodley 2015; Nga & Shamuganathan 2010; Zahra et al. 2008; Zhang 2014). In these environments social enterprises have stepped up to meet the gaps created by firms or institutions which have valued financial returns over social sustainability, causing many governments to encourage community-based entrepreneurship initiatives (Nga & Shamuganathan 2010; Nandan, London & Bent-Goodley 2015; Kraus et al. 2014). For example, in the late nineties and early 2000s, European-based companies sold solar panels to thousands of communities across Africa with no plans for warranties or follow up service. The end result was a massive failure of said solar panels in the following decade and no government legislature to protect consumers from this type of predatory behavior on the part of these MNCs. One can argue that even the need for such panels to provide electricity was, in itself, a major governmental failure; as governments are typically tasked with the responsibility of providing adequate access to electricity. In small villages all over Uganda one social enterprise; Village Energy is running a social revolution where they recruit and train young men and women as technicians and entrepreneurs, setting them up as franchisees with their own branded repair & sales shop for solar panels (Village Energy 2016). This is exactly the type of entity Andersson (2014) envisioned when he argued that social enterprises were practicing “a highly regarded best-practice approach for non-profits to solve social issues, survive in a competitive marketplace, and generate social impact” (‘Introduction’, para. 2). Yet these solutions are being offered in the wake of massive governmental failures. The first pertained to a lack of access to electricity in the home, the second adequate consumer protection in the marketplace. We therefore propose the following hypotheses: H1: Young Afghans who believe that governments are failing them in their communities will have more positive perceptions of the field of social entrepreneurship than those who do not believe the government is failing them. H2: Young Afghans associate social entrepreneurship with self-empowerment, doing good in the community, job creation and innovation. This is where we find Afghanistan currently existing. With high unemployment, limited job creation by the government or private sectors, an overarching threat to national security constantly at play, coupled with crumbling social and educational systems and an almost non-existent infrastructure; they are almost the poster child for what a failing government looks like. This is why we believe the country is ripe for an insurgency of social entrepreneurship. We hypothesize that given the colossal inadequacies of the Afghan government; citizens will look to themselves to create solutions to some of the government dysfunction. H3: Young Afghans will have positive perceptions of the field of social entrepreneurship.

4. Social entrepreneurship: Opportunity recognition Because a social enterprise is so reliant on its unique social, political and technological environments, it is argued that more dynamic environments offer more opportunities (Zhang & Swanson 2014). An opportunity is defined by Corner & Ho (2010) as “a favorable set of circumstances for doing something such as establishing a new


Jawad Ehsanyar, Christina Mullen and Sacha Joseph-Mathews venture” (‘SE Opportunities’, para. 1). If opportunity recognition is a foundational attribute of entrepreneurship, then it can be argued that opportunity recognition is considered to be one of the most fundamental qualities of a social entrepreneur (Corner & Ho 2010). Sserwanga et al. (2014) argues that social entrepreneurship itself could not exist without opportunity recognition, individuals must remain sensitive to changes in the business environment, cueing them into market needs. Extant literature tells us that social entrepreneurship is founded upon the ability to recognize the potential to solve an unmet social need through innovation where governments and private enterprises, historically, could not (Nga & Shamuganathan 2010). We are making the argument that the stronger the social need and the greater the gap left by the inability of governments to meet these needs; then the more opportunities for the development of a robust social entrepreneurship sector. This leads us to hypothesis 4: H4: Positive perceptions of social entrepreneurship will be significantly positively related to perceptions that social entrepreneurship is an effective, innovative tool to address social issues within their communities.

5. Social entrepreneurship: Social capital What a social entrepreneur sees as an opportunity, however, may depend on their individual social networks (Arenius and DeClercq 2005). These networks provide an accumulation of social capital, defined by Sserwanga et al. (2014) as the “trust, norms, and mutual obligations that develop in relationships” (‘Social capital’, para. 1). Social capital, then, includes the creation of strategic partnerships that are essential to the support, participation, and legitimization of a social enterprise. The social networks that social entrepreneurs operate in provide emotional, financial and human resources that would be hard to come by otherwise (Nga & Shamuganathan 2010). Some bodies of research argue that a social entrepreneur is not just one person, but rather multiple actors using their knowledge and experience to provide innovative solutions for social problems, a phenomenon referred to as the “collective entrepreneur” (Corner & Ho 2010). These innovative solutions must require the interaction and collaboration of a variety of stakeholders in order to pool complementary resources (Ghauri, Tasavori & Zaefarian 2013; Neck, Brush & Allen 2009). Thus, our fifth hypothesis: H5: Perceptions that anyone has the power to build the networks to bring about change in a community will be significantly positively related to perceptions of social entrepreneurship as a means for development. Nga & Shamuganathan (2010) argues that there are three benefits to social enterprises participating in social networks: 1) the establishment and sharing of the social mission, 2) the deeper understanding of social norms and the creation of reputation and 3) the definition of shared meanings and collaboration of resources and knowledge to effect long-term change and local solutions to real problems. It is clear then, how essential social capital, and in extension, social networks are in the operation and management of business activities, advice, human resources, innovation, financial and emotional support (Nga & Shamuganathan 2010, Jack 2005). We propose the following: H6: Afghan youth who want to have a career focused on solving problems in the community will consider social entrepreneurship to be a positive means for development.

6. Social entrepreneurship: Innovation and challenges Inevitably, the exponentially increasing demand for social services cannot be met by existing resources. Therefore, new, cutting-edge solutions are required to address and alleviate social ills. Social enterprises and innovators have been known for their ability to combine available resources in new ways in order to meet this growing demand through two different processes: rational/economic or effectuation (Sserwanga et al. 2014; Sarasvathy 2001). Sarasvathy (2001) outlined the rational/economic form of innovation as the process by which an entrepreneur notices a viable opportunity and then follows a “normative decision-making process” to fill the needs/wants associated with that opportunity. A social entrepreneur finds an opportunity to fit an existing product or service rather than the rational/economic process of finding a service/product to fit an existing opportunity (Sarasvathy, 2001). Despite how an entrepreneur chooses to follow the path of innovation, it is widely argued that social innovation faces a set of distinct challenges, including the fear of failure, a lack of financial resources, financing systems, fiscal uncertainties, and legal frames in which potential entrepreneurs operated (Amway 2013; Petrovici 2013).


Jawad Ehsanyar, Christina Mullen and Sacha Joseph-Mathews It is our hope that this paper will add to the body of research that may assist social entrepreneurs in understanding the conditions that facilitate growth, development and success in the midst of said challenges.

7. Sample University students were used as the sample of respondents for the purpose of this study. Professors recruited respondents across ten (10) universities in three (3) provinces of Afghanistan. Respondents attended both private and public institutions in the cities of Herat, Balkh, and Kabul yielding a total of 344 usable survey respondents. There were an additional 29 students who attended a focus group to follow up on the survey responses. 10 students were from universities in Heart, 9 from Balkh and 10 from universities in Kabul. In the sample, 53.45% of the respondents were male, 46.55% were female. In terms of education attainment levels; 12.35% of the sample were in their first year of College, 17.35% were in their second year of College, 34.71% were in their third year, and 35.59 % were seniors in college. Overall, 19.6 % of the sample had an annual income of over $6,012 a year. Table 1 outlines the sample statistics. Table 1: Sample descriptive statistics Gender:

Response Percent





Class Standing:

Response Percent









Monthly Household Income

Response Percent

$ 85 or less


$ 86-170


$ 171-340


$ 341-500


$ 501 or more


8. Measurement This study was exploratory in nature and, as such, focused on a combination of qualitative and quantitative measures. Most of the items were single item measures designed to succinctly assess how Afghan youth perceive the field of social entrepreneurship. Christophersen and Konradt (2011) speak to the validity of single item measures in assessing respondents’ perceptions. The measures were designed to assess if Afghan youth were aware of social entrepreneurship and their feelings towards the construct. Additionally, we explored how empowered these young people felt in terms of their ability to change their communities and their thoughts on the importance of government intervention. Finally, we wanted to explore how interested Afghan youth were in building careers in social entrepreneurship moving forward.

9. Results Six hypotheses were tested using SPSS and content analysis software. A combination of t-tests, simple regression and text analysis were used to test the hypotheses. As seen from the results outlined below; five of the six hypotheses tested were supported. Hypothesis one demonstrates that the SE mean for participants who


Jawad Ehsanyar, Christina Mullen and Sacha Joseph-Mathews believe that governments are failing them in their communities is higher than the SE mean for those who do not believe the government is failing them. H2 confirms that the participants did think of SE in terms of selfempowerment, doing good in the community, job creation and innovation. H3 refers to the positive perception of SE by the participants and a one-way t-test demonstrates that perceptions are significantly positive in the population. The regression model testing hypotheses 4-6, tell us that although the participants do not always see SE as an effective innovative tool to address social ills, they do see it as a means for development, consider self-empowerment key to its success, and they are excited at the prospect of having careers in the field. Table 2: Hypotheses testing results HYPOTHESIS






Two way ttest

SE Mean for Afghans who did not believe =3.0 SE Mean for Afghans who did believe = 4.34 pch15 and (28840-0)/(28840-0)=1 for ch15->u1. In other words, we approximated the knowledge linkages by the intensity of collaborative activities in common R&D projects. A higher knowledge flow was assigned to a higher financial participation of the partner. The nodes in the innovation networks were represented by regional actors. Their innovative activity was measured by the number of patent applications in 2015. Again, the innovative output was rescaled to the range of [0,1] using the above-mentioned normalization process. FCM (Kosko, 1986) can be defined as a signed digraph consisting of nodes and edges causally connecting the nodes. Weights wji are assigned to the edges, representing the strengths of the linkages. To calculate the value of a node in the next iteration k+1, the impact of all edges connected to the node is considered. Finally, to transform the values of the nodes, activation function f is used, such as linear, sigmoid or hyperbolic tangent. Formally, the node value for the next iteration k+1 can be calculated as follows: k *1





" f(ci * # c j / w ji )


j "1 j 0i

where indexes i and j refer to connected nodes. By contrast to original cognitive maps, FCM process the uncertainty in the linkages using the theory of fuzzy logic. Thus, the causal relationships may be represented by fuzzy weights in the range of [0,1]. Note that the new value of a node is calculated based on all edges connected to that nodes. In the regional innovation network, the values of nodes represent the innovative activity of regional actors and the edges stand for knowledge flows. Thus, the dynamics of the innovative activity of the actors is based on its previous innovative activity (in iteration k) and the innovative activity of influencing actors (the strength of the influence depends on both the innovative activity of the actors and the weights of knowledge flows). The nonlinear activation function f such as sigmoid or hyperbolic tangent function is used to transform the linear values in order to capture the full dynamics of the relationship between R&D intensity and innovative


Petr Hajek, Jan Stejskal and Ondrej Prochazka activity (Yang et al., 2010). Nonlinear relationships have also been reported in regional innovation systems (Hajek et al., 2014). By incorporating uncertainty and nonlinear relationships, FCMs have provided good simulation performance in various business applications such as modeling interactions among knowledge management processes (Prochazka and Hajek, 2015). In our experiments, we employed FCMs with a hyperbolic tangent activation function (f=0.5tanh(x)) because it is reported to realistically simulate the intrinsic characteristics of the innovation process (Hajek et al., 2015).

4. Results The regional innovation networks for chemical and transportation industries are represented by the typologies of FCMs presented in Figure 1 and Figure 2, respectively. In the FCMs, the nodes represent regional actors, namely universities, firms and R&D institutions. A label was given to each node, along with the innovation activity scaled to the range of [0,1]. The linkages in the FCMs represent the knowledge flows between the actors with the collaborative R&D projects. Obviously, the University of Pardubice (u1) lies in the central position, with many linkages to other actors. Since the remaining universities were located outside the Pardubice region, thus connected to additional actors in other regions, we assumed that their innovation activity is fixed. In other words, for simplicity their innovation activity is not evolving over time.

Figure 1: FCM for regional innovation network in chemical industry, where u denotes university, v is R&D institution and ch is chemical firm

Figure 2: FCM for regional innovation network in transportation industry, where u denotes university, v is R&D institution and d is transportation firm. To simulate the evolution of the innovation activity of individual regional actors, we used equation (1) with k=20 iterations. We examined the initial values (k=0) of the nodes for several scenarios. In the first set of experiments (scenario 1), we used the current innovation performance (proxied by the rescaled number of patent applications in 2015) of the actors. Note that the values for scenario 1 are based on real data, whereas the


Petr Hajek, Jan Stejskal and Ondrej Prochazka following two scenarios are based on fictional changes in initial conditions. In scenario 2, we examined the sensitivity to initial innovation activity by increasing the value of the central node u1 from 0.165 to 0.365 (i.e. fictional increase by 0.2). In scenario 3, sensitivity to the strengths of the linkages was tested. In this case, we fictionally increased all linkages by 0.1. Figure 3 shows the results of the simulations for the chemical industry. To save space, we focused on two representatives in the innovation network: 1) the University of Pardubice (u1) and 2) average firm innovation activity. In the original scenario, the innovation activity of both the university u1 and firms in chemical industry are increasing to a fixed point, representing a long-term stability of the regional innovation network. The effect of increasing the initial innovation activity of the university u1 (scenario 2) leads to a short-term increase in firm innovation activity, without having a long-term effect. In scenario 3, on the other hand, a significant long-term effect was observed. This is the increasing amount of collaborative R&D projects have a lagged positive impact on innovation activity. Similar, but weaker, effects were also present in the transportation innovation network (Figure 4). This suggests that the public financial support of collaborative R&D projects in the chemical industry is more effective than in the transportation industry.

Figure 3: Simulations of innovation activity for 3 scenarios in chemical FCM a) University of Pardubice, b) average firm

Figure 4: Simulations of innovation activity for 3 scenarios in transportation FCM a) University of Pardubice, b) average firm


Petr Hajek, Jan Stejskal and Ondrej Prochazka

5. Conclusion In this study, we have developed two FCM models to simulate the activity of two regional innovation networks. The evidence from this study suggests that the models allows for the simulation of the effects of public financial support in collaborative R&D projects. However, several limitations of the proposed model should be mentioned. Although the models may explain some of the evolving patterns in the regional innovation networks, we are aware that the models can be further elaborated in several directions. Firstly, the collaborative R&D projects financially supported by the TACR represent one of the most important source of collaborative activities. However, other important sources were omitted owing to the character of the database used, such as collaborative activities with market actors (customers, suppliers, competition) and internal collaborative projects (within a firm or firm group). Secondly, the intensity of knowledge flows was approximated by the size of the collaborative R&D projects, without considering the knowledge intensity and effectiveness of the projects. Thirdly, innovation activity can also be measured by alternative approaches, such as the novelty and economic effects of the innovative products. Finally, the most important limitation of this study is the focus on a narrow context of two industries in one region (one country) within a certain period of time. In this context, we show that the increase in innovative activity of individual actors have a short-term effect on the innovative activity of other actors, without having a long-term effect. On the other hand, a positive long-term effect was observed when the amount of collaborative R&D projects increased. However, we cannot generalize our findings to different contexts. This study is the first step towards enhancing our understanding of the dynamics of regional innovation networks. Further studies, which take different contexts into account, will therefore need to be performed. We believe that this research will serve as a base for future studies undertaken in the abovementioned areas by extending the research methodology developed in this study.

Acknowledgements This article was created as a part of the solution of the research task No. 14-02836S entitled “Modeling of knowledge spill-over effects in the context of regional and local development”, financially supported by the Grant Agency of the Czech Republic. The article is also a result of the grant No. SGS_2016_023 of the Student Grant Competition.

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Entrepreneurship Education in Studio Based Learning Practices Kari-Pekka Heikkinen, Seppänen Ulla-Maija and Jouko Isokangas Oulu University of Applied Sciences, Finland [email protected] [email protected] [email protected]

Abstract: The need for entrepreneurial mindset, skills and creativity in the future work-life will require the renewal of pedagogical methods used. The studio based learning is one of the promising pedagogical methods enabling this change. The LAB studio model, pre-incubator style studio education in Oulu University of Applied Sciences in Finland, develops connections between work-life based problems and the recognition and development of the related business prototypes and start-up companies. Projects, based on the given problems are medium for educating self-aware future professionals, who will gain skills and attitude to work in interdisciplinary teams with entrepreneurial mindset. This article is a study by a literature review of the recent higher education practices utilising studio model as pedagogical method in variety of disciplines. The study will identify the common elements of entrepreneurship education and studio model practices described in the literature. The findings of the study indicate that entrepreneurship as a concept is not sufficiently addressed in the studio model literature; several similarities in the pedagogical principles between the LAB studio model and other studio models; and that LAB studio model has several unique practices compared to other studio model educations. Keywords: studio based learning, studio model education, lab studio model, higher education, activity system model, entrepreneurship education

1. Introduction The current economical decline in Europe causing the increased unemployment rate has challenged also the higher education institutions to renew their offering. One solution to overcome this societal problem is to increase and develop the entrepreneurship education offering in the universities. In Finland, Oulu University of Applied Sciences has responded and taken the initiative to develop the LAB Studio Model (LSM) for the need. LSM is grounded on the studio based learning as a pedagogical solution and is among other targets educating entrepreneurial skills in a small company like environment. Traditionally learning studios have been used to educate disciplinary skills for professional areas, such as architecture, design and software engineering. Since LSM has a significant focus on new business development, this article is a study of entrepreneurship education aspects within the educational settings utilising the studio based pedagogics. In addition the research of entrepreneurship education has shown the requirement of aligning the used methods and pedagogical solutions with the entrepreneurship phenomena, since the traditional methods of education are still widely used. The research questions stated in this article are as follows; how common ‘entrepreneurship’ and ‘entrepreneurship education’ are as a theme in the research articles within context of ‘Studio Model Education’ and ‘Studio Based Learning’?, what elements does studio model education have in common with entrepreneurship education? and what are the unique entrepreneurship education elements of LAB Studio Model compared to other educations utilising studio based learning?

2. Entrepreneurship education and LAB studio model Entrepreneurship is seen as a society-renewing phenomenon (Kuratko, 2005). Schumpeter connects the entrepreneurship to the creation of new innovations, as he describes entrepreneurs according to their ability to adapt to the changing demands of their customers and their own business environment, and the ability to offer a constant process of innovation to societies, no matter whether that innovation is a service or a physical product (Schumpeter, 1926). The main focus of entrepreneurship has shifted to the process of creating new businesses (Alvarez and Barney, 2006; Detienne and Chandler, 2004; Shane and Venkataraman, 2000), which is often an iterative process (Davidsson, 2005). The process is connected to changes in the operational environment (Bryat and Julien, 2000; Eckhard and Shane, 2003) and is used to develop knowledge and networks for the benefit of new businesses (Elfring and Hulsink, 2003). Theoretical categorisations to the creation of a new business have been made by e.g. Alvarez and Barney (2006); Detienne ja Chandler (2004), and Sarasvathy, Dew, Velamuri and Venkataraman (2002). Puhakka (2002) defines entrepreneurship as a process of creating new business, where the opportunity of new business is recognised and transformed into a form of creating economic value by using own and others resources and personal relationships. Coming from this entrepreneurship connects as a phenomenon to the environment of activity, innovation, human activity and future orientation (Shane, Locke ja


Heikkinen Kari-Pekka, Seppänen Ulla-Maija and Isokangas Jouko Collins 2003). The debate around the entrepreneurship education states, that it should be closely connected to the entrepreneurship phenomenon (Deakings and Free,l 1998; Hytti, 2003). Historically, formal education has differed from learning in the informal sector and in working life (Engeström, 1987; Miettinen, 1990). Teaching has typically been teacher-led, involving textbook- and individual-centered learning in classrooms with few connections with actors outside of the education context (Miettinen, Isokangas and Peisa, 1997). The objective of educational change is to move beyond the lesson and textbook structure and move to connect more strongly with activities focused on societal use. Entrepreneurship as new business creation is linked to changes in the environment and societal phenomena. Educational activities related to the recognition of business opportunities have become as part of entrepreneurship education (Detienne and Chandler, 2004). The challenge for the entrepreneurship education is that the traditional teaching methods are still widely used, e.g. Solomon, Duffy and Tarabishy (2002). Entrepreneurship education research has shown that entrepreneurship-learning methods should include functional project-based learning (Pittaway, 2004), which contains a sufficient level of challenge and uncertainty (Cope, 2003). This type of education requires students to be active and self-directed (Bird, 2002; Cope, 2003). In addition functional, new activity creative, pervasive and long-term learning are required. Strengthening of the social dimension and networking (Rae and Carswell, 2000) encourages the student to take part in educational planning (Fiet, 2000), self-organising and the use of versatile assessment (Honig, 2004). The learning methods should emphasise working under uncertainty, working under pressure and solving contradictions in the activity (Cope 2003; Pittaway 2004). Ultimately, linking the recognition of business opportunities to learning requires a detachment from traditional classroom pedagogy (Honig, 2004) and building bridges with learning networks outside the education environment (Deakings and Freel, 1998; Elfring and Hulsink, 2003; Isokangas, 2009). Originally by Schön (1983, 1987), the concept of studio model education has been developed to overcome this dilemma. The model emphasises learning skills of the experienced professionals by having a weak connection to the external representatives of the work-life and its conditions. The LAB studio model (LSM) is a higher education, interdisciplinary education model created in Oulu University of Applied Sciences (Oamk), Finland and aimed at training competent new professionals, self-directed teams and new businesses with an industry focus. In general, the LSM can be defined as a business pre-incubator, created to produce promising teams with solid and proven potential for creating their own new business (Heikkinen, Seppänen and Isokangas 2015). In general, studio model education can be defined as an instructional strategy that provides students with opportunities to engage in relevant, authentic learning in a school setting (Boyer and Mitgang 1996; Burroughs, Brocato, and Franz, 2009) A studio model of educational delivery suggests a more practical approach to professional education. Schön (1983, 1987) summarizes this process as reflective practice or “knowing- and reflecting-in-action". Pakman (2000) adds that this model of learning can allow practitioners to reconstruct their theories of action making and form action strategies explicitly open to criticism. Recent study of Heikkinen and Stevenson (2015) has shown LSM to utilise the studio model for its pedagogical model and include several new factors compared to the existing definition of studio model education by Bull, Whittle, and Cruickshank, (2013). These factors include: the offering a form of instruction that is more competitive in structure in contrast to other studio models (competitiveness); integrating experienced professionals and coaches from the industry (work-life connection); including problems or ideas directly from targeted industries; and building interdisciplinary project teams that cross professional and higher education faculty boundaries. Also the study of Heikkinen et al. (2015) has shown the expansion of the learning networks and the study of Heikkinen and Räisänen (2016) the utilisation of knowledge creation in the LSM. DevLAB is one of the three LSM based educational settings, called as Oamk LABs, using LSM as it´s pedagogical basis. DevLAB is one or two semesters full time education in English aiming to educate self-aware future professionals who are capable for developing client centered solutions in a cooperative interdisciplinary team. During the academic year of 2015-2016 the industries in focus were health and social care, tourism, energy and environment. Industries are chosen based on the local development and employment needs as well as the strategic development areas of Oamk. Student teams develop their solutions and business models by an iterative design thinking process and Lean startup business model. During the academic year of 2015-2016 40 students, consisted from 12 different countries, 11 different degree programs and five different disciplines participated DevLAB. By its organisation and administration DevLAB is part of the Oamk, but it operates outside the university campuses. This is in order to provide possibilities to connect with the startups, entrepreneurship services and learning network beyond the university learning network. (Heikkinen, Seppänen and Isokangas, 2015.) The


Heikkinen Kari-Pekka, Seppänen Ulla-Maija and Isokangas Jouko learning, as well as each student's individual goals of learning and professional and personal aims of development, are based on the goals and methods described in the Oamk LABs curriculum (Oamk, 2016).

3. Method for the study The study was done in two major parts; firstly by an overview of the articles in the studio context published during the past thirty years and secondly by a literature review to identify a more detailed and recent understandings of the core studio model practices described in the literature and compare the entrepreneurship education practices to the studio model practices. For achieving the best coverage for the study, two different search terms for the published articles were used; “studio model education” and “studio based learning”. For the analysis tool of the second part Activity System Model (Engeström 1987), based on Activity Theory, was chosen because of its viability in analysing the activity of a system in general and the social aspect of the activity. Activity Theory defines that the behavior of an individual cannot be separated from the changing environment. Vygotsky (1978) defined mediated action from the individual's perspective. Activity Theory emphasises the concept of object-oriented, collective and culturally mediated human activity and the role of artefacts on it (e.g. Engeström 1987, Leontjev et al. 1977). The production of any activity involves a subject, the object of the activity, the tools that are used in the activity, and the actions and operations that affect an outcome (Nardi, 1996). The subject of any activity is the individual or group of actors engaged in the activity. (Jonassen and Rohrer-Murphy, 1999; Engeström, 2001) A tool can be anything that is used in the transformation process, including both material tools and tools for thinking. (Jonassen and Rohrer-Murphy, 1999) The activity in the system should have an object, which is clearly defined. According to Leontjev et al. (1977) the object of the activity is the real motive for the activity. Objects and motives are collective (Engeström, 1987, 1995), and the individual activity is always part of a system activity and activity among other actors in the system (Engeström, 1983, 1987; Leontjev et al., 1977). Figure 1 illustrates the concept of Activity System Model, where individuals participating to activity are in relation to the environment via artefacts, signs and other individuals.

Figure 1: The structure of a human activity system (Engeström, 1987, p. 78) The activity is social, only the actions are individual (Engeström, 1987). Engeström expanded the Activity Theory to include collective motivated activity toward an object, making room for understanding how collective action by social groups mediates activity by inclusion of community, rules and division of labour. The community consists of the interdependent aggregate, which share object (Jonassen and Rohrer-Murphy, 1999). Rules inherently guide actions or activities acceptable by the community, so the signs, symbols, tools, models, and methods that the community uses will mediate the process. The division of labour prescribes the task specialization by individual members of groups within the community or organization as related to the transformation process of the object into the outcome. The outcome is the form of instruction that is developed and implemented from the object. (Jonassen and Rohrer-Murphy, 1999.) The overview study was performed by a text content analysis (Krippendorff, 2012) for the keywords and abstracts in articles published between the years 1984-2015. The searches with two search terms were directed to Scopus, one of the biggest bibliographic databases having more than 60 million records (Scopus 2016). After the searches the non-relevant and duplicate articles were removed and by using Nvivo-tool the analysis was


Heikkinen Kari-Pekka, Seppänen Ulla-Maija and Isokangas Jouko performed for the relevant articles in two patches; the first batch with a “studio model education”-search term included 92 articles and the second batch with a “studio based learning”- search term included 164 articles. The analysis was performed in two parts, first the total amount of articles published per year was counted from two batches and second the articles of most used words in the abstracts and keywords were found out. The first analysis was performed to achieve overall understanding of the amounts of the articles in studio context and the second analysis was performed to achieve overall understanding of the subjects written in the articles. The literature review was performed for the articles written between the years 2010 and 2015, called ‘Studio articles’ in this study, by an analysis using the Activity System Model. The search for the articles was directed to Scopus and included the articles with the search term “studio model education” and “studio based learning”. Total amount of 23 articles were read by three researchers during the spring 2016 and analysed by a deductive content analysis using the Activity System model as a theoretical background. The findings were written down using Google Sheets in the research seminars between the researchers, after which, two experienced coaches, both working in DevLAB, reviewed the findings and the conclusions.

4. Results 4.1 Results of the overview study The results of the overview are illustrated in the Figures 2, 3 and 4. The Figure 2 shows the amount of the published articles about the studio model education and studio based learning between the years 1984-2015.

Figure 2: Amount of the published ‘Studio Model Education’ and ‘Studio Based Learning’ articles between the years 1984-2015. As it can be seen from the Figure 2, the amount of publications has been significantly rising during the past ten years. This trend can be a sign of a rising interest of new studio environments establishment and interest towards the studio based pedagogic overall. Adding the search terms ‘entrepreneurship’ or ‘pre-incubator’ to the used terms didn’t give any results from the Scopus for published articles. This indicates the possibility of missing entrepreneurship education and startup company pre-incubator settings utilising studio model practices. Provided by the Nvivo-tool, Figure 3 and Figure 4 illustrates wordclouds of the ten most used words in the published articles keywords and abstracts between the years 1984-2015. From the both wordcloud, where larger font means bigger count in the amount of words used, can be seen that subjects like ‘architecture’, ‘environment’, ‘project’ and ‘process’ are the most common used, while as in the first search the words missing are ‘entrepreneurship’ and ‘pre-incubator’. In fact, business related words are a minority in the articles keywords and abstracts. The findings indicate that there are no articles published about business and entrepreneurship educations utilising studio pedagogics within the last thirty years. Based on the nature of words on the wordclouds, there is a possibility that the search term ‘Studio Model Education’ would find the articles describing more the practical implementation of the studios, while ‘Studio Based Learning’ would find the articles describing the practices of the studios.


Heikkinen Kari-Pekka, Seppänen Ulla-Maija and Isokangas Jouko

Figure 3 and 4: Wordclouds of the published ‘Studio Model Education’ (Figure 3) and ‘Studio Based Learning’ (Figure 4) articles between 1984-2015.

4.2 Results of the literature review The results of the literature review are presented first by presenting the common findings of the comparison of Studio articles and LSM, second by comparing the findings to entrepreneurship education and third by presenting the unique features of LSM. 4.2.1 Subject In this study the subject is a group of higher education students. Students might be either bachelor or master level with different phases of studies. Most commonly students are from one or two professions, in fewer cases the groups are interdisciplinary. (Bull and Whittle, 2014; Bosman, Dedekorkut and Dredge, 2012; Khan and Mahmood, 2013; Shraiky and Lamb, 2013; Schnabel and Ham, 2012; Collison, Cody and Stanford, 2012; Hundhausen, Fairbrother and Petre 2012.) When comparing the findings between Studio articles and entrepreneurial educations, none of the articles mentioned students from the field of business or entrepreneurial studies. DevLAB includes students from the field of business and other fields of higher education studies. Before entering the LSM students are ensured to realise the curriculum including entrepreneurial subjects, as well as the possibility for establishing their own enterprise. 4.2.2 Object In this study the object is a prototype of the desired solution to a given problem. The solution is based on a recognised need of a client. Articles describe the prototype to be a kind of fulfilling the needs of the curricula practices within the particular discipline. (Bosman, Dedekorkut and Dredge, 2012; Brandt et al, 2013; Bull and Whittle, 2014b; Gattie et al, 2011; Wang, 2010.) Studio articles are having an object of prototyping a viable solution, while entrepreneurial educations object is making new business. DevLAB object is to combine both of these; prototyping a viable solution with a viable business model. Solutions developed in LSM are based on client’s real need, so there is already a customer willing to pay for the new solution. This setup creates a need for the business opportunity recognition, as well as requirement of scalable solution, enabling growth of their possible business. 4.2.3 Outcome The outcome is a concrete result of the development activities, such as a product or a service; student personal and professional development; understanding the connection between theory and practice and between worklife and academic context. (Bosman, Dedekorkut and Dredge, 2012; Bull, Whittle and Cruickshank, 2013; Bull and Whittle, 2014; Carter and Hundhausen 2011; Clinton and Rieber, 2010; Collison, Cody and Stanford, 2012; Forest et al, 2014; Habash, Suurtamm and Necsulescu 2011; Peterson et al, 2015; Lee et al, 2015; Mathews 2010; Schnabel and Ham, 2012.) Outcomes shared are in categories of personal and professional development and understanding the connection between theory and practice. Findings about student personal and professional development are connected to a personality, skills to work as a team member and networking skills. Common for both entrepreneurship education and studio model learning is that student will develop his/her agility, self-regulation, -awareness and -esteem. Also competences to confidently network and become a team worker are to develop. Common is also different ways of cooperating


Heikkinen Kari-Pekka, Seppänen Ulla-Maija and Isokangas Jouko with the external experts, targeting to develop meaningful networks. Being able to execute and evaluate the process from a need to a solution is one outcome. This requires student to connect theory and practice as well as acting and adapting their product and their own ways of working according to the changes in throughout the process. In DevLAB learning by an interactive process with business model development will enable understanding of the client centered product development. By having concrete results as an outcome of the activities, students will learn how to develop a viable solution fitting to the needs of a client. 4.2.4 Tool In this study the tool is defined to include practices within four different categories; pedagogical models; culture of critique; iterative problem solving process; and practical equipment and spaces. Common for all tools is the aim of using them to support the reflective nature of learning, reflective practice. The common issues for the studio articles and entrepreneurship education can be found from every category. Teaching in studio model is based on different pedagogical models. The most commonly used models are project-based learning, learning by doing and problem based learning. (Bull, Whittle and Cruickshank,, 2013; Bull and Whittle, 2014; Collison, Cody and Stanford, 2012; Habash, Suurtamm and Necsulescu, 2011; Hundhausen, Fairbrother and Petre, 2012; Schnabel and Ham, 2012.) Pedagogical models discussed both in Studio articles and entrepreneurship educationare project-based learning and learning by doing. Solving challenging ill-defined problems with uncertain parameters teaches coping with uncertainty. (Bosman, Dedekorkut and Dredge, 2012; Brandt et al, 2013; Bull and Whittle, 2014; Habash, Suurtamm and Necsulescu, 2011; Hundhausen, Fairbrother and Petre, 2012; Mor and Mogilevsky, 2013; Peterson, 2015; Wang, 2010.) In DevLAB projects are based on illdefined problems from partners from different industries. Critique is in a format of self- and peer-critique as well as receiving critique from the coaches and external experts. Students are also taught how to ask and receive critique from industry client and end-users (Brandt et al, 2013; Bull, Whittle and Cruickshank, 2013; Bull and Whittle, 2014; Carter and Hundhausen 2011; Cennamo et al, 2011; Hundhausen, Fairbrother and Petre 2012; Mor and Mogilevsky, 2013; Schnabel and Ham, 2012; Shraiky and Lamb, 2013; Wang, 2010.) Unique for DevLAB culture of critique is the principle of competitiveness that enhances also the skills of coping with uncertainty. The competition between projects enables the culture of excellence; only the most viable solutions will be made as demonstrations. The decision-making by the external industry experts of the continuing projects will increase the credibility of the solution. Learning process is an interactive process for developing solution. Main issues are the problem, iterative nature of the progress, length of the project, learning theoretical knowledge and ownership of intellectual property (IP). (Bosman, Dedekorkut and Dredge, 2012; Brandt et al., 2013; Carter and Hundhausen 2012; Cennamo et al, 2011; Mor and Mogilevsky, 2013; Peterson et al, 2015.) Learning is based on real life problems, where industry representatives are involved. It is focusing on developing a solution based on analyzed data in order to understand the problem, what is verified by making series of prototypes. (Bosman, Dedekorkut and Dredge, 2012; Bull, Whittle and Cruickshank, 2013; Bull and Whittle, 2014; Bull and Whittle 2014b; Forest et al, 2014; Habash, Suurtamm and Necsulescu 2011; Mor and Mogilevsky, 2013; Peterson 2015; Shraiky and Lamb, 2013; Wang 2010.) In DevLAB the problems are from industry and length of the project is one or two semesters. Development of solution with the business model is done as iterative process, where process is repeated several times. There were no articles in the literature review describing the ownership of the IP rights. Main categories for the equipment and space are defined to include: learning tools, visualisation and description of the space. For supporting students to be more active and self-directed different learning tools are used. One of the most important tools is the studying space; use a public space that could be used also by other people and learning environment that belongs to the students. This conveys the principle of mutual trust and reciprocity. Digital tools, such as learning platforms, virtual environments, social media and video conferences provide student a possibility to become less dependent of teachers and become more team centered. Using tools like log books and journals will support students to store their documents and to reflect their personal learning process. (Bosman, Dedekorkut and Dredge, 2012; Brandt et al, 2013; Bull, Whittle and Cruickshank, 2013; Bull and Whittle, 2014b; Forest et al, 2014; Hundhausen, Fairbrother and Petre 2012; Lee, 2015; Mor, 2013; Schnabel and Ham, 2012; Wang, 2010.) DevLAB uses one platform for team communication and mutual feedback. In studio learning versatile assessment tools are used to support students reflection of professional and personal development. Students are making different kinds of self-reflection reports, learning journals,


Heikkinen Kari-Pekka, Seppänen Ulla-Maija and Isokangas Jouko design narratives as well as personal and team role journals. (Lee et al, 2015; Mor and Mogilevsky 2013.) Becoming a self-aware future professional is one of the main goals of DevLAB. For this reason also other tools for reflection and self-assessment are used, such as future curriculum vitae and Kawa-model river (Iwama 2006). One main difference compared to Studio articles is the location of a studio; DevLAB is located outside of the university campuses and belongs to a startup business community, called Business Kitchen (Business Kitchen 2016). 4.2.5 Rules Rules are divided into four different categories; academic rules; co-operation rules; community rules defined between the studio actors and personal rules for person’s internal behaviour. When comparing the findings between studio articles and entrepreneurial education, academic rules, community rules and personal rules are recognized as shared categories. One common rule is that peers, clients and professionals do evaluation in academic manner enabling a public critique. These rules are descripted in curriculum. For the evaluation versatile assessment methods are used. One rule is that teams own result of their work. One rule for the learning community is the socialization for learning purposes. (Bosman, Dedekorkut and Dredge, 2012; Brandt et al, 2013; Bull, Whittle and Cruickshank, 2013; Bull and Whittle, 2014; Clinton and Rieber, 2010; Forest et al, 2014; Lee et al, 2015; Mor and Mogilevsky, 2013; Wang 2010.) In the DevLAB rules are defined by the university e.g. in curriculum, by the community e.g. how to take care of the premises and by students e.g. one's own goals of learning. A common rule characteristic to DevLAB is that student teams will have IP of their own product. Also strong focus on solving problems from economical and sustainability topics in its projects is one of the learning rules. Rules are enabling the process of creating knowledge development as well as new businesses and networks without economical constraints. 4.2.6 Community The community is an important factor for the process of innovating and creating new business. In this article the community includes students; university staff; and external participants. The process is fostered by social interaction; connections between studio participants and external participants. The external participants are used for e.g. as be clients for the projects and as giving feedback from the professional context. (Bosman, Dedekorkut and Dredge, 2012; Bull, Whittle and Cruickshank, 2013; Bull and Whittle, 2014; Carter and Hundhausen, 2011; Forest et al, 2014; Habash, Suurtamm and Necsulescu 2011; Harinarain and Haupt, 2015; Khan and Mahmood, 2013; Lee 2015; Pektas 2015; Peterson 2015; Shraiky and Lamb, 2013.) In the process of creating innovations the activity of producing personal relationships is enhanced by the mix of students with different levels of knowledge (Khan and Mahmood, 2013). In DevLAB students are at least on 3th year since the model requires a basic knowledge of their own profession. In addition teams of DevLAB includes unemployed, experienced professionals. Staff members have background from different industry fields and have at least master's education as well as pedagogical studies. External participants are experts of different fields of industry. 4.2.7 Division of labour Division of labour is divided between two groups of actors; students and staff members. (Brandt et al., 2013; Bull and Whittle, 2014; Habash, Suurtamm and Necsulescu 2011; Hundhausen, Fairbrother and Petre 2012; Carter and Hundhausen, 2011; Mor and Mogilevsky, 2013.) In DevLAB students are always working in teams. Every team has to decide their tasks and roles. Different tools and team coaching are used to support each team to recognize the roles and members suitable for each role. Students are also encouraged to try roles and tasks they find challenging. In DevLAB students require supervision and coaching several times in a week. There are specific staff members responsible, called LAB Masters, for taking care of operational activities, such as planning of the learning activities in studio and evaluation of the students. Student teams have also possibilities to have coaching from experienced coaches, who have different areas of expertise. In the beginning of the semester these coaching moments are organized by LAB Masters and coaches, by the end of the semester students are expected to be fully independent to recognize the need of coaching and contact coaches themselves.

5. Conclusion Studio based learning are one of the promising pedagogical methods to combine theory and practice in higher education. LAB Studio Model (LSM) is one of the higher education concepts utilising the studio model practices in Finland. This article presents a study about the common elements of studio model and entrepreneurship educations. Results of the overview study give a strong indication that there are no articles written about


Heikkinen Kari-Pekka, Seppänen Ulla-Maija and Isokangas Jouko entrepreneurship and entrepreneurship educations utilising studio based learning. Even with the limitation that the study was performed by using only one database, the results indicate there seems not to be a significant number of entrepreneurship education settings utilising studio practices at the moment. This might also indicate the weakness of the real work-life connection among the educations utilising studio pedagogics. Results of the literature review shows that the current studio practices are mainly established based on the academic and disciplinary needs, while LSM practices instead are established from the needs of renewing and bridging the higher education and work-life practices. The common elements that studio model education have in common with entrepreneurship education are; active learning methods, such as project based learning and learning by doing; iterative process; dealing with uncertainty; close work-life connection; active and self directed learning; and sense of community. The uniqueness in LAB studio model practices compared to the other studio practices include; true interdisciplinarity; conscious support of self-awareness; and conscious support of team working abilities. Also as a process vise, LSM produces new, innovative solutions with related business models; the competitive nature of the development process generate the culture of excellence, where student teams have common goal to work together in order to develop the most viable solutions as demonstrations.

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The Challenge to Entrepreneurship Educators (Non Obstante David Birch) Dale Heywood and Alan Southern University of Liverpool, UK [email protected] [email protected]

Abstract: Just over a decade ago in the journal Academy of Management Learning and Education Magnus Aronsson (2004) published a paper entitled “Education Matters – But Does Entrepreneurship Education? An interview with David Birch”. The reason for the interview was to open up a discussion on what might be required in the taught provision of entrepreneurship education. This was essential, it was argued, for entrepreneurship education to provide a more effective environment for encouraging entrepreneurship. In the paper Birch developed a critique of those involved in entrepreneurship education, particularly citing the role of institutions and the programmes they deliver and questioned their impact on producing high quality entrepreneurs. This debate raised age old issues about practice and theory, about praxis, and about the role of structure and agency particularly relating to the contradictions that arise to even define the discipline of ‘entrepreneurship’. Less sophisticated although equally pertinent, is the question of whether entrepreneurship can be taught. The critique offered in the interview between Aronsson and Birch has left an impression on many entrepreneurship educators and it was this that became the starting point for the design of a programme developed by the authors of this paper. We decided to take on the challenge suggested to incorporate sales training, negotiation and other entrepreneurship relevant content into a curriculum for postgraduate entrepreneurship students at our institution. Our view was sympathetic to the critique offered by Birch so we sought to design a bespoke and creative entrepreneurship M-level degree that has sales and negotiation as the foundational module of the programme. Other equally innovative modules support this. The UK higher education system typically has a dissertation equating to a third of the degree. We replaced this with a three semester module on developing sales skills and teaching negotiation techniques which are practiced repeatedly. We believed we could legitimately question the functional purpose of a dissertation for people aiming to become entrepreneurs. However, in recognising the paradox often found between theory and practice, we felt that those critical, analytical skills that are part of the academic journey, particularly in the dissertation period, had an important role for nascent entrepreneurs. We recognised that if we could support students to produce an output, a paper, of ‘publishable standard’ we would take those students through a journey that would support their learning for entrepreneurship juxtaposed alongside practitioner-based pedagogy. This keeps at arms length, views articulated about student learning that tended to be conservative and opposed to such a change. We present in this paper a case study of what we have sought to develop, showing the barriers we overcame and how we incorporated live projects, utilising various learning technologies and by encouraging entrepreneurial behaviour in the learning activities of students. We hope this case provides inspiration for other entrepreneurship educators to support the development of their courses and programmes in delivering a closer match between what universities can provide and what is required in entrepreneurship education. Keywords: entrepreneurship education, critical skills, experiential learning, negotiation, research publication, dissertation redundancy

1. Introduction This paper shares the advantages of redeveloping a UK Masters' level university programme which was designed to encourage students studying entrepreneurship to gain a better understanding and appreciation of several absent skills, competences and experiences during their education. It explains the thinking behind the introduction of new features and demonstrates how students have benefited from them thus far. The programme we inherited had previously been an MBA and that was reflected in the structure of content focus. It was like many other MBA’s, a rather traditional business management programme but called MBA Entrepreneurship. The year long programme has been completely restructured over the past three years and has been built around a new 60 credits, three semester, foundation module, Sales, Selling & Negotiation. This was designed to be the 'spine of the degree' partly in response to David Birch’s observation that sales lie at the heart of any successful entrepreneurial activity. In this paper we provide evidence of the innovative subjects and activities we have introduced over the entire degree which we feel differentiates our programme from other M-Level entrepreneurship programmes. Consequently other educators may be encouraged to examine features such as the traditional dissertation for its educational and experiential purpose for entrepreneurship students. [Jeske 1984; Vos 2013]. Readers will learn that there are a broader selection of subjects introduced to the degree which have inspired graduates and existing students to become more entrepreneurial even though they don’t all expect to set up new ventures.


Dale Heywood and Alan Southern

2. Surveying associated literatures In order to cover all the associated literature areas required for this project it was necessary to cover many education research specialisms. These include the content of enterprise and entrepreneurship programmes, literature on the objectives and effectiveness of entrepreneurship and enterprise education, sales education, negotiation training and dissertation purposes in higher education. These are consequently set out in this order.

2.1 Content of enterprise and entrepreneurship education There is a great deal of conflicting commentary and opinion when it comes to educators debating ‘what’ should be taught in entrepreneurship and enterprise education and indeed ‘how’ it should be taught (Gibb 2011; Leitch et al 2012). A division of enterprise and entrepreneurship education has emerged recently which now adds to the confusion of which is which (Harte & Stewart 2012; Jones & Matlay 2011). Enterprise education is often presented as more practical focussed whereas entrepreneurship education is presented as more start-up oriented. There are also debates about the expected outcome of entrepreneurship education with Leitch et al [2012] noting how the shift has moved from encouraging students to create new businesses on graduation to a new emphasis on regarding entrepreneurship as a way of thinking and behaving. This has been particularly problematic for us because we have a very diverse cohort of students who have come to study with us since taking over the programme in 2012. We actively recruit small business owners, social entrepreneurs, family firm inheritors, nascent entrepreneurs, self employed people as well as those who have a less defined intention of ‘some day’ setting up a new business. Therefore the assumption and basis for much critique in the literature is that entrepreneurship fails to meet its expected outcome of more start-ups (Aronsson 2004; Pardo 2013). Some researchers argue educators should not only aim for more start-ups and new ventures to be created but to develop ‘autonomy’ (van Gelderen 2010) an entrepreneurial mindset (Collins et 2006) the ability to create new opportunities (Neck et al 2014) and focussing on the future (Fayolle 2013). It would appear that few other subjects taught at university come under as much scrutiny as entrepreneurship and enterprise education with the much debated ‘can entrepreneurship be taught’ at its heart. However with the rapid increase in universities providing entrepreneurship education about, for and through (Sirelkhatim & Gangi 2015) it would seem that the market has decided it is a resounding ‘yes’ and students continue to apply in ever greater numbers. This poses an ongoing problem for educators however.

2.2 What and how of teaching entrepreneurship The authors work in a traditional academic university which imposes its own requirements and traditions for how things should be done in the learning and teaching sphere. In agreement with Vanevenhoven [2013] we found that in order to challenge this traditional philosophy as entrepreneurship educators, we need to be entrepreneurial ourselves. What we proposed was a radical shift in education supported by the broader paradigm shift of moving from teacher centred education to a learner centred entrepreneurship education programme. A decade ago Lourenço & Jones (2006) following a full systematic literature review of what and how entrepreneurship education was taking place, identified a distinct difference between the traditional teaching approach and what they termed an alternative approach. Table 1: Traditional and alternative teaching approach A comparison of traditional and alternative teaching approach/mode for entrepreneurship education Traditional approach Alternative approach Knowledge Instructed to learners Constructed by learners Learners (e.g. students, participants)

Received knowledge and contain knowledge

Constructors, discoverers and creator of knowledge

Institutions (e.g. Colleges, Universities, faculty) Relationships

Classify and sort learners

Develop learners’ competencies and talents Personal interactions among learners and between institutions and students Mixture of individualistic and interactive learning activities dynamic

Activity type

Impersonal relationship among learners and between institutions and learners Individualistic - static


Dale Heywood and Alan Southern A comparison of traditional and alternative teaching approach/mode for entrepreneurship education Traditional approach Alternative approach Example of teaching method Lecturing, reading, question and Activities, presentations, answer session, advice and simulation, role-play, scenario, feedback etc games, etc Assumptions Teaching and learning is through Teaching and learning is through ‘top-down’ instructive approach – ‘bottom-up’ constructive approach transmissive methodology – transformative methodology

Source: Lourenço & Jones (2006) The programme we have designed is very much more reflective of the ‘alternative approach’ with the learning intended to be transformative for students and graduates, not transmissive as is shown in Table 1.

2.3 Sales education and training literature Having decided to introduce a greater focus on sales and selling training for our students we consulted the literature. We found that all the academic journals publishing sales education research were USA based which was disappointing. This helped us appreciate there was scope for our MSc students to not only participate in the novel activities we were preparing for them, but they could also write about their experiences and potentially contribute to research on sales education. The sales training literature is similarly contested for its efficacy [Bolander et al 2014] its place in the curriculum [Bowers & Summey 1983] why sales education needs to be thought of differently [Dixon & Tanner 2013] and how sales education can be transformative. Mani et al [2015] recommend the use of role play exercises to help students understand how body language can have either a positive or negative effect on outcomes. We have utilised these in our module. Several literature reviews are equally critical of existing sales training programmes appealing for future research to concentrate on identified gaps [Cummins et al 2013]. Following their own detailed literature review of sales research Singh et al [2015] suggest that future sales training research needs to incorporate the effects of social media and its propensity for helping people acquire sales skills. The discipline of sales is closely associated with marketing but also with negotiation. One example which links both together is Nielson & Border [2016] who show how sales professionals negotiate with the wider world.

2.4 Negotiation training literature The literature in negotiation education and training is similarly diversified in subject, process and utility often being closely aligned with conflict resolution, law and international business. Pedagogy issues are dealt with rarely but some examples include Fortang [2000] who is interested in pedagogy of teaching negotiation. Borden & Viscomi [2015] recently addressed what they term “the wicked problem” of rethinking negotiation teaching. Others provide a reflective overview of how teaching negotiation has evolved over the decades [Greenhalgh & Lewicki [2015]. Other studies look at specific factors such as emotional intelligence and how it affects negotiations [Kim et al 2014] or how knowing the right questions to ask and when, are significant in negotiations [Miles 2013]. On ‘what’ to teach and ‘how’ is a lively subject base in negotiation literature where suggestions on the use of role plays [Poitras et al 2013] and how the use of videos can be useful too [Williams et al 2008] whereas Bobot & Goergen [2010] are enthusiastic about the use of simulations to help with teaching negotiation techniques. Wade [2009] question how we measure success in negotiation outcomes and how intercultural dimensions are often overlooked in negotiation education programmes which goes directly to assessing how effective different approaches can be. So there is an overlap of scepticism between enterprise education researchers’ questioning if entrepreneurship can be taught with a not dissimilar suggestion in negotiation education research.

2.5 Dissertation literature In order to achieve our radical improvements we first had to tackle the problem in M-Level taught education of the dissertation and universities historic preference for signifying a master’s degree by the production of a dissertation [Grusendorf 1941, Vos 2013]. This feature has remained unchallenged for decades. Where research is now beginning to appear, the question of the purpose of a dissertation has been raised. Anderson et al [2006, 2008] surveyed both students and supervisors and found parallel problems from both sides with commitment and expectations. de Kleijn et al [2014] highlight the tensions in students and supervisors having to adapt to one another’s expectations which are not always balanced. This outcome is also made explicit by Ginn [2014] looking


Dale Heywood and Alan Southern at UK geography masters. Pilcher [2011] terms the dissertation ‘an elusive chameleon’. A recent literature review carried out by the Higher Education Academy [Vos 2013] introduces the problem of plagiarism and academic dishonesty when students are not supported sufficiently in the production of their thesis or dissertation. The review states that dissertations require students to demonstrate higher level skills including evaluation, synthesis, critical analysis and judgement along with intellectual coherence as well as personal skills such as time management and the ability to prioritise tasks. It goes on to state: “Additional research is needed to determine whether the knowledge and skills can be developed and demonstrated using an alternative type of assessment that may also reduce the challenges and problems inherent in the current approach.” p11 We believe our ‘alternative’ proposal does just that and others have voiced similar concerns. Jeske [1984] lists five reasons why writing training workshops are required in order to produce not only the high quality writing required for a master programme, but also the advanced intellectual challenge highlighted in the Vos [2013] report mentioned above. Jeske recognises five problems with how the dissertation process was failing students: !

Graduate writers are usually unprepared for such professional writing tasks as the dissertation.


Graduate departments neglect training in writing. Individual departments may offer research and methods courses, but these almost always focus on acquiring knowledge, not communicating it.


The dissertation is a unique task performed in a unique situation.


More attention to writing would result in sharper thinking


Greater focus on dissertation-level writing would have long-term benefits for both student and profession.

The authors’ consulted this paper and took on its suggestions when we were redeveloping the MSc Entrepreneurship programme. It may be over thirty years old but it still resonated with both authors. Universities expect high level writing but don’t provide the support students had indicated they needed. We decided that our students would be challenged to aim for a ‘publishable standard article’ but with continuous support supervision throughout the entire process.

3. Refocusing of our MSc entrepreneurship degree Having evidenced some of the areas in the higher education literature that were taken into consideration some tough decisions had to be made about what the final degree programme intended to achieve for our students.

3.1 What's in and what’s out? Some of the content of the degree we inherited were dispensed with straight away and others have been removed or revamped over the past three years. Managing Finance covered traditional accountancy methods and was replaced with an entrepreneurship focussed Entrepreneurial Finance module which includes crypto currency uses, payment technology developments, sources of funding for start up businesses and uses crowdfunding in small teams as an assessment method. Table 2: Old programme structure and focus Applied Business Research Methods

Managing Finance

Marketing Management

Entrepreneurship & Business Creation

Strategic Organisation

Government & Business Consumer Behaviour Social Enterprise

Entrepreneurial Marketing

Entrepreneurial Decision Making

Computer Simulation Game = 5 days Dissertation 10,000 words 60 credit module

Marketing Management also relied on traditional marketing theories where applied marketing techniques are better demonstrated and practised in Entrepreneurial Marketing. Students work with local SME’s to enhance their marketing position or the students own businesses if they have them. Strategic Organisation was changed


Dale Heywood and Alan Southern from a compulsory module to an elective. Venture Dynamics: Buying Building Selling Enterprises was introduced as a module that takes entrepreneurship education into the business transfer realm [Heywood 2015].

4. Dissertation redundancy The most significant and contested change was the removal of the 60 credit Dissertation component and replacing it with a year long alternative scholarly article development. If we are training students to be productive in an occupation where a dissertation or large written project will be required on a fairly regular basis, then the dissertation has immense value. However for the majority of students on the MSc Entrepreneurship programme over the past four years, the dissertation was perceived as a pointless ‘bolt on’ at the end of the year. Most M-Level degrees are recognised by traditional faculty as having a dissertation or thesis of varying lengths. Grusendorf (1941) questioned the purpose and relevance of dissertations at M-Level education as far back as 1941 and we agreed that there was a strong argument for making the dissertation redundant in our programme. The academic writing skills required to achieve a masters degree are still fundamental but in the form of a ‘publishable standard journal article’ instead. Increasing restrictions have been put on research conducted by students at our institution so we questioned if an extended literature review has the value it once had when primary research into a subject was permitted (Anderson et al 2006, 2008, de Kleijn et al 2014). Supervision of dissertations is demanding on academics time when they would rather be conducting their own research or writing (Ginn 2014; Pilcher 2011). With increasing internationalisation of higher education, we found many students regard the summer semester as a travelling opportunity, not one where they needed to be focussed on writing a ten to fifteen thousand word dissertation. Below are some of the factors we took into consideration when deciding to remove the dissertation and replace it with the Sales, Selling & Negotiation module but with a publishable quality article instead:

4.1 Purpose of the dissertation to entrepreneurship graduates? !

Quality and length of the dissertation


Supervision of the dissertation


Limitations on gathering primary research


Cost of producing numerous copies of a dissertation


Academic writing abilities of non native English writers

4.2 Article production as a purposeful alternative !

Shorter but targeted towards publication


Academically rigorous


Immersion in the Journal of their choice


Developmental learning incorporated into18 writing clinics


Spans the whole academic year


Mini viva session helps students communicate their research paper


Peer-to-Peer learning in the Student Conference day


Exposure to academics for their views on the article’s value and significance


Collegiate learning culture


Author identity needs to be gradually accepted


PhD potential is increased for writing and submitting an article whether it’s published or not

Sales, Selling & Negotiation has been developed as the ‘Spine of the Degree’ from which other innovative modules hang like limbs as can be seen in Table 3. Other modules have been built to supplement the proactive entrepreneurship education experiences we want students to achieve.


Dale Heywood and Alan Southern Table 3: New programme with sales, selling and negotiation as the ‘spine of the degree’ Research Methods for Business Entrepreneurship & Business Creation

Sales, Selling & Negotiation Part 1 2 videos = 20 credits

Entrepreneurial Finance Venture Dynamics: Buying, Building, Selling Enterprises

Sales, Selling & Negotiation Consumer Behaviour Strategic Organisation E-Business Strategy

Part 2 2 videos = 20 credits

Business Ethics Social Enterprise Becoming a Leader

Entrepreneurial Marketing

Sales, Selling & Negotiation

Entrepreneurial Decision Making

Part 3 1 video Written Article Student Conference Mini Viva

5. Academic article production Unlike the ‘bolt-on’ dissertation, Sales, Selling & Negotiation is taught over all thee semesters with six, two hour practical workshops each semester and six, two hour writing clinics each semester. This way students continuously develop their sales skills and negotiation techniques using role plays (Poitras et al 2011) and eventually develop an entrepreneur identity through live selling situations (Williams et al 2008; Dixon & Tanner 2013) as well as developing an ‘author’s voice’ through working regularly on producing a scholarly quality journal article (Ginn 2014). The supervision of the written article has had the most benefit to students because they feel we are co creating their articles with them. They submit their work in progress every month for suggestions and comments from us and ideas about how to develop their papers further. When compared with the previous dissertation model of supervisors reading a two page proposal and first draft of a chapter only, the redeveloped structure and supervisory model is both more efficient and more productive. The standard of students’ scholarly writing improves incrementally with guidance from us as supervisors [see Sirelkhatim & Gangi 2015 as an example]. This has created a practical programme that fosters innovation, creativity, technology exploitation which demonstrates enhanced enterprising skills and intellectual stimulation too.

5.1 Practising sales and negotiation Role play exercises are used to reflect real world and imaginary problems and situations and permit students to practice scenarios that represent everyday buying and selling situations. These in-class role play scenarios are a very popular method of transferring information but also of awakening student’s perception of sales and negotiation as fundamentally important to all businesses. Assessment topics can be created from current affairs. For example one of the authors was travelling to South America just as the media was reporting the intervention of the World Health Organisation with regard to the Zeka virus (WHO 2016). So students were given a ‘brief’ as either buyers or sellers of a recognised product which could prevent mosquito bites but is not in fact marketed as a mosquito repellent. This required clever manipulation of online customer feedback without claiming the


Dale Heywood and Alan Southern product will prevent Zeka infection. For the buyers team, who were a tourist business their task was to persuade the manufacturer of the product to sell them a large quantity as a first time customer. This similarly involved not mentioning explicitly why they were so eager to purchase this product whilst expecting them to demonstrate being willing to offer favourable terms to the supplier. Each group creates a video ‘pitch’ as either buyers or sellers based on information they can gather online and from mainstream media sources.

6. Entrepreneurship educators challenges Our ambitions meant we started with what we wanted students to learn and how we wanted them to learn and constructed ways and means of that learning being achieved (Biggs & Tang 2011). We have designed teaching and learning activities that directly address the learning outcomes. There is an ever challenging need to dispense with what has been taught ‘about’ entrepreneurship and an acceptance that students need to learn ‘for’ and ‘through’ active participation in entrepreneurial situations (Neck et al 2014). Learning-by-doing (Chang et al 2014) has had a far greater impact on all our students for the past few years which encourages us to continually look for better learning and teaching styles which directly benefit students whilst they are learning. These also help graduates to adapt quicker to the demands of the labour market when they select their career paths. Every situation in life is presented as a potential selling and negotiation situation including interviews for jobs, opening a bank account, choosing a partner, deciding to have children, setting up a business and selecting a career so this subject should be given much greater prominence in the modern entrepreneurship and management education curriculum.

6.1 Limitations and reflections As this is only the second year the new structure and module contents have run these are very early observations. We met determined resistance to these changes from traditional faculty but perseverance, patience and persuasion won in the end. Students have found it more relevant to their future careers and several colleagues have also abandoned dissertations in their own programmes.

References Anderson, C. Day, K. and McLaughlin, P. [2006] Mastering the dissertation: lecturers’ representations of the purposes and processes of Master’s level dissertation Studies in Higher Education Vol. 31, No. 2, pp. 149–168 Anderson, C. Day, K. and McLaughlin, P. [2008] Student perspectives on the dissertation process in a masters degree concerned with professional practice Studies in Continuing Education Vol. 30, No. 1, pp 33-49 Aronsson, M. [2004] Education Matters – But Does Entrepreneurship Education? An interview with David Birch. Academy of Management Learning & Education Vol. 3, No. 3, 289–292. Biggs, J. and Tang, . [2011] Teaching for Quality Learning at University 4th Ed. Open University Press: Maidenhead Bobot, L. and Goergen, A. [2010] Teaching European Negotiations: The EU Chocolate Directive Simulation International Negotiation Vol 15, pp 301–323 Bolander, W. Bonney, L. and Satornino, C. [2014] Sales Education Efficacy: Examining the Relationship Between Sales Education and Sales Success Journal of Marketing Education Vol. 36, No. 2, pp 169–181 Borden, R. and Viscomi, R. [2015] Review Essay. The Wicked Problem of Rethinking Negotiation Teaching Negotiation Journal Vol 31, Iss 1, pp 65-81 Bowers, M. and Summey, J. [1983] A curriculum for personal sales training in an academic setting Journal of Marketing Education, Spring, pp 11-15 Chang, J. Benamraoui, A. and Rieple, A. [2014] Learning-by-doing as an approach to teaching social entrepreneurship. Innovations in Education and Teaching International Vol 51, Iss 5, pp 459-471 Collins, L. Smith, A. and Hannon, P. [2006] Discovering entrepreneurship: An exploration of a tripartite approach to developing entrepreneurial capacities Journal of European Industrial Training Vol. 30, No. 3, pp 188-205 Cummins, S. Peltier, J. Errfmeyer, R. and Whalen, J. [2013] A Critical Review of the Literature for Sales Educators Journal of Marketing Education Vol 35, No. 1, pp 68–78 de Kleijn, R. Bronkhorst, L. Meijer, P. Pilot, A. and Brekelmans, M. (2014) Understanding the up, back, and forward component in master's thesis supervision with adaptivity, Studies in Higher Education pp 1-17 Dixon, A. and Tanner, J. [2013] - Transforming Selling: Why It Is Time to Think Differently About Sales Research Journal of Personal Selling & Sales Management Vol 32, Iss 1, pp 9-13 Fayolle, A. [2013] Personal views on the future of entrepreneurship education. Entrepreneurship & Regional Development Vol 25 No 7-8 pp 692-701 Fortang, R. [2000] Taking Stock: An Analysis of Negotiation Pedagogy across Four Professional Fields Negotiation Journal Vol 16, Iss 4, pp 325-338


Dale Heywood and Alan Southern Gibb, A. [2011] Concepts in to practice: meeting the challenge of development of entrepreneurship educators around an innovative paradigm. The case of the International Entrepreneurship Educators’ Programme (IEEP) International Journal of Entrepreneurial Behaviour & Research Vol. 17 No. 2, 2011 pp. 146-165 Ginn, F. [2014] “Being like a researcher”: supervising Masters dissertations in a neoliberalizing university Journal of Geography in Higher Education, Vol 38, No 1, pp 106–118 Greenhalgh, L. and Lewicki, R. [2015] Evolution of Teaching Negotiation: The Legacy of Walton and McKersie Negotiation Journal Vol 31, Iss 4, pp 465-476 Grusendorf, A. [1941] The Master’s Thesis The Journal of Higher Education Vol 12, No 2 pp 85-88 Harte, V. and Stewart, J. (2012) Develop.evaluate.embed.sustain: enterprise education for keeps Education + Training Vol. 54 No. 4, 2012 pp 330-339 Heywood, D .[2015] Venture Dynamics: Buying Building Selling Enterprises: Moving Entrepreneurship Education Beyond Start-Ups European Conference on Innovation and Entrepreneurship 2015 Genoa, 18-19 September Heywood, J. [2000] Assessment in Higher Education: Student Learning, Teaching, Programmes and Institutions. Jessica Kingsley Publishers: London Jeske, J. [1984] Demystifying the Dissertation U.S. Department Of Education Office ERIC Number: ED268529 Jones, C. and Matlay, H. [2011] Understanding the heterogeneity of entrepreneurship education: going beyond Gartner Education + Training Vol. 53, No. 8/9, pp 692-703 Kim, K. Cundiff, N. and Choi, S. [2014] The Influence of Emotional Intelligence on Negotiation Outcomes and the Mediating Effect of Rapport: A Structural Equation Modelling Approach Negotiation Journal Vol 30, Iss 1, pp 49-68 Leitch, C. Hazlett, SA. and Pittaway, L. [2012] Entrepreneurship education and context Entrepreneurship & Regional Development Vol 24, Nos. 9–10, pp 733–740 Lorenco, F. and Jones, O. [2006] Developing Entrepreneurship Education: Comparing Traditional and Alternative Teaching Approaches International Journal of Entrepreneurship Education Vol 4, pp 111-140. Mani, S. Kothandaraman, P. Kashyap, R. and Ashnai, B. [2015] Sales Role-Plays and Mock Interviews: An Investigation of Student Performance in Sales Competitions Journal of Marketing Education pp 1-16 Miles, E. [2013] Developing Strategies for asking questions in negotiation Negotiation Journal Vol 29, Iss 4, pp 383-412 Neck, H. Greene, P. and Bush, C. [2014] Teaching Entrepreneurship: A Practice-Based Approach. Edward Elgar: Cheltenham Nielson, B. and Border, T. [2016] Teaching and Training Future Sales Professionals How to Negotiate with Real World Experience Journal for Advancement of Marketing Education Vol 24, pp 8-15 Pardo, C. [2013] Is business creation the mean or the end of entrepreneurship education? A Multiple Case Study Exploring Teaching Goals in Entrepreneurship Education Journal of Technology Management & Innovation, Vol 8, Iss 1, pp 1-10 Pilcher, N. [2011] The UK postgraduate Masters Dissertation: an ‘elusive chameleon’? Teaching in Higher Education, Vol 16, No. 1, pp 29-40 Poitras, J. Stimec, A. and Hill, K. ]2013] Fostering Student Engagement in Negotiation Role Plays Negotiation Journal, Vol 29, Iss 4, pp 439-462 Sirelkhatim, F. and Gangi, Y. [2015] Entrepreneurship education: A systematic literature review of curricula contents and teaching methods Cogent Business & Management Vol. 2, No. 1, pp. 1052034. Singh, V. Manrai, A. and Manrai, L. [2015] Sales training: A state of the art and contemporary review Journal of Economics, Finance and Administrative Science Vol 20, pp 54–71 Vanevenhoven, J. [2013] Advances and challenges in entrepreneurship education Journal of Small Business Management Vol 51, No 3, pp. 466–470 van Gelderen, M. [2010] Autonomy as the guiding aim of entrepreneurship education Education + Training Vol. 52 No. 8/9, 2010 pp 710-721 Vos, L .[2013] Dissertation study at the postgraduate level: A review of the literature Higher Education Academy Wade, J. [2009] Defining “Success” in Negotiation and Other Dispute Resolution Training Negotiation Journal Vol 25, Iss 2, pp 171-179 Williams, G. Farmer, L. and Manwaring, M. [2008] – New Technology Meets an Old Teaching Challenge: Using Digital Video Recordings, Annotation Software, and Deliberate Practice Techniques to Improve Student Negotiation Skills Negotiation Journal Vol 24, Iss 1, pp 71–87 World Health Organisation (WHO) Press Release


Entrepreneurial Characteristics in STEM: A Higher Education Institution Perspective Simon Hill Coventry University, UK

[email protected] Abstract: The benefit of entrepreneurship and innovation within the STEM subjects is not in question, with national bodies and academic research, expanding within the topic (RAEng 2015). The existence of entrepreneurship education and support within Higher Education Institutions (HEIs) is also increasing, although not necessarily within all subject areas (Young 2015). With often limited resources to integrate entrepreneurship education and support into STEM, is there an entrepreneurial characteristic profile that can be targeted? Are these student profiles attracted to certain topics within the STEM arena? By answering these questions, the enterprise resources of HEIs can be better allocated (but not limited to) to those individuals with increased entrepreneurial potential. This paper presents empirical data conducted at Coventry University into the entrepreneurial profiles possessed by students within the Faculty of Engineering and Computing. The data was collected based upon the Gasse et al. (2006) Characteristic Inventory model. The data collected measures eleven characteristics such as internal locus of control, creativity, self-efficacy and risk taking propensity; all of which have significant levels of research surrounding the impact upon entrepreneurial action and intent. The results are compared across a range of samples groups that reflect disciplines within the STEM arena. This data is discussed in the context of specific STEM topics and the potential focusing of enterprise support resources being directed towards these individuals. By targeting these engineering students further, there is a potential economic impact to business and job creation. Comparison is also drawn between the use of the Engineering Councils UK-SPEC Chartered Engineer competencies, as many of the characteristics are mirrored within the entrepreneurial characteristics measured within this research. Improved focus upon the characteristic development in areas such as leadership and tolerance to ambiguity, can be implemented further within engineering curriculum. Keywords: entrepreneurship, STEM, characteristics, traits

1. Introduction Within Higher Education (HE) the focus upon the need for students with an understanding of enterprise and entrepreneurship has been highlighted within multiple key reports (Andersson et al. 2014; Curth et al. 2015). Yet there are areas of HE that have less enterprise and entrepreneurship engagement, such as engineering (Hill 2014). Therefore this paper looks to evaluate the different discipline segments of under graduate engineering students, in relation to entrepreneurship. Within the range of engineering disciplines for mechanical to design, each may invoke an image of a certain type of individual with specific characteristics, the research will highlight the differences between the differing types of engineering students. The measure of entrepreneurship to be used is not the stereotypical ‘has this person ran a business’, as it is known that being a business owner is regular appearance in entrepreneurial behaviour, but not a mandatory one (Koh 1996; Stokes and Wilson 2010). Rather this study breaks down what it means to be entrepreneurial into eleven entrepreneurial characteristics (Gasse et al. 2006), and measures these through quantitative research methods to establish which characteristics stand out within certain disciplines and which disciplines have the most significant levels of the characteristics. Whilst entrepreneurship in engineering may not be aswell integrated as it could be, the existence of these characteristics arise in multiple engineering based reports from the Engineering Council and the Royal Academy of Engineering, as well as the UK Standard for Professional Engineering Competence (UK-SPEC)(Engineering Council 2011). These associations are drawn out within the literature review.

2. Literature review Whilst there is some discussion as to the most appropriate word to encompass the characteristics that make up an entrepreneurial individual, such as a characteristic, trait or attribute (Stokes and Wilson 2010; White et al 2010), there is high degree of similarity between them. The QAA (2012) for example highlights a number of key behaviours, attributes and skills that account for key entrepreneurial characteristics that include opportunity recognition, self-confidence, perseverance, internal locus of control, action orientation, innovation/creativity, approach to management and decision making. The characteristics have been echoed within multiple self assessment questionnaires designed to measure entrepreneurial mind-sets, from both Gasse et al.(2006) and Caird (1993). Gasse et al.(2006) focuses upon twelve characteristics that include all those discussed by the QAA.


Simon Hill However one characteristic discussed by Gasse was the need for challenge, which has yielded little further research to justify its inclusion. From another perspective, Caird (1993) focuses upon a narrower view of the characteristics of enterprising people, which include risk taking propensity, creative tendency, locus of control and motivation. Whilst this method has seen much usage within the enterprise education field, the narrow field of view limits the feedback to users. Following the review of these self assessment methods, Gasses method will be discussed in the research methods section in order to outline the process implemented within the study. The following paragraphs discuss the characteristics (derived through Gasse’s method) backgrounds both generally in the context of entrepreneurship and more specifically with engineering demographics.

2.1 Action orientation Having an idea is one thing, but without taking some form of action toward that idea leaves an unanswered opportunity. For this reason the ability for entrepreneurial individuals to take action is essential, both to start businesses but also to take action in other organisational contexts (Crant 2000). Similarly to business, being an engineer also requires an action orientated mindset to take problems and put into action solutions. Rodrigues and Rebelo (2013) highlighted the importance of software engineers being action orientated, as it acted as an indicator towards their future job performance being increased. The UK-SPEC suggests two key competencies to meet the Chartered Engineer standard that highlight the need for a action orientated mind-set: !

“Ensure that variations from quality standards, programme and budgets are identified, and that corrective action is taken.” (Engineering Council 2015: 26)


“Set targets, and draft programmes and action plans.” (Engineering Council 2015: 25)

2.2 Creativity The connection between creativity and entrepreneurship is clear throughout the literature (see Rae 2007; Robinson 2006). Whilst businesses can be established by following structure, such as the processes imposed in many franchise models,creativity can be considered a key element that takes a business with limited potential and opens avenues for diversification and growth. As with other characteristics discussed within this literature review, creativity appears within multiple competencies listed to meet the Chartered Engineer status in UK-SPEC. These competencies are shown below: !

“Engage in the creative and innovative development of engineering technology and continuous improvement systems.” (Engineering Council 2015: 25)


“Use imagination, creativity and innovation to provide products and services which maintain and enhance the quality of the environment and community, and meet financial objective.” (Engineering Council 2015: 29)

2.3 Independence The need for independence is often a characteristic that is associated with popular entrepreneurs, who venture into business as a ‘lone wolf’ to deliver solutions to the masses (Cooper and Schindler 2001). Often one of the motivations behind going into business initially is linked to the pull factor that independence presents, being your own boss and leaving the restraints of employment (Kuratko et al 2001). Yet as ventures grow, the need for support and additional stakeholders within an organisation, dilutes the independence that an entrepreneur can achieve. There is greater debate as to whether engineers can be characterised as desiring independence. Within a study of college students (Brown and Joslin 1995) it was established that the students had a significantly lower need for independence, when compared to those students in other disciplines. Despite this, research undertaken into professional engineers in a later stage of their careers, independence arises as a key factor into whether they remain in engineering (Jackson et al. 1993). Unlike many of the characteristics discussed within this literature review, the need for independence does not appear clearly within UK-SPEC, which draws parallels with Brown and Joslin (1995).


Simon Hill

2.4 Internal locus of control As with creativity, internal locus of control forms a substantial level of research within the entrepreneurship discussion (see Rotter 1966; Leone and Burns 2000; Caird 2013). The prominent name in the topic, Rotter (1966) discusses internal locus of control as a characteristic that gives individuals the ability to perceive a positive outlook upon changing the events around them. This ability is key to the establishment of businesses, but also forms a key element of the challenges that engineers undertake. The other side of the locus of control scale is external locus of control, which puts an individual into a mindset that suggests that events and other factors cannot be impacted by their actions. Understandably an engineer must also hold a degree of internal locus of control thinking, in order to develop solutions that can be applied. As well as being able to impact upon problems, having an internal locus of control associates with proactive personal development too, as to effectively move forward the belief that it is possible is essential. As it is unlikely that any engineer will automatically cover all of the UK-SPEC competencies, having an internal locus of control relates to achievement of all of the competencies. Internal locus of control also can be seen more specifically within the competencies below: !

“Strive to extend own technological capability” (Engineering Council 2015: 24)


“Broaden and deepen own knowledge base through research and experimentation. Engage in formal postgraduate academic study. Learn and develop new engineering theories and techniques in the workplace. Broaden your knowledge of engineering codes, standards and specifications.” (Engineering Council 2015: 24)

2.5 Leadership Whilst entrepreneurs that remain as sole traders may display personal leadership, as responsibility grows within an organisation an entrepreneurial individual needs to demonstrate effective leadership over teams. Painoli and Losarwar (2012) describe the entrepreneurial leader as someone who not only manages a team, but brings groups of people together in order meet a common vision through committed effort. A review of UK-SPEC demonstrates 14 references to leadership (and its synonyms) within the assessment competencies. Below is a selection of these competencies: !

“Lead work within all relevant legislation and regulatory frameworks, including social and employment legislation.” (Engineering Council 2015: 28)


“Identify, agree and lead work towards collective goals. “(Engineering Council 2015: 28)


“Lead and support team and individual development.” (Engineering Council 2015: 27)


“Lead teams and develop staff to meet changing technical and managerial needs.” (Engineering Council 2015: 27)

2.6 Need for achievement Another highly researched characteristic associated with the entrepreneurial mindset, is that of need for achievement. Discussed at length by a number of key scholars (see McClelland 1987; Perry et al. 1986; Klyver et al. 2007) the need for achievement is based around the achievement of goals and the potential recognition that can accompany that. Mathieu and St-Jean (2013) further discuss the need for achievement and its association with narcissistic views of these individuals. The achievement of the Chartered Engineer status is an achievement in itself and therefore suggests there is a need for achievement within those engineers that strive for that level. However the extent to which the need exists is not clear within UK-SPEC or the broader engineering literature, especially at University level.

2.7 Opportunity recognition Strongly attached with the creative process, the recognition of opportunities that present themselves is essential to the entrepreneurial method (Rae 2007). Not only to establish businesses, but also effectively develop and grow as an individual outside of the working environment. Baron describes the process as “connecting the dots”


Simon Hill (2006: 108), and therefore once a pattern of cognition is established, it can become habitual to repeat the pattern. Within UK-SPEC the need for engineers to recognize opportunities is highlighted in a number of the competencies, examples of which are shown below: !

“Identify potential projects and opportunities.” (Engineering Council 2015: 25)


“Prepare, present and agree design recommendations, with appropriate analysis of risk, and taking account of cost, quality, safety, reliability, appearance, fitness for purpose, security, intellectual property (IP) constraints and opportunities, and environmental impact.” (Engineering Council 2015: 25)


“Identify constraints and exploit opportunities for the development and transfer of technology within own chosen field” (Engineering Council 2015: 25)

Despite the competencies suggested by UK-SPEC discussed above, Park (2005) notes that the average engineer does not have the tendency for opportunity recognition. Rather they need to actively develop the process or form partnerships with others.

2.8 Perseverance Eisenberger (1992) discusses the process of perseverance as one that utilises effort to achieve a goal, whilst overcoming a multitude of factors and adversity. Through the development of SMEs, adversity is a familiar term that often appears, therefore require this perseverance to continue to accomplish the goals and continue forward when the process is difficult. Van Gelderen (2012) cites the story of Sir James Dyson and the development of his dual cyclone technology into the mainstream vacuum cleaner market. Engineers like Dyson might be considered as needing an increased level of perseverance, however the literature joining these two groups is limited and no direct reference is made with UK-SPEC. Harris (1994) indeed does present empirical research that suggests students studying engineering at HE level do hold increased levels of perseverance, which was further clarified by Brown and Joslin (1995). These approaches however did not take into account inter-discipline differences across engineering as a whole.

2.9 Risk taking propensity An individual’s assessment of risk and decisions based upon that assessment, are discussed heavily within the entrepreneurship literature. This is not surprising given the original meaning of the word entrepreneur by Cantillon, as someone who takes upon risk in order to potentially achieve a return on investment (Thornton 1998). Brockhaus and Horwitz (1986) goes further, discussing the importance of recognising the probability factor within a decision and whether the probability of reward outweighs the initial risk. Luthje and Franke (2003) look specifically at the risk taking of engineering students and their future intentions towards starting a business post-graduation, and in line with the theory those with higher levels of risk taking are more inclined to starting a business in the long term. Whilst the taking of risks is not focused upon primarily within UK-SPEC, there are four competencies that refer to risk and its effective management: !

“Prepare, present and agree design recommendations, with appropriate analysis of risk.” (Engineering Council 2015: 25)


“Define a holistic and systematic approach to risk identification, assessment and management.” (Engineering Council 2015: 26)


“Raise the awareness of risk.” (Engineering Council 2015: 27)


“Develop and implement appropriate hazard identification and risk management systems and culture.” (Engineering Council 2015: 28)

2.10 Self-efficacy The belief and confidence that an individual has toward their own abilities to accomplish a task, is an important one in both entrepreneurship as a whole, as well as narrower fields such as engineering. Self-efficacy (also referred to as self-confidence), is a cognitive dimension that like locus of control, relates to the control an individual wields over themselves (Rotter 1966).


Simon Hill As a part of UK-SPEC, there is an individual competency that directed relates to the self-efficacy: !

“Be confident and flexible in dealing with new and changing interpersonal situations” (Engineering Council 2015: 28)

2.11 Tolerance to ambiguity The ability for individuals to manage uncertain situations is important for the process of starting a running a business as events often can differ from the initial plan (Furnham and Ribchester 1995). As situations vary with the environment and decisions by others, an effective entrepreneur can manage the high and low events, and effectively continue to produce results, whether others may lose momentum. Within higher education generally, El-Gohary et al. (2012) highlights that the competencies that should be developed during the education process is the ability to cope with uncertainty. Despite this focus within higher education, a focus upon the characteristic within UK-SPEC is not clear (compared to the clarity of connections discussed in previous sections).

2.12 Summary A number of the characteristics discussed within this literature review as being associated with entrepreneurial personalities, share resemblances with the competencies required to be assessed as a Chartered Engineer. As well as this, these characteristics have been shown to be important to the process of starting a business and turning ideas into economic impacts. The literature suggests that yielding these characteristics can in many cases have a positive influence upon an engineer, although this may not always be the case. In order to assess the level of these characteristics within engineering students of varying disciplines the approach discussed within the next section was adopted.

3. Research methodology Following the discussion within the literature around differing measurement techniques of these entrepreneurial characteristics, the decision was taken to base this research upon the validated methodology proposed by Gasse et al. (2006). This methodology presents a series of statements with attached four point Likert scales for respondents to respond with strongly agree, agree, disagree, strongly disagree. The forced nature of these scales aligns also with Caird’s General Enterprise Tendency test, that provides responded with a true/false two point Likert scale. Whilst the framework presented aligns with the supporting entrepreneurial characteristic research in the field, minor adjustments were made to the questionnaire tools to suit the sample groups and the objectives of the research. Firstly on initial pilot testing of the questionnaire with engineering students, the matter of vocabulary was risen. The initial test presented by Gasse was designed with business orientated individuals in mind, therefore presenting many of the statements with terms such as business, enterprise and commercial. Whilst these are not foreign words to the engineering community to be questioned, the feedback from pilot test participants was that by changing words such as business to project would disguise the entrepreneurial topic being assessed through the statements. Another change to the research methodology was the number of statements to be responded to, based upon the feedback from pilot test participants. Whilst the original assessment tested the existence of need for challenge, these questions amongst others lengthened the overall assessment to a level that was suggested as potentially off putting the students taking it un-incentivized. The final questionnaire that was released to the respondents was 33 statement long (based around the entrepreneurial characteristics) with supplementary questions to segment the participant demographics. Following the distribution of the self assessment questionnaire 452 engineering students responded fully.

4. Results and discussion The results gathered using the method discussed in the previous section is presented below based upon the highest levels of the characteristics measured. Whilst this research categorised the student sample into 18 disciplines, table 1 highlights the disciplines that achieved the highest result within each of the characteristics measured. The greatest proportion of the characteristics shared within the engineering disciplines were the Manufacturing and Communication Management students, sharing the highest scores for four of the characteristics each. For


Simon Hill manufacturing students it is a positive results to see these characteristics being identified, with elements such as action orientation and creativity being recognised as an important competency within UK-SPEC. Despite the lack of clear mention within UK-SPEC, need for achievement and perseverance is also noted as being important in a long term perspective for these students (Harris 1994). Table 1: Characteristic top results Architecture


Action Orientation

Communication Management Internal Locus of Control





Tolerance to Ambiguity

Need for Achievement

Opportunity recognition


Risk taking propensity


The Communication Management students also claimed a high score with four of the characteristics. Whilst the Manufacturing students yielded an en equally high number of the characteristics results, the characteristics that the Communications Managements students displayed have a deeper connections with the UK-SPEC competencies, with each having one or more competencies that directly relate. The other two course disciplines that claimed the highest characteristic results were Architecture and Design students. These characteristics again share resemblance with the competencies seen within UK-SPEC, as well as other literary works that suggest the positive employability impacts upon professional engineers. For example based upon Jackson et al. (1993) work, the architecture students may enjoy a longer working period within the sector, based upon increased level of independent working. Whilst graphs were created for each of the characteristics measured within this study, due to space restrictions a summary graph is presented in Figure 1. The graph demonstrates characteristic results gathered through the self assessment methodology.

Figure 1: Mean entrepreneurial characteristics results graph


Simon Hill Based upon these results, this paper suggests a potential connection and learning point that can be taken from these Manufacturing and Communication Management students. Notably, there are many factors that will impact upon these students to mould their mind-sets and the characteristics that they possess, such as upbringing and culture. But the key learning point for future changes to practice is learning from the pedagogies that are seen within these disciplines. Do the lecturers themselves impress their own characteristics upon students. Given the overall mean value of characteristics displayed by the Manufacturing, Architecture and Communication management students shown in Figure 1, engineering faculties globally could potentially develop their curriculums further to be in line with both the characteristics discussed in documents such as UKSPEC. Added to this further development of the mind-set of an entrepreneur, which will increase the propensity for business start ups, as well as the development of existing business through an intrapreneurial focus(Pinchot 1985). A key element that stood out within this data was the low level of creativity within disciplines such as Design. Whilst the Design students appeared within the middle range of the total results, the creativity level, was expected to be higher given the types of activities undertaken within their curriculum.

5. Conclusions This paper recommends a number of opportunities for both practices within the Higher Education sector as well as wider policymaking for engineering education. As suggested throughout the literature review, the characteristics considered to be those that make up an entrepreneurial individual, are also considered desirable in a non-entrepreneurial sense, especially in reference to the competencies assessed through the Engineering Councils UK-SPEC and other key engineering reports. Therefore the development of these characteristics and attributes, should be developed further to account for the variations within the various disciplines. The results recommend that engineering faculties within this institution could considered the pedagogical approaches of fellow teaching peers and the topics themselves in order to assess potential developments that may readdress the perceived imbalance of characteristics within the study.

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Simon Hill Koh, H. C. (1996) 'Testing Hypotheses of Entrepreneurial Characteristics: A Study of Hong Kong MBA Students'. Journal of Managerial Psychology 11 (3), 12-25 Kuratko, D. F. and Hodgetts, R. M. (2001) Entrepreneurship: A Contemporary Approach. Harcourt College Publishers Fort Worth Leone, C. and Burns, J. (2000) 'The Measurement of Locus of Control: Assessing More than Meets the Eye?' The Journal of Psychology 134 (1), 63-76 Lüthje, C. and Franke, N. (2003) 'The ‘making’of an Entrepreneur: Testing a Model of Entrepreneurial Intent among Engineering Students at MIT'. R&D Management 33 (2), 135-147 Mathieu, C. and St-Jean, É. (2013) 'Entrepreneurial Personality: The Role of Narcissism'. Personality and Individual Differences 55 (5), 527-531 McClelland, D. C. (1987) 'Characteristics of Successful Entrepreneurs'. The Journal of Creative Behavior 21 (3), 219-233 Park, J. S. (2005) 'Opportunity Recognition and Product Innovation in Entrepreneurial Hi-Tech Start-Ups: A New Perspective and Supporting Case Study'. Technovation 25 (7), 739-752 QAA (2012) Enterprise & Entrepreneurship Education: Guidance for UK Higher Education Providers. Gloucester: The Quality Assurance Agency for Higher Education Painoli, G. K. and Losarwar, S. G. (2012) 'Leadership through Entrepreneurship'. Leadership 2 (1) Perry, C. Macarthur, R. Meredith, G. and Cunnington, B. (1986) 'Need for Achievement and Locus of Control of Australian Small Business Owner-Managers and Super-Entrepreneurs'. International Small Business Journal 4 (4), 55-64 Pinchot III, G. (1985) 'Intrapreneuring: Why You Don't have to Leave the Corporation to Become an Entrepreneur'. University of Illinois at Urbana-Champaign's Academy for Entrepreneurial Leadership Historical Research Reference in Entrepreneurship RAEng (2015) What is Engineering [online] available from [09/23/2015] Rae, D. (2007) Entrepreneurship: From Opportunity to Action. Basingstoke: Palgrave Macmillan Robinson, K. (2006) How Schools Kill Creativity. [Video] California: TED Rodrigues, N. and Rebelo, T. (2013) 'Incremental Validity of Proactive Personality Over the Big Five for Predicting Job performance of Software Engineers in an Innovative Context'. Journal of Work and Organizational Psychology 29 (1), 21-27 Rotter, J. B. (1966) 'Generalized Expectancies for Internal Versus External Control of Reinforcement.'. Psychological Monographs: General and Applied 80 (1), 1 Stokes, D. and Wilson, N. (2010) Small Business Management and Entrepreneurship. Andover:Cengage Learning EMEA Thornton, M. (1998) 'Richard Cantillon and the Origin of Economic Theory'. Journal Des Economistes Et Des Etudes Humaines 8, 61-74 Van Gelderen, M. (2012) 'Perseverance Strategies of Enterprising Individuals'. International Journal of Entrepreneurial Behaviour & Research 18 (6), 630-648 White, G., Carter, S., Abd Razak, A., and Prabhakar, G. P. (2010) 'Profiling an Entrepreneurial Family in the UK'. Management & Organization 2 (1), 5-18 Young (2014) The Lord Young Report: Enterprise for all. London:


Relationships of Playfulness, Work Engagement and Innovative Performance Pia Hurmelinna-Laukkanen1, Sari Alatalo2, Eeva-Liisa Oikarinen1, Taina Vuorela2, Helena Ahola2, Päivi Aro2 Tiia Kallio3 and Kwadwo Atta-Owusu1 1University of Oulu, Oulu Business School, Finland 2Oulu University of Applied Sciences, Finland 3University of Oulu, Faculty of Education, and Axico, Finland [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected] [email protected]

Abstract: Playfulness and serious, credible business seem to be an unfitting match at first glance. However, astutely combined, they might promote competitiveness of firms. This study addresses a specific area in which humor and business can come together, as we examine the relationships between playfulness, work engagement and individual-level innovative performance. Earlier research on work engagement, playfulness and innovativeness has contributed to the creation of current research framework with hypothesized relationships between playfulness and work engagement as well as playfulness and innovative performance. Web-based survey data comprising the responses of 115 employees were collected from nine different organizations. The theoretical considerations and empirical evidence based on the collected data add to the existing knowledge on innovation management, entrepreneurship, human resource management, and organizational and humor theories. Our findings suggest that of the different forms of playfulness, playful attitude and atmosphere relates positively to work engagement which, in turn, shows positive relationship with innovative work performance. Nonetheless, a conclusion can be drawn that, like earlier research suggests, playfulness and humor need to be approached with certain caution when they are used as a strategic business tool: different forms of playfulness and humor can have different – even opposite – consequences for different innovative outcomes. Keywords: innovation, work engagement, playfulness, humor, management, entrepreneurship

1. Introduction Humor and business, play and work, are often contrasted to each other. However, closer examination reveals that the boundaries are not solid (Hunter et al. 2010). As a relatively obvious example of overlap areas, innovation activity and entrepreneurship comprise not only serious business but also creativity (Brattström, Löfsten and Richtnér 2012; Ward 2004) with which fun, humor, and playfulness resonate well. Although there is no general agreement on the composition of playfulness as a concept, some scholars have identified spontaneity, sense of humor, and manifested joy as the basic components (e.g., Proyer and Jehle 2013). In general, it could be assumed that playfulness and humor as a specific, verbal variant of play would be positively related to employees’ wellbeing at work, creativity, and innovative output (Mainemelis and Ronson 2006; Davis 2009). This is because important functions of organizational play involve e.g., play as creation, play as meaning-making and enactment, and play as orientation (Tökkäri 2015), all of which can promote the emergence of even radical ideas. For example, Ward (2004, 173) suggests that creativity relates “to an important task of entrepreneurs: generating novel and useful ideas for business ventures”. In contemporary organizations, playfulness has a significant role. Specifically, this applies to serious play, the intention of which is to achieve work-related goals which is of relevance (Heracleous and Jacobs 2005; Tökkäri 2015). Humor and play can provide a psychologically and strategically safe environment for introducing new ideas, for generating debate about important issues, for challenging assumptions, and for generally building a sense of joint purpose, thereby potentially strengthening work engagement and intrinsic motivation. However, deviating somewhat from the general definition of playfulness in which spontaneity is brought to the front, play in a business setting can seldom be totally impulsive (see Spraggon and Bodolica 2014). In particular, given that


Pia Hurmelinna-Laukkanen et al. play and humor can turn out to be a “double-edged sword” (Malone, 1980; Rogerson-Revell 2007) with potentially negative consequences such as collusion and loss of credibility (Rogerson-Revell 2007; Bressler and Balshine 2006; Isaksen and Ekvall 2010), managerial astuteness and careful organization are needed. Creativity and wellbeing can emerge around serious, strategic issues as a result of promoting humor and playfulness, but certain level of attentiveness is likely needed. Although there are studies that have addressed the relationships of play and organizational creativity, explicit connection of work engagement and innovativeness has rarely been examined, especially empirically. Among the empirical studies, West, Hoff and Carlsson (2013) addressed the link between play and creativity, and found the mediating effects of openness, intrinsic motivation, and collaborative relationships to be relevant for this relationship. Similarly, there have been few studies that have examined the relationship between individual innovativeness and innovative work performance (see, e.g., de Jong and den Hartog, 2010). Still, play and humor rarely emerge explicitly in innovation literature. In order to add to the existing knowledge, we examine how perceived organizational playfulness (divided here into attitudes and atmosphere within organization, internal actions involving play and humor, and organizationexternal actions incorporating humor use) is related to work engagement, and further, what kind of relationship work engagement has to an individual–level innovation output (i.e. innovative work performance). The search for answers to these questions builds on the examination of existing innovation management and organization research and humor theories, and empirical evidence involving examination of 115 responses from nine firms of different sizes and representing different industries. In the following, we will first outline current knowledge on the relationships of work engagement and innovativeness, and then examine how playfulness in its different forms may contribute to these. Empirical examination follows this review. Discussion on the findings, theoretical contribution and managerial implications conclude the study together with evaluation of limitations and suggestions for future research.

2. Work engagement and innovativeness As relevant part of entrepreneurial activity and innovation management literature, the relationship between work engagement and innovativeness is one of the central interests in this paper. Lately there has been a significant increase in the research on engagement (Bakker et al. 2008). Here engagement refers to a workrelated state of mind characterized by vigor, dedication and absorption (Schaufeli and Bakker 2004; Schaufeli et al. 2002). These attributes, in turn, are characterized by such features as high levels of energy, resilience, enthusiasm, inspiration, pride, and deep concentration (Schaufeli and Bakker 2004). These aspects emerge in a variety of studies where human resource management and entrepreneurship, for example, are taken as guiding views. As a consequence it can be said that engagement is a relatively widely studied topic, as is innovativeness. Organizations have traditionally organized their innovative activities through quite formal institutionalized structures, such as Research and Development (R&D) departments (Cassiman and Veugelers 2006). However, innovation can now be found in various parts of organizations and their interactions (Huizingh 2011). Companies increasingly rely on their employees to facilitate their innovation efforts (Subramaniam and Youndt 2005). Employees are increasingly encouraged to be entrepreneurial and proactive in the search for novel solutions to work-related problems (Kesting and Ulhoi 2010). This has also attracted the interest of researchers. There is a growing body of research, e.g., in the field of social psychology, that is trying to enhance understanding of the phenomenon (e.g., Scott and Bruce 1994). Innovations are fundamentally products of human mind or minds, and manifestations of entrepreneurial orientation. The objective of individual innovativeness at work is to generate and realize useful ideas which enhance an organization’s competitiveness (Ward 2004; Tuominen and Toivonen 2011). The result of an innovative idea is often a tangible output such as a new product or service, working method, process, technology or design (Criscuolo et al. 2013; Oslo Manual 2005). These outputs can be employed as objective ways of measuring the level of innovative performance, which quite a few studies have preferred (consider, e.g., patent counts) (Scott and Bruce 1994). However, we argue that how individuals perceive their innovative output is relevant as well.


Pia Hurmelinna-Laukkanen et al. As the role of employees in all areas of company’s activities has become more pronounced, attention has turned to work engagement and innovativeness. Regarding innovativeness, work engagement is highly relevant. For example Hakanen et al. (2008) found a positive relationship between these two features. According to their research, work engagement predicts individual initiative over time, and the individual initiative further has a positive effect on work-unit innovativeness. This would seem to suggest that individual initiative can be spread out to a wider context. Based on the above discussion, we expect to find a positive relationship between work engagement and innovative output at individual-level, and hypothesize the following: H1: Work engagement is positively related to individual-level innovative work performance

3. Playfulness and humor promoting work engagement While work engagement and innovative output can be expected to be positively related, it is likely that both are also related to other factors that promote creativity and idea generation. Playfulness and humor can be quite closely linked to work engagement. As suggested above, playfulness can mean different things in organizational settings, covering attitudes, atmosphere, and activities. Spontaneity, sense of humor (a personality trait), and manifested joy are inherently present when playfulness is considered. Humor (which is different from the sense of humor) can be defined as a state of mind, but it also involves the quality of causing amusement and making people laugh (Longman 1998). Humor and play are closely intertwined and they are clearly significant in contemporary organizations. Play and humor in organizations can be related to creativity, collaborative learning and identity formation. Using play for beneficial impact requires getting employees and managers to step outside their normal roles to examine the organization and its challenges (Heracleous and Jacobs 2005). According to Lin and Lin (2011), in the best cases, entrepreneurial managers can create a work culture that can contribute to an improved sense of work community. However, play in a business setting can seldom be totally spontaneous; it needs to be organized so that it allows creative playfulness to emerge about real strategic issues (Heracleous and Jacobs 2005). The challenge is that sometimes humor can be misplaced. Some scholars have observed that applying humorous stimuli into brainstorming sessions can have a negative effect on the quality of group work (Wodehouse, Maclachlan and Gray 2014). Nevertheless, as humor and play can be adjusted by managerial action, suitable forms for generating a positive relationship between play and work engagement could be found: especially younger generations seem to appreciate having fun at work (Romero and Pescosolido 2008). It could also be expected that playfulness and humor relate to innovative performance quite directly: In some situations, especially in formal organizations, structures, rules and routines may hinder the employees’ acceptance of innovative ideas (Brattström et al. 2012; Hirst, Van Knippenberg, Chen and Sacramento 2011); search for efficiency and concentration on fulfilling expectations related to rule following easily turns attention away from trial-and-error types of exploration and experimentation. At the same time, playfulness and humor can mitigate rigidity: Kuiper et al. (1995), for example, have found that individuals with high sense of humor are better able to revise their perspectives. Besides, as the expectation of employees is increasingly to be able to work in relaxed environments where they can genuinely enjoy working (Romero and Pescosolido 2008), many employers have come to acknowledge this and specifically allocate some working time for doing things not directly related to the everyday job descriptions (Buskus and Oster 2012). A work environment where humorous exchanges are encouraged can remove the excessive performing and inflexibility, and reduce the fear of failure and increase ideation (Romero and Curthirds 2006). Surely, overshooting in this area is possible as well, but eventually, playfulness and humor can reach the actual products and services as well (e.g., Cao and Shi 2013). Based on these considerations, we expect to find connections between playfulness and work engagement, and playfulness and innovative performance: H2a: Playfulness in its different forms is positively related to work engagement H2b: Playfulness in its different forms is positively related to individual-level innovative work performance. Figure 1 below combines the aspects discussed above, and illustrates the relationships that we examine in this study.


Pia Hurmelinna-Laukkanen et al.

Figure 1: Research framework with hypothesized relationships

4. Empirical evidence 4.1 Sample and data collection The data were collected from employees of nine different organizations by means of cross-sectional, web-based survey. These organizations operated in manufacturing, media, leisure and recreation, and service industries. This group of companies involves firms of different sizes (from micro to large), and all of them are based in Finland. One large firm also operates internationally. Common factor for these Finnish firms was that all had expressed interest in developing their businesses with help of humor and had invested both time and money to examining this activity. This is a fairly new perspective in Finnish working life, and Finns are nowadays perhaps more prone to accept humor in working life (Leander 2010) while Finnish identity has not previously been associated to humor, but rather to ‘hard work and feelings of anxiety’ (Ollila 1998). The survey was conducted in late 2015. A pretested questionnaire was designed following the suggestions of Podsakoff et al (2003) so as to avoid common method bias. The internet links of the questionnaire in both English and Finnish were sent via email to the contact persons in each firm, who then forwarded the links to the participants. In small organizations, every employee was asked to complete the questionnaire while in large firms, the contact persons selected a random sample of employees to participate. Employees from different functions were encouraged to take part. At the end of the research period, 115 responses had been gathered. Most respondents were in non-managerial positions and had about four years of work experience in their organizations. The potential of non-response bias was checked following the instructions of Armstrong and Overton (1977), and no problems were detected in this regard.

4.2 Measures The measures were generated by relying on established item sets and original, theory-driven item sets measured on six-point Likert-scale, and by applying factor and reliability analyses on the item sets. Employees’ innovative performance was assessed with nine item scale based on de Jong and den Hartog (2010) and the OECD’s Oslo Manual (2005). Following de Jong and den Hartog (2010), respondents rated their innovative performance based on subjective self-evaluation. This subjective measurement approach was adopted because due to the diverse work roles and different professional backgrounds of the respondents, it would have been challenging for them to assess their innovative performance based on objective measures such as patent counts. The variety with regard industries represented by the firms and the related differences with regard what constitutes “innovation” also pointed towards this approach. The final measure included items like ‘I am involved in the implementation of completely new production or delivery methods’, and ‘I am involved in the implementation of new methods for organizing routines/ procedures’. The Cronbach alpha value was .919. Work engagement was evaluated with the help of Finnish version of the Utrecht Work Engagement (UWES; Shaufeli Wilmar B. Schaufeli,. Bakker A.B., Salanova, M.2006) Scale (see Hakanen 2008). The final construct comprised eleven items that loaded into one factor and produced an alpha value of .951. The items in this measure include statements such as ‘I find real enjoyment in my work’, ‘I am proud of the work that I do’, and ‘my job inspires me’. Playfulness and humor were measured by asking the respondents to evaluate the extent to which humor and playfulness are used or present in their organization’s business or work environment. The 18 items loaded in to three distinctive factors. Six items (e.g., ‘our organization’s premises are a showcase of our playful work culture’) captured items that reflected a general playful attitude and atmosphere, reflecting a natural tendency to incorporate humor and playfulness to the work. The alpha value for this measure was .819. Five items


Pia Hurmelinna-Laukkanen et al. (alpha= .791) captured the organizational humor-related activities. Items such as ‘staff is allowed to personalize their work spaces in our organization’ and ‘humor is used in developing our products and services’, covered these issues. Finally, seven items (alpha = .888) reflected outbound humor use, that is, organization-external actions incorporating humor use. Examples of items in this construct include the following: ‘humor is used in our marketing communications’ and ‘we use humor in interacting with some of our business partners’. Finally, as different factors can relate to work engagement and innovative behavior, we also controlled for age (years), gender (a dummy variable), and work experience within the organization (years), and industry (years), in our analyses.

4.3 Analyses and results We started our examination of the hypothesized relationships by computing a correlation matrix (see Table 1 below). Table 1: Descriptive statistics and correlation matrix related to work engagement, playfulness, and innovative performance

1.Innov.perf 2.Work eng. 3.PlayAttitude 4.Org.humor activity 5.Outbound humor use 6. Age experience experience a

Mean (St.D.) 2.70 (1.32) 3.74 (.853) 2.48 (1.12) 2.53 (1.13) 2.01 (1.25) 30.39 (12.8) 4.17 (2.03) 4.13 (1.93)








.287** .149a



























= p < .10; * = p < .05; **= p < .01

The examination of the correlations indicates, that work engagement is positively related to innovative performance (see italics in Table 1), and that the different forms of playfulness have similar connections with work engagement and innovative performance (underlined in Table 1). The connections seem to be somewhat weaker in case of playful attitude and innovative performance, and outbound humor use and work engagement, respectively. While these findings seem to support our hypotheses, we also utilized regression analyses in order to get a more comprehensive insight on the relationships between the different constructs. Before going further with the actual analyses, statistical parameters were checked for possible violations of the underlying assumptions of regression analysis. The variance inflation factor (VIF) scores of all models revealed that they were all within the acceptable limits with the highest value of 3.0 (Hair et al. 1998), and the values of the Durbin-Watson statistic showed that they were all below 2. Subsequently, we proceeded with the analyses. Tables 2 and 3 below show the results of the hierarchical regression analyses. Control variables were entered first (Models 1 and 4) followed by the examination of the main effects. Work engagement was first reflected on its own against innovative performance (Model 2), and then it was examined together with the different forms of playfulness (Model 3). Model 5 shows the relationships between playfulness and work engagement.


Pia Hurmelinna-Laukkanen et al. Table 2: Regression analyses - work engagement, playfulness, and innovative performance Analysis 1/ Dependent variable: innovative performance Model 1 Model 2 -.001 (.397) -.008 (.016) .057 (.120) .059 (.117) .141 (.122) .140 (.119) .438 (.308) .416 (.301) .370 (.175)*

Age experience experience Gender Work engagement PlayAttitude Org.humor activity Outbound humor use F R2 R2 Adj. ∆R2 a

2.569* .125 .076

Analysis 2/ Dependent variable: Innovative performance Model 3 -.007 (.015) .037 (.115) .090 (.120) .377 (.296) .331 (.180)* -.279 (.216) .291 (.189) .225 (.176)

3.048** .177 .119 .052*

2.779** .246 .158 .122*

= p < .10; * = p < .05; **= p < .01; St.Error in parenthesis

Table 3: Regression analyses – playfulness and work engagement

Age experience experience Gender PlayAttitude Org.humor activity Outbound humor use F R2 R2 Adj. ∆R2

Analysis 3/ Dependent variable: Work engagement Model 4 Model 5 .020 (.010)* .022 (.009)* -.008 (.075) -.020 (.073) .002 (.076) .023 (.076) .059 (.192) .001 (.187) .261 (.133)* .006 (119) -.041 (.111) 1.958a .089 .044

2.431* .181 .107 .092*

a= p < .10; * = p < .05; **= p < .01; St.Error in parenthesis The results of the regression analyses suggest that our hypothesis 1 finds support: work engagement seems to be positively related to innovative performance. Hypothesis 2a receives partial support: of the different forms of playfulness, playful attitude and atmosphere seems to be the one related to higher work engagement. Of the more structured forms, outbound use of humor actually has a negative sign (even if the relationship is not statistically significant), and there is no significant relationship between organizational humor activity and work engagement either. Hypothesis 2b is not supported: playfulness does not have direct relationship with innovative performance (while the findings are not reported here, running the regression analyses without work engagement produced similar results as shown in Model 3 in Table 2; while the model itself was improved as a result of adding the different forms of playfulness, none of the coefficients were significant at the .05 level. Within-organization activities that involve humor come close to being significant (p =.12), but not quite. Rather interestingly, playful attitude shows a negative (non-significant) sign. These findings are discussed below.

5. Discussion and conclusions The aim of this study was to contribute to existing theories on innovation and humor by examining what kind of relationships can be found among playfulness, work engagement, and individual-level innovative performance. Our empirical findings indicate that playfulness is a plausible supporting factor for work engagement (H2a), which, in turn, contributes to innovative performance (H1). Both of these findings seem to be in line with earlier studies. For example, Lin and Lin (2011) suggest that the management has the potential to create humor-


Pia Hurmelinna-Laukkanen et al. oriented work culture resulting in improved sense of work community. Likewise, in their research Hakanen et al. (2008) established a positive relationship between work engagement and innovativeness. Regarding the empirical evidence of the present study, correlation analysis points towards overall positive relationships between different constructs. Results of regression analysis, where various factors are controlled for, show more nuanced aspects: according to our findings, work engagement (rather than playfulness) is related to the level of innovative output. In other words, playfulness as such seems not to directly contribute to innovativeness. Heracleous and Jacobs (2005) suggest that play needs to be organized appropriately to allow playfulness to have a real role in business settings. Also, it is worth noticing that with respect to playfulness, it is the presence of playful attitudes and atmosphere rather than concrete actions that are positively related to higher work engagement. It could be that trying to “force” humor into different processes cannot ensure better results, but if such environment is created where natural humor is facilitated, work engagement can be improved. Innovative performance, however, is another thing, as too much “joking around” might actually limit the execution and implementation of an idea. Even though not significant in this analysis, the negative coefficients point towards the aspect that managers and entrepreneurs should approach playfulness and humor with some caution (e.g., Smith and Khojasteh 2014; Rogerson-Revell 2007). Finally, an issue to notice is that the R2 values, while satisfactory, are not extremely high. Other factors exist that can explain a notable proportion of the variation. Further research is therefore warranted. Nevertheless, these results bring their contribution to the existing knowledge on the role of playfulness and humor in innovation, human resource management, leadership, and entrepreneurial activity. Practice-oriented implications can be derived from the study as well. Entrepreneurs and managers can increase work engagement of employees by communicating and providing the platform for playfulness in relation to showing the organizational values, for example. The more practical manifestations and embodiments do not seem to affect employees as much. This does not mean, however, that activities promoting playfulness would not be useful in different stakeholder relationships, for example. Further research can reveal the areas where such forms of playfulness become valuable. One practical implication to be studied later is to investigate the potential of playfulness embedded in peer-group mentoring as effective form of intervention for work engagement. Thus, continuing still relatively modest research of work engagement is relevant (Bakker et al. 2011). Further research is needed also due to limitations of this study. While adequate for identifying some general directions, our data is relatively small and closer scrutiny of differences between organizations in different industries and of different sizes, for example, might reveal relevant aspects. Interrelations of playful organizational culture and humor use with other factors promoting work engagement and innovativeness would also be interesting to study. Our hope is that this study, with its findings and limitations, can be utilized in the future work as well.

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Governing Ownership: A Case Study About the Board’s Role in Family Business Ownership Decisions Tuuli Ikäheimonen, Marita Rautiainen and Timo Pihkala LUT School of Business, Lappeenranta University of Technology, Finland [email protected] [email protected] [email protected]

Abstract: Well-functioning governance enables entrepreneurial intentions and behaviour to channel into organizational outcomes like strategic renewal, the creation of new ventures and improved performance in companies. The board of directors is the most central governance body, and especially board roles and composition have been popular topics among governance researchers. Despite this, the research on boards of directors in a family business context is still just emerging. In this study we will open a new path for the board role discussion and examine how the board of directors participates in the ownership-related decision-making of family businesses. The research is implemented as a qualitative case study, using two Finnish family businesses as cases. The findings from the cases show that the board has several tasks regarding ownership. These tasks include, for example, decisions about dividends, the evaluation of and decisions about acquisitions, and compensation negotiations in succession. The case studies suggest that the board also participates actively in the management of the ownership structure. As a conclusion we present that although ownership creates the basis for the activities and the essence of the board, the board also contributes, to a large extent, to the ownership decisions and in this way to the management of ownership. The findings presented in this paper contribute to the theoretical discussion of family business governance by presenting a new, ownership-related role for the board of directors. In addition, the findings reveal some interesting but little-researched topics, like the use of the dual stock-class system in family business succession. Simultaneously, we contribute to the practice by providing concrete examples of how the board participates in ownershiprelated decision-making and highlighting the need to manage ownership in order to secure family businesses’ continuity from generation to generation. Keywords: family business, governance, board of directors, board roles, ownership

1. Introduction This paper builds on family business governance research, including research on family businesses’ boards of directors and ownership. Governance is needed when turning entrepreneurial intentions into business actions. It can be seen as one of the organizational antecedents enabling entrepreneurial behaviour to channel into organizational outcomes like strategic renewal, the creation of new ventures and improved performance (Kuratko, 2010). As a critically important part of all businesses, governance has increased its success as a research topic lately. As the board of directors is the central governance body (Nordqvist, Sharma & Chirico, 2014), the board’s roles and composition have especially stimulated a wide range of scientific discussions. Research on boards in general is plentiful, but the literature about boards in family businesses is sparse (Bettinelli, 2011; Gersick & Feliu, 2014). The research question in this paper is How does a family business’s board of directors participate in decisions regarding ownership? The study is implemented as a qualitative case study with two Finnish family businesses. The role of the cases is to show what kind of decisions family business boards make regarding ownership issues and why these decisions are made. The findings contribute to the theoretical discussion of family business governance by presenting a new board role. We also contribute to the practice by providing concrete examples about board participation in ownerships issues, and emphasizing the need to manage ownership in order to secure family business continuity over generations. The paper will proceed as follows. The first section includes an introduction to the paper and topic. In the second section, we sketch out the family business governance literature, emphasizing the roles of the board of directors and studying family business ownership as a base for family business governance and board roles. Next, we present the methodological aspects and data used in this study. This is followed by short case descriptions and analyses from the viewpoints of ownership and board roles. We conclude by discussing the findings in relation to existing literature, presenting implications to theory and practice, and suggesting potential research possibilities for future studies.


Tuuli Ikäheimonen, Marita Rautiainen and Timo Pihkala

2. The board of directors as a part of family business governance A governance system can be defined as a system consisting of structures and processes for directing, controlling and accounting for a family firm in the long term (Sharma and Nordqvist, 2008). More broadly, governance structure describes responsibilities and rights among participating actors and it dictates how benefits are created, maintained and distributed across different stakeholders (Aguilera & Crespi-Cladera, 2012). As a system, governance includes the determined ways to implement management, the form of ownership in a particular firm and the board of directors as the top governance actor (Carney, 2005; Chrisman, Chua & Sharma, 2005). A family can exert strong control over a firm through the ownership (or control) of a significant number of shares (Aguilera & Crespi-Cladera, 2012). Therefore it is ownership that suggests the distribution of power and control in a firm (Goel et al., 2012), and forms a reason and a basis for governance activities. Governance refers to ownership, but treating these as synonymous would be misguided. Gersick and Feliu (2014) note that governance is not only a matter of ownership rights, it also determines how the use of ownership power is organized within the firm. This explains why effective governance bodies, like a board of directors, are such influential participants within a governance system. A family’s influence on governance has often been described by using two dimensions: ownership concentration and the characteristics of family control (e.g. Silva & Majluf, 2008; Pieper, Klein & Jaskiewicz, 2008). The use of power in a family firm can be examined by using a combination of family ownership (either direct or indirect [through financial holdings]), the extent of direct governance control (through family board members) or indirect control (through members nominated by the family), and the extent of direct managerial control (through family managers) and indirect control (through managers chosen by the family) (Corbetta & Salvato, 2004). Thus, family influence in the business is reflected by the family’s ownership and presence in the business, for example in terms of board seats (Silva & Majluf, 2008; Pieper, Klein & Jaskiewicz, 2008). It is typical for family businesses rather to use board of directors than external auditors when monitoring managerial decisions (Aguilera & Crespi-Cladera, 2012). Ward (1987) states that an effective family business board is one of the most important structures and processes in maintaining the company’s continuity and success. To enable success, the board has to operate in multiple roles. These are, for example, strategy development, general and technical advice, networking and the exercise of control (see e.g. Voordeckers, Van Gils & Van den Heuvel, 2007; Bammens, Voordeckers & Van Gils, 2012). The board and its members also ensure the protection of shareholders’ interests, strengthen the link between the corporation and its environment by providing useful business contacts and help in corporate identity creation (Pettigrew, 1992; Huse & Rindova, 2001). Earlier studies about the relationship between the board of directors and ownership have mostly concentrated on how ownership and changes in ownership influence a firm’s governance, the board of directors and the firm’s financial performance. The family system itself affects various board dimensions, such as tasks (e.g. resolving family disagreements), composition, processes (Voordeckers, Van Gils & Van den Heuvel, 2007) and also the expectations the board faces. For example, as the ownership structure in a family business changes, the goals and values also change. When the ownership structure becomes more complicated, goals and values often become more diverse (Ward, 1987; Vilaseca, 2002). This means that as families expand and owners grow older, cohesion at the ownership level becomes crucial for future success (Ward, 1987). As a family business develops and diversifies, and ownership is shared among multiple family members, there is also an increasing need for monitoring the attitudes and expectations of the expanding number of familymember shareholders (Thomas, 2009). In closely held businesses the owners’ will are often closely linked to business activities, meaning that the board of directors has to be fully conscious about the owners’ expectations in business. Although this seems to create a clear need and task for the board of directors, the board’s role in ownership decision-making has hardly been studied.


Tuuli Ikäheimonen, Marita Rautiainen and Timo Pihkala

3. Methodology and empirical data The chosen research strategy in this study is a multiple case study with two cases. The case selection follows the sampling guidelines suggested by Patton (2002) for purposive samples. The criteria for the selection of a case were as follows: the case must be a family-owned business; it must have an actively operating board of directors; the business must have gone through at least one family business succession; and there must be more than one generation of family members available for data gathering. Although the two chosen cases have their unique characteristics (e.g. ownership structure, field of business and the generation in charge), they both have active boards of directors. Table 1: Summary of case characteristics Characteristics Age Size

Case 1: Fashion House About 100 years old 70 employees, turnover of €8 million


12 (mainly) 4th generation owners; the share of ownership ranging between 4% and 20%; three owners participate in daily operations

Generation in charge

4th (cousins)

Board of directors

Five members, including three owners, one manager of the firm and one from outside the firm (but inside the family)

Collected data

Ten interviews, total time 11:44:16

Case 2: Garden House About 60 years old 40 employees, turnover of €10 million Two owners; a 2nd generation ownermanager with 90% of the shares, a 1st generation owner with 10% of the shares (who does not participate in the daily business) 2nd (siblings) Three members, the owner and two outsiders; in addition one external adviser participates in all board meetings Six interviews, total time 11:32:54

The data includes a range of archival records to support the preunderstanding of the cases (see Ikäheimonen, 2014). The primary data consists of interviews. The interviews were analysed by using content analysis (Miles & Huberman, 1994) to find meaning from the data, to concentrate the information it includes and to organize this information in order to make conclusions possible.

3.1 Case description: Fashion House Fashion House is an approximately 100-year-old Finnish family company. Today, Fashion House is a mediumsized company with 70 employees and an annual turnover of €8 m. Its business activities are mainly located in southern Finland and it represents some big international fashion chains and brands. The current owners of the company represent the fourth generation in the family. The company’s business structure has developed over time, and different ownership operations have been implemented when needed. Over the years, there have been at least 14 business acquisitions or company start-ups. In 2011 (when the data was collected) the company consisted of the parent company and three subsidiaries, all 100% owned by the parent company. The latest succession has been the most significant event influencing ownership issues in the current Fashion House. The transitions of ownership and management were implemented separately and the process took over 20 years. The process was started by founding a new company, Mode as Mode Ltd, at the end of 1980s. Stocks of the company were divided into two different classes with varying accompanying voting rights. Most of the fourth generation members – eleven cousins – were quite young, and the third generation family members wanted to keep control over the business, so they held back privileged shares with accompanying higher voting rights. The fourth generation had ordinary shares with one vote per share. During the following period of seven years, the new company Mode as Mode bought the shares of Fashion House from the third generation until Fashion House was totally owned by Mode as Mode in the 1990s. After this, these two companies merged, and the name was changed back to Fashion House Ltd. In 2007, the company bought all the privileged shares from third generation and abolished shares to both ensure peace at work for the fourth generation leaders and prevent e.g. potential threats of uncontrolled ownership changes arising from the aging third generation. This finalized the ownership succession process and gave the fourth generation full control over the company. The implementation of succession was financed by selling a family owned estate. Over the years, the firm achieved several other ownership operations regarding real estate as estates and offices were bought both for


Tuuli Ikäheimonen, Marita Rautiainen and Timo Pihkala use and to rent out. The acquisition of real estate was perceived to be a good way to prepare for the future and possible changes in markets, competition and the business environment.

3.2 Case description: Garden House Garden House Ltd is a Finnish family company specializing in growing and selling plants. In 2010 when the data was collected, Garden House had little more than 40 employees and an annual turnover of €10 m. The company had its first transgenerational succession at the beginning of the 2000s. In the beginning of the ownership succession, the whole family (the founder, his wife and four children) owned the business. About 10 years later two children withdrew. The remaining two children intended to continue the business after their father’s retirement, and their ownership shares in the company were increased. At the age of 65 the founder decided to retire, and the succession was implemented through an acquisition in order to give the founder the possibility to be compensated for his life’s work. Both successors got the same number of shares, but the son’s shares had higher accompanying voting rights, which gave him authority over the company. Both successors continued working in the daily business but their ways of leading differed extensively. Over time, the tension between the siblings increased and, finally, the son ended up buying his sister out. As part of the purchase price, she got one of the related businesses. Since the end of 2000s, the remaining successor has been the main owner of the parent company and three subsidiaries with 90% ownership. From the family perspective, the ownership was used to manage family and business wealth, and the ownership structure of the company. The family used ownership to take more family members into the business but also to decrease the number of involved owners. The orderliness of ownership ran through the company’s history, and the business was divided or sold many times. There were several reasons for this: at first, when the business went well, there was a need to do something with the money in order to avoid excessive taxation. Secondly, if the owners disagreed about the firm’s future directions, dividing the company enabled each owner to carry out their own intentions. The third reason related to families and ownership structures, as division offered an opportunity for family members to be owners, and selling the company enabled withdrawal from the business. Although ownership operations concerning family ownership played a big role in the company’s history, ownership was also used to develop the company and its business, to take advantage of different possibilities (e.g. taxation, financial support) or to provide solutions for future needs or changes. Complimentary businesses were selected and bought because of their added value to the business (or owners), as reasons to buy or found a new company varied from holding properties to being close to the customer interface or having supplementary production.

4. The board’s participation in ownership decision-making Both family businesses have a rich history full of events, and they used ownership actively to achieve different goals. The companies had active boards of directors implementing multiple tasks, including participation in the decision-making that related directly or indirectly to ownership. Ownership operations were implemented partly from the business reasoning of conducting the business strategy and partly from family reasoning, especially that of securing the family business’s continuity. The board was not active at Garden House before the succession, so it did not take part in the succession planning or the estimation of the related ownership arrangements. Later, board work captured this task well, especially with acquisitions and buyouts regarding the business strategy: ‘Estimating the keeping or selling options is a typical task for the board’. (The board member.) At Fashion House there were also many decisions relating to business acquisitions and buyouts. The board also actively discussed about the management of the ownership structure and the number of owners. One result of this thinking was the buyout of the older generation. In addition, the board presented different plans for the future for the owners at the Annual General Meeting and collected the owners’ attitudes towards the plans. ‘And we will present that [plan] in the general meeting and say that most likely this will mean that short-term profits for owners will be smaller than before. And at the same time we will ask who is ready for this, the fact that for the next five years there will not be so much [dividends]. And we will ask who is willing to participate, and if someone isn’t, of course anyone can also use their own money to buy shares but we, as a board, also have an interest in reducing the number of shareholders. So we could – in the same way as we did with the A-shares – the firm could buy those


Tuuli Ikäheimonen, Marita Rautiainen and Timo Pihkala shares. This will decrease the dividend profits for everyone but, on the other hand, increase everyone’s ownership share.’ (The Chair of the board.) When withdrawing from the business, the earlier generation usually has an interest in getting good compensation for their life’s work, and this creates a need to balance the needs of business and withdrawing owners. As one fourth generation member at Fashion House said ‘During the succession, the board should absolutely ensure that it is not only the interests of owners that are monitored but also the interests of the company. The succession must not be too heavy for the business. … We have seen those successions where the former generation has tapped the company so much that there are no longer the operational prerequisites. Although the business continues, development is impossible.’ At Garden House, the board’s role in relation to the owners and ownership is visible in decisions concerning newly founded companies and the amount of dividends (see Table 2). For example, the family used to utilize experts from different fields to gain advice on ownership operations. After succession, the board’s role in these decisions was to consider different options and their consequences. As a result, the board partly replaced the outside advisers the family had previously used. Table 2: Board tasks relating to ownership issues Task Deciding about the ownership operations and succession, finding out about the owners’ expectations Discussions about different possibilities and consequences regarding ownership operations Managing the ownership structure (the number of owners; ownership concentration or diffusion) Decisions about the amount of dividends (to provide suggestions in the General Meeting) Decisions about newly founded companies The estimation and acceptance of acquisitions and buyouts Negotiating the price of the company in succession








business, ownership








business, ownership business, ownership ownership


In the studied cases the boards’ aims for managing ownership were based both in business and family reasoning. Thomas (2009) found that the quality of the board’s future decision-making is enhanced by understanding shareholders’ views of the company. In ownership related decisions, e.g. those related to dividends, the board has to balance the interests of owners and the business. The task is not easy when the monitoring of owners’ interests is the reason why the board exists, and the monitoring of business benefits is the most important means of achieving this goal. Piper (2003) provides the solution of parallel family and business thinking to support the development of planning, decision-making and problem-solving structures for both the family and business system.

5. Discussion Decision-making related to business activities is the basic task of the board. The cases also provide evidence of the board’s role in ownership-related tasks. In governance research, the board’s participation in ownershiprelated decision-making has been largely overlooked. However, ownership-level decision-making includes decisions every board will face, such as decisions about dividends. Although decision-making about dividends is a common board task, there are only a few studies examining the issue from the board’s perspective (Gersick & Feliu, 2014). The cases also indicate several more tasks for the board that relate to owners and ownership issues. One of those is the board’s participation in decisions concerning business succession. In the studied cases, these included decisions such as starting the succession process, decisions about business acquisitions or newly founded companies, and price negotiations. As business viability after the succession is one criterion for the success of the succession process (Sharma et al., 2001; Le Breton-Miller, Miller & Steier, 2004), the board’s task is to balance the needs of the business and withdrawing owners. Succession planning is a recognized board task (Le Breton-Miller, Miller & Steier, 2004) but only a few studies note the board role in price negotiations regarding transgenerational changes.


Tuuli Ikäheimonen, Marita Rautiainen and Timo Pihkala The case studies suggest that the board has tasks in managing the ownership structure (both the number of owners and the degree of ownership concentration) and establishing the owners’ will, namely the family’s vision about issues regarding ownership in the present and future. The question of how to collect and deliver the owners’ will to the decision makers lies at the core of corporate governance. It is also meaningful for the family companies’ success and viability over generations (Thomas, 2009). In both cases the firms had a dual stock-class system, meaning that companies’ shares were divided into two classes. The dual stock system can be used for different purposes, for example if there is a need to have distinct voting rights or dividend payments policies for different owner groups (Gersick & Feliu, 2014). In these cases, the dual stock-class system is used to determine power relationships and to prevent threats arising from situations in which the number of owners increases and, simultaneously, the ownership competence decreases or becomes more difficult to control. According to Gersick and Feliu (2014), studies on the impact of the dual stock system on generational dynamics among family branches, or on succession planning in family firms, have not been reported earlier.

6. Conclusion The relationship between ownership and the board of directors has been studied a lot but from different perspectives. In earlier studies the main emphasis has been on the relationship between family influence (often examined through family members on the board) and the firm’s performance (e.g. Anderson & Reeb, 2004; Zattoni, Gnan & Huse, 2012). In other words, earlier studies have concentrated on clarifying what kind of consequences ownership has for the board of directors and for the firm’s performance. In this paper we have focused on board participation in ownership decision-making. This approach provides a new and underresearched perspective on family business governance. Thus this study contributes to the family business governance literature by illustrating the two-way relationship between ownership and the board of directors in a family business, and by suggesting a new, ownership-related role for the board by presenting examples about the decisions the board makes regarding ownership issues. Understanding the linkage between the board and ownership more clearly also has several managerial implications. It is not obvious that a closely held SME has outside board members and an active board of directors. As the destiny of the owner is often closely related to that of the business, it is understandable that business owners want to keep crucial decisions in their own hands. In order to decrease reluctance to utilize the board of directors in these firms, we emphasize the need to be aware of the owner’s will and their insights into the business and its ownership, and to use this knowledge as a basis when making decisions affecting ownership. Further, understanding the board as a decision-maker that also considers ownership issues may encourage business owners to think about goals and objectives not only for their business activities, but also for their ownership, and to communicate these goals to the board of directors. This can be seen as the first step towards also seeing ownership as a strategic activity in smaller companies. Goal-oriented strategic ownership, and the board’s role in ownership management, offer fruitful possibilities for future studies. First, the board role in ownership decision-making should be studied more closely to understand the phenomenon better. This demands both qualitative studies, in order to better understand the role contents, and quantitative studies to analyse how usual this phenomenon is and what kind of forms it takes in different kind of companies. Secondly, business strategies have seldom been consciously studied from the perspective of the family´s or individual family members’ long-term goals and wishes. This is especially important as the family grows and the business develops. Again, creating a strategy for ownership can offer one possible way to handle the wholeness of economic and non-economic goals, and the aims of different owners. However, as earlier studies about this topic are almost non-existent, more research is needed to clarify the usability of the idea in a family business context.

References Anderson, R. C. and Reeb, D. M. (2004) “Board composition: Balancing family influence in S&P 500 firms”, Administrative Science Quarterly, Vol. 49, No. 2, pp. 209–237. Aguilera, R. V. and Crespi-Cladera, R. (2012) “Firm family firms: Current debates of corporate governance in family firms”, Journal of Family Business Strategy, Vol. 3, pp. 66–69. Bammens, Y., Voordeckers, W. and Van Gils, A. (2011) “Boards of directors in family businesses: A literature review and research agenda”, International Journal of Management Reviews, Vol. 13, No. 2, pp. 134–152.


Tuuli Ikäheimonen, Marita Rautiainen and Timo Pihkala Bettinelli, C. (2011) “Boards of directors in family firms: An exploratory study of structure and group process”, Family Business Review, Vol. 24, No. 2, pp. 151–169. Carney, M. (2005) “Corporate governance and competitive advantage in family-controlled firms”, Entrepreneurship: Theory & Practice, Vol. 29, No. 3, pp. 249–265. Chrisman, J. J., Chua, J. H. and Sharma, P. (2005) “Trends and directions in the development of a strategic management theory of the family firm”, Entrepreneurship: Theory & Practice, Vol. 29, No. 5, pp. 555–575. Corbetta, G. and Salvato, C. A. (2004) ”The board of directors in family firms: One size fits all?”, Family Business Review, Vol. 17, No. 2, pp. 119. Gersick, K. and Feliu, N. (2014) “Governing the family enterprise: Practices, performance and research”. In L. Melin, M. Nordqvist, and P. Sharma (Eds.), The SAGE handbook of family business (1st ed., pp. 196–225), London: Sage Publications. Goel, S., Mazzola, P., Phan, P. H., Pieper, T. M. and Zachary, R. K. (2012) “Strategy, ownership, governance, and sociopsychological perspectives on family businesses from around the world”, Journal of Family Business Strategy, Vol. 3, No. 2, pp. 54–65. Huse, M. and Rindova, V. P. (2001) “Stakeholders' expectations of board roles: The case of subsidiary boards”, Journal of Management & Governance, Vol. 5, No. 2, pp. 153. Ikäheimonen, T. (2014) “The board of directors as a part of family business governance – multilevel participation and board development”, Acta Universitatis Lappeenrantaensis 591, Lappeenranta. Kuratko, D. (2010) “Corporate entrepreneurship: an introduction and research review”. In Acs, Z., & Audretsch, D. (Eds.) Handbook of Entrepreneurship Research: An Interdisciplinary Survey and Introduction (2nd ed.), New York: Springer. Le Breton-Miller, I., Miller, D. and Steier, L. P. (2004) “Toward an integrative model of effective FOB succession”, Entrepreneurship: Theory & Practice, Vol. 28, No. 4, pp. 305–328. Miles, M. B. and Huberman, M. A. (1994) Qualitative data analysis: An expanded sourcebook (2nd ed.), Thousand Oaks, USA: Sage Publications. Nordqvist, M., Sharma, P. and Chirico, F. (2014) “Family firm heterogeneity and governance: A configuration approach”, Journal of Small Business Management, Vol. 52, No. 2, pp. 192–209. Patton, M. Q. (2002) Qualitative research & evaluation methods (3rd ed.), California: Sage Publications. Pettigrew, A. M. (1992) “On studying managerial elites”, Strategic Management Journal, Vol. 13, p. 163. Pieper, T. (2003). Corporate governance in family firms: A literature review (No. 97/IIFE), INSEAD, Working Paper Series. Pieper, T. M., Klein, S. B. and Jaskiewicz, P. (2008) “The impact of goal alignment on board existence and top management team composition: Evidence from family-influenced businesses”, Journal of Small Business Management, Vol. 46, No. 3, pp. 372–394. Sharma, P. and Nordqvist, M. (2008) “A classification scheme for family firms: From family values to effective governance to firm performance”. In J. Tàpies, and J. L. Ward (eds.), Family values and value creation: The fostering of enduring values within family-owned businesses (pp. 71–101), New York: New York, Palgrave Macmillan. Sharma, P., Chrisman, J. J., Pablo, A. L. and Chua, J. H. (2001) “Determinants of initial satisfaction with the succession process in family firms: A conceptual model”, Entrepreneurship: Theory & Practice, Vol. 25, No. 3, p. 17. Silva, F. and Majluf, N. (2008) “Does family ownership shape performance outcomes?”, Journal of Business Research, Vol. 61, No. 6, pp. 609–614. Thomas, J. (2009) “Attitudes and expectations of shareholders: The case of the multi-generation family business”, Journal of Management and Organization, Vol. 15, No. 3, p. 346. Vilaseca, A. (2002) “The shareholder role in the family business: Conflict of interests and objectives between nonemployed shareholders and top management team”, Family Business Review, Vol. 15, No. 4, p. 299. Voordeckers, W., Van Gils, A. and Van den Heuvel, J. (2007) “Board composition in small and medium-sized family firms”, Journal of Small Business Management, Vol. 45, No. 1, p. 137. Ward, J. L. (1987) Keeping the family business healthy: How to plan for continuing growth, profitability and family leadership. San Francisco, CA: Jossey-Bass. Zattoni, A., Gnan, L. and Huse, M. (2012) “Does family involvement influence firm performance? Exploring the mediating effects of board processes and tasks”, Journal of Management, October (online).


Triple Helix Relations in Innovation: Conflicts, Tensions, and Struggles in Rentier Regions Chidubem Ikeatuegwu and Zoe Dann University of Portsmouth, UK [email protected] [email protected]

Abstract: This study investigates academic entrepreneurship within a prism of the triple helix model of innovation relating university, industry, and government. The study adopts a sociological approach, defines academic entrepreneurship as a social game, and aims to unravel the mechanisms of relations within the triple helix that arise in oil-rich regions, using oilrich Nigeria as case. In particular, it focuses on how socio-economic-political institutions of rentierism within these regions influence commercialization of findings of research. The study argues that the structural powers that shape academic entrepreneurship in different environments are governed by the interdependencies between agency and socio-economic political institutions. This is in line with the prevalent claim that institutions impose rules that constitute constraints and enablers of agency. This study however argues that agential actions are not mere rules-compliance, rather they are strategic calculations based on pragmatic contingent decisions about what works best within given institutional dynamics. The study employs Bourdieu’s sociology as the conceptual framework, underpinned by critical realist philosophy. It uses data from multiple sources to transcend the agency-structure divide, and unearths the various conflicts, tensions, struggles and negotiations between the three players in the triple helix in oil-rich environments. Findings of the study offer new insights to academic researchers, industrialists, governments, and policy makers especially in knowledge-driven economies. It identifies and highlights the points of divergence of the key players in the fields of innovation and entrepreneurship. The findings are also of significance to innovation and regional development policy-makers as they offer insights into what works, what doesn’t work and what may never work regarding policy; and illustrates that entrepreneurship and innovation policies that are effective in one clime may not necessarily be effective in another, thus highlighting the critical importance of institutional considerations in entrepreneurship and innovation policy-making. Keywords: academic entrepreneurship, Bourdieu, Rentier states, agency-structure, social space, practice

1. Introduction Academic entrepreneurship stimulates economic growth (Audretsch, 2006). Natural resource-rich rentier states prevalently derive income from external rents from natural resources in contrast with production states that tax domestic economic activities for their income (Beblawi & Luciani,1987). This paper takes a sociological perspective and conceptualizes academic entrepreneurship as a game; Scharle (2002) defines ‘gaming’ as “activity involving more than one participant, where... the moves of the participants correspond to a pattern of complementary roles, the participants (either individuals or groups) have specific goals and driving strategies, the moves are motivated by the outcome of the game and by the pay-offs". Academic entrepreneurship is defined in this study as a Social Game where opportunities from utilizing findings of academic research are discovered, evaluated, and exploited through actions of individuals who aim at advancing their social positions by the pursuit of the various forms of capital availed by the commercialization of findings of research. This study focuses on rentierism, a socio-economic construct that shapes institutional outlook of oil-rich regions, and investigates its impact on academic entrepreneurship. Formal and informal institutions underpin social order and pivot the dialectic between entrepreneurs and their wider societies; Jones-Evans (1998) argues that "academic entrepreneurship is a phenomenon that exists in a range of different institutional and regional settings” (p.103). Impacts of contextual institutions on academic entrepreneurship is discussed by Siegel (2006). In his triple helix model of innovation, Etzkowitz (2008) discusses universities, governments, and industries as the key players in Academic Entrepreneurship; he states: “university, industry, and government enter into a reciprocal relationship with each other in which each attempts to enhance the performance of the other” (p. 8). Academic entrepreneurship conceptualized as a game implies that the three members of the triple helix are in a game-like (Dallas & Zapalska, 2006) relationship. This study therefore focuses on understanding the various position takings and game strategies (Bourdieu, 1996) of the players in academic entrepreneurship game, with focus on the dialogues, negotiations, tensions and struggles (Bourdieu, 1990) between the players, and how these relate with the socio-economic structures of a rentier ‘games arena’; and how the position-takings, relations, strategies, rules, and pay-offs shape academic entrepreneurship in these environments.


Chidubem Ikeatuegwu and Zoe Dann

2. Literature review Strands of literature exist on how natural resources influence regional socio-economic and political topography, including how the rentier apparatus shapes government, economy, politics, and even behaviour. The Dutch disease thesis (Corden, 1984) for instance blames resource wealth for the comparatively slow economic growth in resource-rich countries. Collier & Hoeffler (2005) link mineral wealth with violent conflicts, Harford & Klein (2005) cites resource wealth as the determinant of institutions, while Karl (1997) argues that oil booms caused a destabilization of governance structures and national capacities. Yates (1996) posit that “the conditioning factor of economic stagnation and political authoritarianism in oil-dependent states is the corrosive effect of external rent”. The effects of oil wealth on national institutions are well documented in African, Middle Eastern, American, Asian and European oil-rich states. The European state of Russia is oil-rich, although its rentier status remains arguable (see Arilla, 2005; Freinkman & Plekhanov, 2009; Oomes & Kalcheva, 2007); Algieri (2011), and Kalcheva & Oomes (2007) find that oil wealth in Russia have produced: relative de-industrialisation, contraction in nonoil exports, and real wage growth; a trend associated with African, Asian, Middle-Eastern and South-American rentiers. This study investigates how the institutional dynamics of oil rentier states influence academic entrepreneurship. The study strengthens entrepreneurship and rentier state literature by adding to knowledge regarding influence of external rents on entrepreneurship. Three perspectives dominate Academic entrepreneurship research: individual, process, and context. Perspectives on individual focus on characteristics of agents (Mosey & Wright, 2007), or entrepreneurial teams (O'Shea, et al., 2005), and influence of agents’ social capital/ networks (Mosey & Wright, 2007); main argument being that some academics are better predisposed to commercialize their findings as a result of their personality, psychological characteristics, or possession of scarce knowledge that helps in creating, identifying, and seizing opportunities offered by research findings. Process-based studies address the courses of action that transform research outputs into economic values, seeking to understand the speeds, stages, typologies, and determinants of success (Knockaert, et al 2011). More recent works bring into account the impact of contextual situations; three levels of analyses dominate this perspective: individual, organizational, and regional levels. While the contextualized studies identify the geographies of their studies, they commonly fail to identify specific institutional forces that govern action in the geographies studied. Failure to identify and account for the contextual institutional dynamics at play in the contexts studied constitutes weakness in these previous studies. This study therefore gains strength by identifying rentierism as the socio-economic predicator, underlying institutions in oil-rich regions. Influence of natural resource abundance on academic entrepreneurship is rarely studied, and account at a multi-level is rarely given of the underlying socio-economic dynamics governing academic entrepreneurship; these are gaps in knowledge this study fills.

3. Theoretical framework 3.1 Research philosophy and analytical framework Critical realism is the underpinning philosophy of this study. Critical realism as the underpinning philosophy requires that this study provides account not only of concrete structures that regulate agential action, but also that objectively inaccessible subjective structures within agents, and underlying instigative powers and mechanisms of relations that generate, enable, constrain, or shape agency in rentier states be brought into the analysis. The analytical framework for this study is based on Bourdieu's (1977) theory of practice. Bourdieu’s sociology serves for this study, as mediator of the tension between objectivism and subjectivism, enabling transcendence of the three levels of analysis (individual, organisational, and regional). It reconciles external social structures with embodied subjective experience of agents, thereby opening avenues for logical illustration of the social governance of academic entrepreneurship. Bourdieu's theory of practice has its foundation on his thesis that choices and preferences of social agents in diverse domains of practice have basis on agential internal dispositions and their external social positions. Bourdieu refers to these dispositions as ‘habitus’- a product of the objective conditions that agents encountered


Chidubem Ikeatuegwu and Zoe Dann and encounters; an embodiment within agents of the structural constraints and enablers within their environment, that provide them with personally configured rules of their games; what Bourdieu termed “structuring structures” (Bourdieu, 1977, p.72).

3.2 Forms of capital Bourdieu’s concept of capital is intended to extend account of society beyond Marxian economic models that limit analysis of society to concrete economic assets. Bourdieu’s concepts of capital “extend economic calculation to all the goods, material and symbolic, without distinction, that present themselves as rare and worthy of being sought after in a particular social formation” (Bourdieu, 1977, p.177). Capital is “accumulated labour (in its materialised form or its ‘‘incorporated,’’ embodied form), which, when appropriated on a private, i.e., exclusive, basis by agents or groups of agents, enables them to appropriate social energy in the form of reified or living labour” (Bourdieu, 1986, p.241). To Bourdieu, the various resources available to agents becomes conceptualized as capital "when they function as a 'social relation of power', that is, when they become objects of struggle as valued resources” (Swartz, 1997 p.74). Capital “can present itself in three fundamental guises: as economic capital, which is immediately and directly convertible into money and may be institutionalized in the forms of property rights; as cultural capital, which is convertible, on certain conditions, into economic capital and may be institutionalized in the forms of educational qualifications; and as social capital, made up of social obligations (‘connections’), which is convertible, in certain conditions, into economic capital…” (Bourdieu, 1986 p.82).

3.3 Habitus Every agent possesses a system of disposition emergent from their past history, present situation, and future expectations. Agents in proximate positions within the social space possess specific modes of thinking about the world, of interpreting the world, and of behaving in the world; Bourdieu terms these modes of apprehending the world as ‘habitus’ (Bourdieu, 1977). Bourdieu considers habitus a reflection or reproduction of the hierarchical social structures and positions existent within the agent’s environment. The concept of habitus is crucial in the analysis of the society, since it is through the same mechanisms that mental dispositions (habitus) reproduce 'images' of the existing social world that the 'rules of the game' within the fields of power are also reproduced (ibid). Implication is that decisions or choices, including choices of field strategies conform to the mental, or dispositional conditions characterising the agents’ existence, history, and personal trajectories (Bourdieu, 2000) since they are the conditioners of the agent’s habitus.

4. Methodology This study followed a three-phase, seven-stage process; the process is set out in Table 1. Table 1: Summary of the research process

Mapping Relations

Data Analysis

Data Collection




Quantitative Data

Collecting quantitative data on the forms, volumes and configurations of capital held by the agents under investigation.

Qualitative Data

Collecting desk data and interview data that shed light on the mind dispositions, actions and practices of the agents.

Construction of the Social space Separating the fields within the field of power Identifying homologies in the fields

Applying quantitative data to spatially locate agents based on their volumes and configurations of capital. Once the social space has been constructed, the distinct fields are identifiable, characteristics of these fields are identified and specified. Identifying objects, events, dispositions, tendencies, etc. that are specific (or homologous) to the each of the identified fields.

Relating events, actions, habitus and fields

Logically relating the various objects, events, dispositions, etc. identified in the earlier stages.


Using existing theory and literature to validate the findings.


Chidubem Ikeatuegwu and Zoe Dann

4.1 Sources of data The research data consist of quantitative data on volumes and configurations of capital held by agents, qualitative data from desk research, and interview data that illustrate dispositions, choices, and actions of the agents. The survey consist of self-reported closed questions involving twenty-one academic entrepreneurs. This was followed up with semi-structured interviews involving eleven (11) of the twenty-one (21) agents; the quantitative data is applied to develop the social space of academic entrepreneurship.

4.2 Analysis of data Analysis of data starts with plotting the social space. The forms, volumes and configuration of capital the respondents hold position them differentially on the social space. Within the resulting social space, the various proximate groups and specific properties of each field are identified, and analysis shifts focus to identifying the various homologies and oppositions between the various groups, in particular, their underlying categories of perception and thought (habitus), and distinctive practices. The final stage of the analysis is relational, where retroductive processes (Danermark, 2002) and logic are applied to establish the relational mechanisms between the forms of capital, agential habitus, action, and practice. This stage illustrates the various power struggles, position takings, inter-agential and inter-group tensions, struggles, negotiations, and the relations between these and wider societal structures. The emergent mechanism of relating constitute the dynamic governance of academic entrepreneurship within the context studied.

5. Findings 5.1 The social space The resulting social space show three distinct fields that constitute Etzkowitz’s (2008) triple helix model: Government, Industry, and Academia (figure 1). The government field occupies the top right position, making it the dominant field (Bourdieu 1984). The academic field occupies the bottom left position being the dominated field, while the Industry field occupies an intermediate position between the government and the academic fields. The resultant social space is shown in figure. 1.

Figure 1: The social space

5.2 Field properties Data from desk research, from literature, and inferences from the interviews are used to build up a qualitative description of the three distinct fields within the space. These, alongside ‘field actions’ are represented in the ‘space of action’ (Figure 3); and a comparison of the field properties is tabulated in table 2. Table 2: Comparison of properties across the three fields


Chidubem Ikeatuegwu and Zoe Dann Field Property

Government Field

Industry Field

Academic Field

Access to rents

Direct (high)

Earned (low)

Indirect (intermediate)

Academic knowledge




Technical power




Business skills








Research skills




5.3 Habitus in the three fields of academic entrepreneurship Agents within the three fields possess different habitus conditioned by the life trajectories of its agents. Although no two individuals possess the same habitus, individuals with similar life trajectories may possess “similarities in their habitus and lifestyle” (Bourdieu, 1984, p. 93). Interview data was used to produce the resulting space of academic entrepreneurial dispositions (figure 2.)

Figure 2: The space of dispositions

5.4 Action in the three fields of academic entrepreneurship Agents and agential groups in the social space strategize and compete at various fronts, the ultimate being “to maintain or enhance their positions in the social order" (Swartz, 2012, p.210). The agents, consciously or unconsciously are 'aware' of their positions in the social order, aware of the resources within the social space, aware of the constraining and enabling properties of their particular fields, aware of the powers and limits of powers of their positions, and strategize to maintain or advance their positions in the social order by "preserving, reinforcing, or transforming their stock of capital" (ibid); or converting them to preferred new forms. This study uncovered five typologies of entrepreneurial actions homologous with the three fields of academic entrepreneurship; these typologies (table 3) define the practice of academic entrepreneurship in a rentier state. Table 3: Typologies of academic entrepreneurial action in a rentier state


Chidubem Ikeatuegwu and Zoe Dann Action Accessive Assessive Mediative Creative Allocative

Description Actions of agents aimed at gaining access to the rentier capital. Accessive action pervade the entire social space and permeates all the three fields. Assessing commercialization proposals to determine their commercial values, market potentials and suitability. Assessive actions are homologous with industry field. Bridging the gap between demands of the society and supplies that satisfy the demands. Mediative actions are homologous with the industry field Creation of new knowledge through research; homologous with the academic field. Distributing from coffers of the state, necessary resources for the execution of the academic entrepreneurial actions; this is homologous to the government field.

Other entrepreneurial actions within the various fields are represented on the space of action (Figure 3).

Figure 3: The space of action

6. Discussion 6.1 Symbolic violence within the fields Agents within the three fields capitalize on resources available and opportunities presented by their fields to further enhance incomes accessible to them. They deploy accessive strategies that enable legitimate or illegitimate access to the rentier capital. The dominant position of the government field and the dominated position of the academic field polarizes the main struggles between these two fields, each striving to access maximum possible capital from the circuit. The industry field is neutral in these struggles, its neutral position being homologous with the intermediate position it occupies on the social space. The field has no access to the rentier circuit, therefore focuses on maximizing the profitability of its activities, refusing to be involved in commercialization activities when its profitability is not demonstrable. Employment serves as a primary channel for converting cultural capital into economic capital (Weis, 2009). Cultural capital in this regards relate mostly to education, experience and skills acquired over time and embodied within agents. In any given society there are different categories of employment and different salary levels, agents are consciously or unconsciously aware of their social positions. They will seek employment, and negotiate a salary that corresponds to their social positions. When government is the employer, agents negotiate their rewards not as reflection of work, but as reflection of their social positions, and reflection of


Chidubem Ikeatuegwu and Zoe Dann rents accruing to the state. Government agents deploy the power and control they retain over the rents from petroleum to enhance and maintain their dominant position over other fields in the social space. Even in the face of possible illegality and illegitimacy of such actions, the government field utilizes the political power at its disposal to justify and legitimize approvals of enormously high levels of salaries for their field, in this way widens the social gap and power distances between the field and the other two fields. This is the strategy of symbolic violence (Bourdieu& Thompson, 1991). There exists, an apprehension of instability of the field and its vulnerability to destabilization by the elites. The government field guards against any destabilization by seeking the support of the elites by funding their interests. “…oil rents accrue directly in the hands of the state, and loyalty to the state is gained through patron– client networks which help increase political stability, giving the government a certain measure of legitimacy” (Franke, Gawrich, & Alakbarov, 2009, p. 112). This works in favour of the academic field, as the government invests in research and commercialization of its findings, not out of genuine desire to encourage wealth-creation through commercializing findings, rather aimed at maintaining and consolidating their positions in the field by appeasing the elitist academic field. "Instead of attending to the task of expediting the basic socio-economic transformations, they devote the greater part of their resources to guarding the status quo" (Cook, 1970, p.443). The academic field is the dominated field , agents in this field access the rentier capital primarily through salaried employment, because the field lacks direct access to the rentier circuit, and lacks the political power and structure required to set the dynamism of the social space in its favour in contrast to the government field. As a result the salary levels in the academic field more than those of the government field follow the work-reward causation, while those of the government field follow the tides of the state’s income from petroleum, rising when petro-income rises and reluctantly downwardly adjusted when income dwindles. To enhance income levels of the field, the academic field resorts to a strategy of undermining the state structure, thereby threatening stability of the government field. This is often in form of strikes, industrial action, public criticism and activism. Agents in this field are aware of their stock of cultural capital which having been acquired over long periods of time are rare and inimitable. Having acquired legitimacy, credibility and trust of the general population above the government field as a result of its social disposition, the wider population are more inclined to believe and accept voices from academia over that from the government field, government field having been apprehended by the population as untrustworthy, deceitful and kleptomaniac. Aware that government cannot afford a substitute to their rare skills, knowledge, and experience; the academic field deploys the symbolism of their rare position in the social space as tools of symbolic violence to rattle the government. The government field responds by enhancing funding levels made available to the academic field, funding their research and its commercialization. These funds are however often misapprehended by the academics as earned income, thus misappropriated, but justified with basic research that has little or no potential for commercialization; hence the commercialization effort fails. Funding being provided through this mechanism explains why the government’s expenditure on the projects are rarely monitored- it serves to purchase the indulgence of the academic field. Although some of these practices are ordinarily identified as ‘corrupt’, they form part of the power struggles in a rentier state. In the European rentier state of Russia for example, Lane (1999) reports that corrupt activities form "part of the politics of confrontation", and are better understood "as an indication of power struggles between Russias's political and economic elites" (p.97), and that the Russian oil and gas wealth has resulted in "the triumph of rent-seeking over profit-seeking" (p.181). Osipian (2012) argues that the widespread corruption in Russian universities results from the quest by the state to “derive its rent not in money but in loyalty to the regime" (p.153). These findings even in European rentiers illustrate and mirror the same rentier institutional dynamics that produce unfavourable commercialization outcomes as identified in this study. The Russian science-technological complex founded in 2010 was aimed at commercializing new Russian technologies, but academics (eg. Dezhina, 2010) criticize the project as being hijacked by the dominant "narrow circle of government officials" (p.108) to the detriment of innovation firms and researchers, and was administered through political rather than scientific considerations, and decision about its location, politically motivated (ibid). Liuhto (2010) argues that these government projects, although Russia’s best innovation promotion measures, the state remains too involved for them to “form an effective, flexible, and sustainable innovation system” (p.99).


Chidubem Ikeatuegwu and Zoe Dann

7. Conclusion 7.1 Access to the external rents: Driver of action This study finds that the major driver of action in rentier states is access to the rentier circuits. Earlier studies eg. Grant (2014) finds in rentier states, favouristic employment and political appointments as classic means of gaining access to the rents, “jobs and contracts and licences are given as an expression of patronage and clientelism rather than as reflection of sound economic rationale” (Grant,2014). In Russia, Satarov (2000) finds that the competition that exists in Russia "is principally that of competition for rents" (p.113). Social position and clientelism rather than suitability for the role determines who gets employed or appointed to positions, this way, efficiency of academic entrepreneurship efforts are hindered. When unqualified and uncommitted persons, given such roles merely as means to access rentier capital via employment occupy strategic job positions that deal with commercialization, misappropriation of funds follow, and they will most likely lack the relevant skills, knowledge, experience, and drive to carry the role through. This gets further complicated by the shift in the focus of the government agents from how to achieve successful commercialization projects, to how to illegitimately gain access to the rentier circuits through the opportunities offered by the commercialization process. This explains why investments made towards commercialization produce mismatched outcomes.

7.2 The dynamics of the triple helix in a rentier state Further, this study finds that the triple helix model works differently in rentier regions. Etzkowitz (2008) states that triple helix relations in knowledge-based societies result when “university, industry, and government enter into a reciprocal relationship with each other in which each attempts to enhance the performance of the other” (p. 8). Similarly Fetterman & Wandersman (2005) states that “the three partners in the relationship work together to build upon one another's strengths to achieve results”. But this study finds contrast in the structure and dynamism of this relationship in rentier regions. In rentier states the three partners support each other only to fulfil their obligations, rather than to enhance performance; and to ingratiate self to other stakeholders, and the wider society; if such ingratiation supports their cause. Rather than mutual enhancement, the three partners strive to enhance self, and gain advantage even to the detriment of one another. This study finds that the triple helix of innovation in a rentier state involve intra-relational struggles and tensions that hinder its effectiveness. Among the major functions of the government within the relationship is making policy initiatives and providing enabling environment such as intellectual property regimes and law enforcement. But the institutional dynamics of rentier states dictate in contrast that it is in the interest of the government that these institutions remain weak, as Bratton & Van-de-Walle (1997) explains “In most rentier states, the ruling elite often undermine institutional integrity to protect their own rent-seeking interests” (p.19). Sound legal system is required for academic entrepreneurship to flourish, but the rentier government rather supports the status quo of weak institutions; this in the overall works against intellectual property ownership, and stifles academic entrepreneurship. Owing to the peculiarity of academic entrepreneurship in rentier regions, it is recommended that governments and policy-makers before borrowing policy initiatives from other regions should first scrutinize them under the prism of their peculiar institutional outlook. Especially for natural-resource rich regions, evidence that such policy initiatives worked in some regions may not guarantee that it would work in others.

References Algieri, B., 2011. The Dutch Disease: evidences from Russia. Economic Change and Restructuring, 44(3), 243-277. Arilla, C., 2005. Is Russia Drifting Toward an Oil-Rentier Economy?.Eastern European Economics, 43(5), pp.46-73. Audretsch, D. B., 2006. Entrepreneurship, innovation and economic growth: Edward Elgar Publishing. Beblawi, H., & Luciani, G., 1987. The rentier state (Vol. 2). New York: Routledge Kegan & Paul. Bourdieu, P., & Thompson, J. B., 1991. Language and symbolic power. Cambridge: Harvard University Press. Bourdieu, P., 1977. Outline of a Theory of Practice (Vol. 16). Cambridge: Cambridge university press. Bourdieu, P., 1984. Distinction: A social critique of the judgement of taste: Harvard University Press. Bourdieu, P., 1986. The forms of capital. In I. Szeman & T. Kaposy (Eds.), Cultural theory: An anthology (81-93). Bourdieu, P., 1990. In other words: Essays towards a reflexive sociology. Stanford: University Press. Bourdieu, P., 1996. The rules of art: Genesis and structure of the literary field. Stanford: SUniversity Press. Bourdieu, P., 2000. Pascalian meditations. Stanford: University Press.


Chidubem Ikeatuegwu and Zoe Dann Bratton, M., & Van-de-Walle, N., 1997. Democratic experiments in Africa: Regime transitions in comparative perspective. Cambridge: Cambridge University Press. Braunerhjelm, P., 2007. Academic entrepreneurship: social norms, university culture and policies. Science and Public Policy, 34(9), 619-631. Collier, P., & Hoeffler, A., 2005. Resource rents, governance, and conflict. Journal of Conflict Resolution, 49(4), 625-633. Cook, M. A., 1970. Studies in the Economic History of the Middle East: from the Rise of Islam to the Present Day. Oxford: University Press. Corden, W. M., 1984. Booming sector and Dutch disease economics: survey and consolidation. Oxford economic papers, 359-380. Dallas, B., & Zapalska, A., 2006. Entrepreneurial Decision Making in a Dynamic Environment, Journal of East-West Business. Danermark, B., 2002. Explaining society: Critical realism in the social sciences: Psychology Press. Dezhina, I., 2010. Big projects as a stimulus for innovation development in Russia. Edited by Eini Laaksonen Etzkowitz, H., 2008. The triple helix: University-industry-government innovation in action. London: Taylor & Francis. Franke, A., Gawrich, A., & Alakbarov, G., 2009. Kazakhstan and Azerbaijan as post-Soviet rentier states: resource incomes and autocracy as a double ‘curse’in post-Soviet regimes. Europe-Asia Studies, 61(1), 109-140. Freinkman, L., Plekhanov, A., 2009. Fiscal decentralization in rentier regions: evidence from Russia. World Development, 37(2), pp.503-512. Grant, J. A., 2014. New Approaches to the Governance of Natural Resources: Insights from Africa. Basingstoke: Palgrave Macmillan. Harford, T., & Klein, M., 2005. Aid and the resource curse. Public Policy Journal, 291, 1-4. Henrekson, M., & Rosenberg, N., 2001. Designing efficient institutions for science-based entrepreneurship: Lesson from the US and Sweden. The Journal of Technology Transfer, 26(3), 207-231. Jones-Evans, D., 1998. Universities, technology transfer and spin-off activities: Academic entrepreneurship in different European regions. Targeted socio-economic research project (1042). Kalcheva, K. and Oomes, N., 2007. Diagnosing Dutch disease: does Russia have the symptoms? (No. 7-102). International Monetary Fund. Karl, T. L., 1997. The paradox of plenty: Oil booms and petro-states. California: University of California Press. Knockaert, M., Ucbasaran, D., Wright, M., & Clarysse, B., 2011. The Relationship Between Knowledge Transfer, Top Management Team Composition, and Performance: The Case of Science-Based Entrepreneurial Firms. Entrepreneurship Theory and Practice, 35(4), 777-803. Lane, D. S., 1999. The Political Economy of Russian Oil. Plymouth: Rowman & Littlefield Publishers Levin, M., & Satarov, G., 2000. Corruption and institutions in Russia. European Journal of Political Economy, 16(1), 113-132. Liuhto, K., 2010. Rosnano and Skolkovo are Russia’s best innovation promoting measures, but they are not enough to modernise Russia as a whole. Edited by Eini Laaksonen. Mosey, S., & Wright, M., 2007. From Human Capital to Social Capital: A Longitudinal Study of Technology-Based Academic Entrepreneurs. Entrepreneurship Theory and Practice, 31(6), 909-935. Oomes, N., Kalcheva, K., 2007. Diagnosing Dutch disease: does Russia have the symptoms?. O'Shea, R. P., Allen, T. J., Chevalier, A., & Roche, F., 2005. Entrepreneurial orientation, technology transfer and spinoff performance of U.S. universities. Research Policy, 34(7), 994-1009. Osipian, A.L., 2012. Loyalty as rent: Corruption and politicization of Russian universities. International Journal of Sociology and Social Policy, 32(3/4), pp.153-167. Scharle, P., 2002) Public-Private Partnership (PPP) as a Social Game, Innovation: The European Journal of Social Science Research, 15:3, 227-252. Siegel, D., 2006. Technology entrepreneurship: Institutions and agents involved in university technology transfer, Vol. 1. London: Edgar Elgar Publishing. Swartz, D., 1997. Culture and power: The sociology of Pierre Bourdieu. Chicago: University of Chicago Press. Weis, L., 2009. The way class works: Readings on school, family, and the economy. New York: Routledge. Yates, D. A., 1996. The rentier state in Africa: Oil rent dependency and neocolonialism in the Republic of Gabon. New Jersey: Africa World Press.


How Mobile Technologies and Social Media Merge to Help Managers and Entrepreneurs Fast Track Their Business Alexandra Ioanid, Cezar Scarlat and Gheorghe Militaru University Politehnica of Bucharest, Romania [email protected]

Abstract: The approach most of the organizations have taken recently is to integrate social media and mobile technologies into their activity to create awareness and persuading the customer into liking, following an organization’s social media profile or interacting with other users or organization’s representatives on its platform. The mix between social media tools and mobile technologies is the key to a successful business development. The authors noticed that only with social media very few users progress into buying a product or service, but rather remain of the first stage of social media reactions. The main objective of the paper is to determine the best way to mix social media and mobile technologies in order to fast track a business. A structured questionnaire was the main survey tool for this study. After the preliminary results were analyzed, there were conducted several interviews with the entrepreneurs that obtained a significant business growth mainly through social media merged with mobile technology. The exploratory research aims at answering the following questions: (i) if using mobile social media technologies is correlated with the performance of the company; and (ii) if there is a preference for social media mobile applications depending on the industry. One of the most important benefits of mobile social networking is the location awareness, leading to a great opportunity for marketers to target customers better. Also, offering various promotions through social media might be even more successful when merging targeted demographics with the location. Understanding that social media alone is not enough anymore for business growth, but that it rather becomes a successful approach when used together with mobile technologies, helps entrepreneurs develop their business. The model presented in this study can be adapted by several industries where the customer interacts directly with the provider. Keywords: social networks, social media, Facebook, mobile technology, business performance

1. Introduction Social networks have been intensely used by individuals all over the world and according to there are 1.65 billion monthly active Facebook users. (, accessed April 2016) Since social networks appear as a Web 2.0 innovation in the early 2000s, it represented an opportunity for “both private life of individuals and professional life of organizations” and in the future “it is expected to continue to revolutionize personal and organizational communications and interactions worldwide”. (Ngai et all, 2015) Social media for business is considered a must for any company that wants to increase its online performance and indirectly its financial and non-financial benefits. This paper presents the final results of a larger research on how managers and entrepreneurs use social networks and what benefits they obtain. In the previous studies, the authors proved that the use of social media is highly correlated with education and previous work experience of the manager or entrepreneur and that social media platform choice is highly correlated to the industry, now based on several interviews with entrepreneurs of SMEs the authors noticed that mobile technologies influence the success of social media activities by at least 15%. (Ioanid et all, 2015) During interviews with entrepreneurs and managers the authors noticed some of them mention that their online performance has increased after adapting their website for mobile technology, becoming more mobile-friendly, so customers could access the content via smartphone or tablet. Most interviewed companies’ representatives reported an increase in both financial and non-financial benefits from social media presence after adapting their content to be suited for different types of devices. However, there are only some industries that reported this difference between using only social media or social media merged with mobile technologies. The paper is structured as follows: first, the authors go through a literature review and develop the hypothesis, highlighting the financial and non-financial benefits of using social networks. Secondly, the research methodology is described and after that the results obtained are analyzed. The authors focused especially on the performance obtained with classical use of social media versus the development of applications that with the permission of the user of course, collect and use demographic data and the location coordinates for better targeting. One important aspect worth mentioned is that due to the sample, this study is applied for SMEs as most of the respondents represent small and medium enterprises. Finally, the authors present which are the conclusions and the implications of the study for both members of


Alexandra Ioanid, Cezar Scarlat and Gheorghe Militaru the academia and managers or entrepreneurs looking to fast track their business using social networks strategies.

2. Literature review and hypothesis development Social media is considered now an integral part of people’s lives, so it provides businesses with an almost free and easy to use tool for communicating with customers. Even more, social networks are especially beneficial for SMEs as these types of companies are not able to invest into more technical solutions. (McCann, 2015) Social media changes the way people communicate online from a traditional one-to-one private conversation to a many-to-many type. (Derham et all, 2011) In this way, businesses can reach much higher audiences through one single post. Social network platforms like Facebook, Twitter and Instagram are used mostly for growing the brand awareness, marketing and customer service. Among all these three networks, Facebook is the most used network in business for two reasons: first, it is the most popular across individual users and secondly, supports mobile apps that can subtract data about the users for better targeting. Twitter allows targeting also based on the location of the user, but there are not so many mobile apps developed for this network, while Instagram is mostly used for sharing photographs and works better for young adults, the other age groups preferring Facebook. Facebook can be implemented with a very low financial investment and also as the platform is very intuitive, doesn’t require advanced IT skills either. (Derham et all, 2011) The authors agree with Derham et all on the fact that it doesn’t imply a high cost to start using Facebook, Twitter or Instagram as it is free to create an account for the business and it is not necessary to train an employee to take care of these accounts daily, however for better results, businesses should develop their own applications where they can attract followers and keep in this way customers closer to the brand. In the second part of the paper, this idea will be developed and practical examples will be given on how to obtain benefits from merging mobile applications with classical social media presence. Together with the development of smartphones, businesses adapted their websites for new environments: mobile phone or tablet. Social media platforms like Facebook, Twitter, Instagram have their own applications for smart phones and tablets, functional in all operating systems (iOS, Android, etc.). Therefore, it would be a mistake for business to ignore the fact that their customers spend so much time accessing these social networks platforms from their mobile devices while they travel, wait for the train or relax in the park. On the contrary, this new behavior of spending time on social networks while going to work or while relaxing in a park, represent a huge opportunity for business owners that can target the potential customers interested already in their products or services. Also, as most mobile applications function better if the location option is active, the businesses might promote their products or services primarily to users in their area. Therefore, from the business perspective, social networks can be used for better communicating with customers, raising the brand awareness through amplifying the world of mouth effect, gaining new customers, promoting the products or services of the company, raising the traffic on the website of the company, building online communities and increasing both financial and non-financial benefits. (Kaplan and Haenlein, 2010; McCann, 2015) Facebook improves the customer-oriented process, leading to financial benefits (Rodriguez at all, 2014), but also impacts the social capital of a business and indirectly its performance (Ferrer at all, 2013). Previous studies proved that using Facebook has an impact on the business performance, but there hasn’t been made a comparison yet on using only the basic functions of Facebook versus upgrading to using mobile applications designed for marketing on Facebook. The authors want to see in what percent the online performance of a business already using the basic functions of Facebook increased after using mobile applications to target better customers on social network platforms. Hence, the following hypothesis is postulated: H1: Using mobile applications for social networks positively influences the perceived online performance of the business. The development of social networks and mobile technologies is beneficial for both individuals and organizations, as using social networks “has become a common practice in the workplace”, helping organizations to “conduct business anytime from anywhere”. (Chen at all, 2011) Of course that this affirmation leads to a discussion on


Alexandra Ioanid, Cezar Scarlat and Gheorghe Militaru rather this new trend is beneficial for the work productivity or if employees can make a difference between navigating on internet and/or on the social media platform for their own interest or for the business interest, but this doesn’t make the purpose of this research. In a study on social media adoption by SMEs done in Ireland in 2013, it was shown that in case of the private sector companies, the engagement with the social media was seen as an opportunity, whereas in the case of the state-owned companies not being present on social networks platforms was seen as a threat. Durkin and McGowan published in their study that the interest of the customer in social media differs according to the area of the business. So, it is more likely that the activity on the Facebook page of a clothing retailer or tourism promoter to be higher than on the page of a restaurant or an energy company. (Durkin and McGowan, 2013) Another study was done in Scotland in 2015 on a wide range of companies’ type: IT consultancy, graphic design and hairdressing, childcare and legal companies. The main objective for using social media stated in this study included: raising awareness on the company, building relationships with customers and reaching wider audiences. (McCann, 2015) The authors obtained similar results on the domains best suited for using social media, in general the ones that deal directly with the customer: restaurants, clothing retailers, hairdressers, etc. However, no study so far treated separately the companies that use the basic functions of social media only and the ones that mix these basic functions with mobile applications. Hence, the second hypothesis is proposed: H2: The preference for social media mobile applications is correlated with the industry

3. Research methodology and sample description The participants at this study are representatives of Romanian SMEs, both managers and entrepreneurs. The research was done in two steps: first a structured questionnaire was distributed to several companies in Bucharest, the capital city of Romania, asking companies’ representatives how they use social networks for their business and what benefits they obtained and secondly, based on the first results the authors had face-to-face interviews with a part of these respondents going deeper into the perceived performance of the business with only basic functions of the used social media versus the perceived performance after using social media merged with mobile technology. A number of 962 individuals completed the questionnaire; however for this study the authors consider relevant only 388 questionnaires, the questionnaires completed by managers or entrepreneurs. The respondents are demographically distributed as follows: 67% men and 33% women; 70% of them graduated university, and 28% graduated a master program.

4. Research findings The authors noticed that managers and entrepreneurs with less experience are more open to trying new technologies, both social networks platforms and mobile applications but they rather do it chaotically, without any plan. On the contrary, the more experienced the manager or entrepreneur, the social media strategies are more targeted and the financial and non-financial benefits higher. Out of the total number of respondents, 78 have a top management position, 92 a middle management position and 56 have a first-line management position. 162 respondents have entrepreneurial experience: 40 respondents for less than one year, 34 respondents have between one and three years of entrepreneurial experience, 16 respondents have three to five years of entrepreneurial experience, 24 respondents five to ten years, while 48 respondents have more than 10 years of entrepreneurial experience. The distribution of both managerial and entrepreneurial experience can be seen in the tables below:


Alexandra Ioanid, Cezar Scarlat and Gheorghe Militaru Table 1: Correlation between the entrepreneurial experience and the managerial experience Entrepreneurial experience Less than 1 year 1-3 years 3-5 years 5-10 years More than 10 years

Managerial experience Top Management 2 14 2 12 20

Middle Management 8 10 6 8 6

First-line management 4 2 4

The authors noticed the more entrepreneurial experience has the person managing that business, the more likely is that the business adapts strategically new technologies, including mobile social media applications. The managerial experience is not correlated to the openness of trying new tools for social media marketing. From the respondents using social networks for their business, 99% use Facebook, 61% LinkedIn, 38% Twitter, 45%YouTube, 7% Google+. The authors chose to focus only on Facebook in this study, as it is the most used social network for business in Romania, according to a study published in 2015. (Ioanid et all, 2015) The managers and entrepreneurs were asked about their purpose for using Facebook for the business, the results being presented in the table below: Table 2: Benefits of using Facebook for the stated purpose Purpose for using Facebook

Percent of the respondents who obtained benefits for the stated purpose

Communication Customer Service Brand awareness Gaining new customers Profit growth Marketing Networking Recruiting

78% 41% 77% 75% 20% 55% 68% 12%

In conclusion, this study and others stated in the literature review (Kaplan and Haenlein, 2010; Chen et all, 2011; Derham et all, 2011; Durkin and McGowan, 2013; Rodriguez et all, 2014; McCann, 2015) show that there are several financial and non-financial benefits resulting from using Facebook. The financial benefits are harder to quantify because the business representatives don’t know exactly in what percent the sales are a consequence of Facebook marketing, but all agree what with the followers number and the share and likes on company’s posts, it grows the brand awareness, and indirectly the sales. The non-financial benefits such as easier communication with customers and the opportunity to obtain feedback from customers directly, without having to pay for surveys are more visible and thus these purposes obtained a higher percent in the perceived obtained benefits. Only one item doesn’t bring so much benefits for business – recruiting, but Facebook wasn’t primarily designed for this purpose, and most businesses use LinkedIn for Human Resources specific activities. In the second part of the study, there were selected the companies active on Facebook for at least two years, that used mobile applications designed for Facebook for at least one year, leading to a number of 11 companies on which the authors could test the first hypothesis. The company’s representatives were asked during interviews in what percent the performance of the business increased or decreased after starting to use mobile applications for social networks. In table three, it is written the percent in which the performance increased and where the respondents considered that they have no data to answer, it is written No data. Table 3: Benefits of using mobile applications for Facebook for the stated purpose versus using only the standard functions of Facebook Purpose for using Facebook Communication Customer Service Brand awareness Gaining new customers

Benefits of using standard functions of Facebook versus mobile applications for Facebook +5% No data +7% +20%


Alexandra Ioanid, Cezar Scarlat and Gheorghe Militaru Purpose for using Facebook Profit growth Marketing Networking Recruiting

Benefits of using standard functions of Facebook versus mobile applications for Facebook +11% +15% No data No data

Therefore, hypothesis H1 is supported in this study. Using mobile applications allows businesses to target better the customers, by knowing users location and their demographic data settled as public by each user. For example, a boutique that offers fashion clothing for women would promote the products mainly to women aged 18-35, with interests in fashion and that encounter themselves within 1 kilometer from the shop. Another examples is one of a luxury barber shop in Bucharest, who plans the marketing strategy by targeting men aged 25-65, with their current city Bucharest. This targeting based on location and demographics is not something new, but not so many businesses upgraded their social networks technologies yet. From the interviews, the authors concluded that for gaining new customers, mobile applications merged with social networks basic functions bring about 20% extra clients. The revenue also increased in the period that the company used also mobile applications, but all 11 managers and entrepreneurs interviewed mention is hard to quantify this fact as the profit growth might as well come from other factors. The marketing campaign was better targeted and the costs optimized since instead of addressing the entire amount of followers a page has, they address only the ones they plan; in case of payed marketing campaigns the rate of leads also increased. For the customer service there was no perceived difference as the communication and customer service activities are developing the same way regardless the device from which the user connects. However, there is a small increase in communication, based on the fact that customers connect easier from wherever they are on their smartphones with internet access, without the need to be in front of a computer or in a location with WiFi. The authors noticed that the companies that started using mobile applications for Facebook are belonging to the services sector or to the retail sector. These two sectors have to deal more with the final customers and also in these sectors the competition is higher. The activities of the companies varied from fashion retailer to barber shop, from restaurant to sport club. They all have in common higher competition and the limitation of offering their services or products in a certain location. This targeting based on location was of no relevance for the representatives of companies in energy sector, for the mobile telephony provider or for online retailers that are able to deliver the goods anywhere in the country. So the second hypothesis is partially supported. The preference for social media mobile applications is correlated with the industry, however it is given more importance to it only if that business is offering their products or services in a certain location and needs to attract potential customers into that specific location. Otherwise, if the goods are deliverable, the applications targeting users based on their location are not so relevant anymore.

5. Conclusion This study revealed ones again that the presence on social networks and especially on Facebook could help any business gain new customers, target better potential customers during online marketing campaigns and in the end increase revenue. So, social networks bring both financial and non-financial benefits. The idea for this study came from the fact that in Romania many companies focus only on attracting as many followers as they can on their page through “like and share” campaigns offering some prizes instead, but in the end these companies do not obtain so many benefits from using social networks. Of course that the bigger the number of followers, the bigger the audience for the promotions and the opportunity to increase the sells, but the results are statistically better only if the posts are more targeted for the needs of the customers. Merging social networks with mobile applications proved to have effect in the sectors where there is direct communication between the company and the customer and if the business offers products or services in a certain location without the possibility to deliver these goods. In this case it is a must to target the customer after the location. The other demographic data can be successfully used for better targeting during marketing campaigns, leading to a growth in sales. The authors recommend for any business that is not able to deliver the goods and needs to bring the customer to its location to start using social media mobile application.


Alexandra Ioanid, Cezar Scarlat and Gheorghe Militaru The limitations of this study are the size of the sample and the geographical localization of the businesses, making it difficult to generalize the results. Further research is being recommended in other countries also and on specific industries.

References Chen, Y., Fay, S., & Wang, Q. (2011). The role of marketing in social media: How online consumer reviews evolve. Journal of Interactive Marketing, 25(2), 85-94. Derham, R., Cragg, P., & Morrish, S. (2011, July). Creating Value: An SME And Social Media. In PACIS (p. 53). Durkin, M., McGowan, P., & McKeown, N. (2013). Exploring social media adoption in small to medium-sized enterprises in Ireland. Journal of Small Business and Enterprise Development, 20(4), 716-734. Ferrer, R., Eerola, T., & Vuoskoski, J. K. (2013). Enhancing genre-based measures of music preference by user-defined liking and social tags. Psychology of Music, 41(4), 499-518. Ioanid, A., Scarlat, C., & Militaru, G. (2015, September). How Managers and Entrepreneurs use the Innovative Social Technologies. In European Conference on Innovation and Entrepreneurship (p. 298). Academic Conferences International Limited. Kaplan, A. M., & Haenlein, M. (2010). Users of the world, unite! The challenges and opportunities of Social Media. Business horizons, 53(1), 59-68. McCann, M., & Barlow, A. (2015). Use and measurement of social media for SMEs. Journal of Small Business and Enterprise Development, 22(2), 273-287. Ngai, E. W., Moon, K. L. K., Lam, S. S., Chin, E. S., & Tao, S. S. (2015). Social media models, technologies, and applications: an academic review and case study. Industrial Management & Data Systems, 115(5), 769-802. Rodriguez, M. G., Gummadi, K., & Schoelkopf, B. (2014). Quantifying information overload in social media and its impact on social contagions. arXiv preprint arXiv:1403.6838., accessed April 2016


Developing Innovation Ecosystem of the University Through Implementation of Interfaculty Master’s Program: The Case of LMSU Nataliya Ivashchenko, Petr Kiryushin, Alexandra Engovatova and Darya Komarkova Faculty of Economics, Lomonosov Moscow State University, Russia [email protected] [email protected] [email protected] [email protected]

Abstract: This article discusses the overall performance of the first interfaculty Master’s program at Lomonosov Moscow State University (LMSU) called "Management of Biotechnology" (MB), and significance of its contribution to the development of the University's innovation ecosystem (IE). The program was implemented by the Faculty of Economics in conjunction with the Faculty of Biology. We deduced the following three hypotheses: Implementation of the MB Master’s program promotes development of the University’s IE since it attracts students to working in a knowledge-intensive industry, where biotechnology is used extensively; MB Master’s program stimulates development of entrepreneurial skills among students which is essential for work in high technology industries related to biotechnology; MB Master’s program facilitates implementation and, hence, contributes to further commercialization of high-tech biotechnology products which are created on the basis of the Faculty of Biology. Within our methodological framework we used a combination of research methods which encompass the analysis of: Embodied lived experience of the authors before empirical data were collected via selfinspection and reflection of own experience; Interviews: results of published scientific research and interviews conducted by the team during 2012-2016; Surveys: we assessed responses of students, stakeholders of IE of LMSU and potential employers which were conducted during 2014-2015. The results generally confirm all three hypotheses presented above. Moreover, we found out that students that are enrolled in the program demonstrate a good level of motivation and interest in the subject matter which stimulates an increasing support from employers and members of the IE of the university. At the same time, there are limitations, including slowly developing market for biotech innovations in Russia, which leads to limited employment opportunities for students, as well as difficulties associated with commercialization of biotechnological products in LMSU due to the generally theoretical nature of such products. Nevertheless, our MB program integrates these projects into the curriculum to allow students to gain practical experience in biotechnology field. Keywords: interdepartmental Master’s program, collaboration, interdisciplinary research, university infrastructure, university innovation ecosystem

1. Introduction In our previous article (Ivashchenko, Kiryushin and Engovatova, 2015) we analyzed the stages of development of the innovation ecosystem of Lomonosov Moscow State University. Back then we have determined that it was linked inter alia with inter-faculty educational projects. Since the end of 2012, our team was directly involved in creation and implementation of such projects: first interfaculty master's programs at the Lomonosov Moscow State University. These programs are carried out jointly by the Faculty of Economics and the Faculty of Biology, and are called "Management of biotechnology" and "Bioengineering, biotechnology and bioeconomy" respectively. The goal of this study is to analyze the current role and opportunities of the interfaculty Master’s program "Management of biotechnology" for the development of innovation ecosystem of the university. This article will examine one of the two interfaculty Master’s programs due to the fact that the authors work at the Faculty of Economics and participate in the implementation of this program. Moreover, the information obtained as a result of this study also will help determine the future course of development of this specific Master’s program.

2. Research framework and methodology Modern trends in global university environment encompass modernization of universities, development of market components in the higher education system, race for the top positions in global university rankings, increasing mobility of students and access to distance education, and spread of higher education across the society (life-long learning). All of these aspects help to establish the new role of universities in the world (Nelson and Wei, 2012; Ka Ho Mok, 2013; Crow and Dabars, 2016). Current research is structured around the university as the key grounds for conducting entrepreneurial activities. The methodological framework is built around the


Nataliya Ivashchenko, et al. concepts described in Clark’s research papers (Clark, 1998; 2004), Etzkowitz’s “triple helix” concept (Etzkowitz, 2003; 2008), as well as the academic entrepreneurship approach (Slaughter and Leslie, 1997). Contemporary research studies promote diverse ideas with respect to the entrepreneurial university model, out of which the work of Konstantinov and Filonovitch (2007) deserve special attention. These authors explain the concept of the entrepreneurial university in their own way by incorporating the much needed "Russian feature": "Entrepreneurial university is a higher educational institution which, systematically makes efforts to overcome limitations in three areas such as knowledge creation, teaching and translation of knowledge into practice by initiating new activities, transforming internal environment and modifying the process of interaction with the environment" (Konstantinov and Filonovich, 2007). In order to use the entrepreneurial university concept as the backbone of our research, we adopted the model of innovative infrastructure of a classical Russian university, which was developed by Engovatova (2013) (see Fig.1) Center for foresight in the priority fields of scientific, technological and socio-economic development University as the industry center for fforecasting scientific, technological and socio-economic development

University as the executive within the trend specified by the industry center

University as the developer of products and services within the selected areas of development

Project Management ment of the University Department De D For aap application process s support

Center for grant support

Research R arch aspect o of the University

Ce Center for shared use of equipment and prototyping + ratory laboratory

Department on cooperation with relevant industries

Centter for the Center University’s intellectual property management geme

Department on cooperation with universities with similar profiles

Marketing d department of the University

Department on cooperation with international and business partners

Business B i Incubator (Project teams of 3-4 people)

Department on on collaboration mni with alumni


((Small, medium and d large innovative companies)

Seed foundation and foundation for discretionary funding of the university

School of entrepreneurship

Figure 1: Model of innovative infrastructure of a classical Russian university (Engovatova, 2013). In order to analyze the role of the first interfaculty Master’s program “Management of biotechnology” (MB) in Lomonosov Moscow State University (LMSU) innovation ecosystem (IE) development, we applied a combination of several methodological approaches. Our goals were: !

To provide a general description of the IE of the university and the MB master’s degree program;


To formulate the basic hypotheses, describing opportunities for the development of IE of the university, which are offered by the interfaculty MB master’s program;


To either verify these hypotheses or to further adjust them depending on the result of the study.

The methodological basis of this research encompasses analysis of the team’s personal experience of working with IE and MB program, since the authors are directly involved in its implementation process. We also analyzed various sources of information, including secondary sources such as peer-reviewed articles, news reports, interviews and reports issued by distinguished consulting firms. On top of this, in order to analyze current results of preparation and launch of interfaculty programs, we conducted surveys (presented as questionnaires) between June 10th 2014 and April 15th 2015 among the following stakeholder groups: MB Master’s program graduates, selected representatives of the innovation ecosystem of LMSU, representatives of various Russian


Nataliya Ivashchenko, et al. biotech companies, as well as students of the 1st and 2nd year of MB program. Finally, we used the data from the interviews, which were conducted between 2012 and 2016.

3. Innovation ecosystem of LMSU and first interfaculty MB Master’s program Modern universities are the core of the knowledge society and one of the most important channels for technology transfer purposes (Shane, 2004; Morris, 2009). These social institutions act as the innovation hubs within the national innovation system (European Commission, 2008; Fuller, 2005; Gibb, Haskins and Robertson, 2009). Etzkowitz (2003) defines entrepreneurial academic model of a modern research university through "teaching, research and economic development of entrepreneurship”. Indeed, along with companies and corporations, universities are the key institutional stakeholders of national innovation systems due to their critical role in conducting breakthrough research as well as in commercialization of research results obtained at the university (Guerrero and Urbano, 2010; Mainardes, Alves and Raposo, 2011). Due to the fact that LMSU is one of the largest and most famous universities in Russia, it has a significant influence on stimulation of innovation development in Moscow and Russia as a whole. The university hosts various centres, which focus on education and innovation research and entrepreneurship. For example, LMSU is home to the Science Park and innovation incubator, as well as laboratories, which conduct research in the field of biotech. According to our study results Kiryushin et al., (2013), LMSU is considered as a favourable place for innovation development since it stimulates interdisciplinary research and incorporates information about innovations in its educational materials. Nevertheless, some of our respondents considered that, the university has just as many purely scientific projects, which do not fit the real business frame and also many students are not inclined to view entrepreneurship as a viable career opportunity. The first interfaculty MB master’s program came into light due to the cooperation between the deans of the Faculty of Economics and Faculty of Biology of LMSU. They determined that one of the most promising areas of cooperation was bioeconomy, which basically represents an economy reliant on the application of biotechnologies. Biotechnology is the basis for innovative development of numerous industries, including pharmaceutical, medical, agricultural, food, environmental, industrial production, and other industries (McCormick and Kautto, 2013; OECD, 2009; Kirpichnikov and Kanygin, 2012; Bobylev, Mikhailova and Kiryushin, 2013). As a result of such collaborative effort, in 2012 it was decided to create interdepartmental master’s program, which would be developed by two departments in the bio-economy field. It was agreed that there should be two “mirror” programs in this field: !

one program should be developed by the Faculty of Biology with participation of the Faculty of Economics – this program is called "Bioengineering, biotechnology and bio-economy";


another program should be developed by the Faculty of Economics with participation of the Faculty of Biology – this program is called "Management of biotechnology" .

The idea of interfaculty collaboration consisted of a) developing joint training courses for students from both programs; b) collaborative preparation of final projects in joint teams called "biologist-economist", which would use examples of technologies created at the Faculty of Biology; c) joint marketing and promotion of both master’s programs. Table 1: Comparative characteristics of the first LMSU master’s programs – "management of biotechnology" and "bioengineering, biotechnology and bioeconomy" Management of biotechnology Bioengineering, biotechnology and bioeconomy Implemented at the Faculty of Economics together with Implemented at the Faculty of Biology together with the the Faculty of Biology Faculty of Economics Designed for students with basic economic and Designed for students with basic biological education managerial education Full-time training Part-time training (Evening classes) Additional study of economic and management Additional study of biological disciplines disciplines Final projects conducted in pairs “biologist - economist” using cases of real technologies Joint training at the Faculty of Economics and Faculty of Biology Joint promotion of the master’s programs Results of the program – trained managers in the field of Results of the program – trained researchers with biotechnology specialized for working in business and managerial skills in the field of biotechnology who will be state organizations as well as entrepreneurs. specialized for working in the corporate sector, new innovative companies and research organizations.


Nataliya Ivashchenko, et al. According to our research, we have not identified any existing master’s programs which would be similar to the MB in our country. At the same time, there are foreign programs that are similar in nature. For example, there is a program “Advanced master in biotechnology & pharmaceutical management”, which is organized by Grenoble Ecole de Management, France, and exists since 2002. This program’s feature is studying in teams – the program participants work on “crucial innovative projects” designed to highlight the current challenges and decisions facing managers and business leaders. However, we haven’t found any universities that experimented with a "mirror" master’s program for students with natural science and economic backgrounds. Additionally, the feature of our program lies in the course project, which students perform in joint teams: one “biologist” and one “economist”. The project is based on existing technologies developed in research laboratories and chairs of the Faculty of Biology, LMSU.

4. Research results: testing the hypotheses. We have identified the following three hypotheses, concerning the possibility of development of the IE of the university with help of the MB master’s program. Implementation of the MB master’s program facilitates the processes of: !

engaging students for further employment in knowledge-intensive industries, where biotechnology is extensively used;


developing entrepreneurial skills for work in knowledge-based industries related to biotechnology;


commercializing high-tech biotechnology products created at the Faculty of Biology.

4.1 Engaging students for further employment in knowledge-intensive industries, which extensively use biotechnology It seems that today there is only a small number of LMSU graduates with economic and managerial skills, who proceed to work in the field of high-technology business, related to biotech, for example, graduates from the Faculty of Economics (Zolotina, 2015). On the other hand, it seems that the graduates of the Faculty of Biology are also not currently inclined to work as managers in knowledge-intensive companies in the field of biotechnology. These trends can be explained by the following factors. 1). Lack of demand for professionals in the field of biotechnology in comparison with other segments – FMCG, consulting, etc. This is due to a more rudimentary level of development of biotechnology in comparison with other advanced industries in Russia (Frost & Sullivan, 2014). 2). Low demand for graduates with economics and management training from scienceintensive businesses, since there was always a higher demand for professionals with scientific background. 3). Insufficient popularity of jobs in the high-technology business in the field of biotechnology for students of economic and management specialties (Zolotina, 2015). 4). Lack of knowledge among students with economics and management majors regarding opportunities and available jobs in biotech industries as well as the low interest in applying for jobs in these fields. According to the main findings after our surveys, implementation of MB master’s program will help to: a) provide sufficient knowledge about career opportunities and raise interest of students, who major in economics and management specialties, for the field of biotechnology; b) promote integration of students into professional biotechnology environment. Our goal is to test these hypotheses. The admission to the master’s program shows small but steady demand: in 2014 – 37 students filed documents for enrolling in this program, while in 2015 – 40 students. However, in comparison to other popular master programs at Faculty of Economics – the number of enrollment papers to MB is 2-3 times less. It seems that more traditional industries remain more attractive to students, while biotechnology management field remains relatively vague and unappealing. There are number of factors that can affect students’ decisions when choosing their education path, for example, the lack of knowledge among students regarding employment opportunities in the field of biotechnology or the real lack of these opportunities. On the one hand, the survey shows that potential employers, which are also involved in our course, report that they observe a shortage of young staff in the biotech industry, including managerial positions. On the other hand, in fact, there are not many employment opportunities in that area for students that major in economics and management. Nevertheless, the results of our survey show that students are interested in the program, because it can offer "various professional/ cross-disciplinary knowledge", they are attracted by "prospective industries" and the


Nataliya Ivashchenko, et al. ability to "learn the basics of economics and management, which are essential for running future business in this area." The respondents' answers point out that after completing the master’s program they plan to work "for large firms and companies engaged in the development of biotechnology", including the areas of ”biochemistry, biotechnology, biomedical informatics, medicine as "project managers, CEOs, group leaders, and medical advisors". This generally corresponds to the objectives for attracting students into the field of biotechnology. We also noticed a good level of motivation among students regarding future employment in comparison with other similar master’s programs. At the same time, the program is generally characterized by integrating students into the professional environment. Students note that: "during the training they were able to meet a large number of practitioners and experts in the field of biotech", "they learned about working in the field of biotechnology companies." One student mentioned that "as for our homework, we are often asked to prepare a business plan for the creation of our biotech projects, which is extremely useful from a practical point of view". This confirms the importance of the existing approach, which focuses on attraction of practitioners to teach – about 25% of the courses are taught by practicing experts.

4.2 Developing entrepreneurial skills for employment in high technology industries related to biotechnology Despite the availability of courses in entrepreneurship, systematic education in that field is conducted mainly on the Faculty of Economics. Additionally, there are some educational projects in this field, which are based on the elements of innovation infrastructure, e.g. "Formula biotech" at the science-park. However, these activities are not systematic. At the same time, popularity of interfaculty courses in this area reflects the growing demand for education in entrepreneurship at LMSU, which also holds true for the sphere of biotechnology. This way, more students studying in the field of biotechnology can obtain entrepreneurial skills for creating their own start-ups as well as for conducting entrepreneurial activities on the basis of any organization. Other reasons, which explain the lack of entrepreneurial training of LMSU students for obtaining jobs in knowledge-intensive industries and also in biotechnology, include: 1) lack of entrepreneurial culture – this culture became a trend for LMSU only during the last years; 2) innovation development at LMSU produced more IT projects than biotech ones, because they could be created faster and needed less costly resources; 3) the activity in the natural sciences departments did not assume participation in entrepreneurial activity until recently. Since the 2010s, various projects in this area were launched, including "Formula Bio" (in 2012) and "LMSU Biotech incubator" (in 2014). Within the framework of MB the solution to this problem was found primarily in incorporating in curriculum a significant part of the disciplines devoted to the issues of innovation and entrepreneurship – about 20% of all disciplines. On top of this, we decided to invite experienced entrepreneurs as teachers of the program, who could demonstrate their experience and inspire students. Additionally, our training incorporated real technological developments and projects created at the Faculty of Biology so that our project teams "biologisteconomist" would examine the practical aspect of biotechnology field. We also designed the course so that the students would create their final projects together and we encourage student participation in various competitions such as the "Formula biotech" or "Project competition for scientific-technological valley". According to the survey results about 75% of the students mention that they are interested in employment in the biotechnology start-ups. Additionally, students say that in order to launch their own business in the future it would be very useful to learn the following skills: "overall purview”, “knowledge of various industries and available jobs in business field”, “ability to network and to present their own point of view”, “communication skills required for working with experts and obtain their contacts in a variety of scientific and industry fields”, “practice of creating a team of like-minded people and working in a team”, “understanding the biotech industry”. From the point of view of representatives of the IE of the university most useful for the future establishment of a private company will be "communication skills", "knowledge of the industry", "contacts in other departments of the LMSU", "business process understanding" and "sales skills". Thus, it can be argued that students are becoming more motivated for launching their businesses in the field of biotechnology and gaining the essential skills for this. Nevertheless, it will only be several years after the


Nataliya Ivashchenko, et al. graduation when we will be able to assess how well the students expressed themselves as entrepreneurs, as well as how effective were their skills.

4.3 Commercializing high-tech biotechnology products created at the Faculty of Biology There is a possibility to increase the number of successful commercial technologies, which are created at LMSU, including in the field of biotechnology. There are related barriers in that area including the lack of entrepreneurial culture among technology developers and the lack of effectiveness of the university innovation infrastructure. Despite the fact that the need for technology commercialization is marked as an important task for the LMSU, it is currently not viewed as a top priority by the university and by the majority of faculties. The opportunities presented by MB program in that area include: 1) the program can promote commercialization of biotechnological developments created by the Faculty of Biology due to input from work conducted by joint teams "biologist-economist"; and 2) the program could demonstrate that commercialization of biotechnology is a prospective industry. In 2015 joint team working in pairs “biologist-economist” was launched with the purpose to develop the projects and prepare joint dissertations based on technology created at the Faculty of Biology. "The biologist" – a student of the program “Bioengineering, biotechnology and bioeconomy”, engaged in the development of technological solutions and initial commercialization. “The economist” – a student at the “Management of biotechnologies” program, who is responsible for market analysis and development of opportunities for project in the market. The projects which are selected for this joint “biologist-economist” pairs includes the following: development of a medicament for preventing cardiovascular disease, a test system for detection of human cancer, test system for detection of plants and animals’ contamination by mycotoxins, food supplement, and biological technology for enhancing oil recovery process. According to the survey results, out of five joint project teams’ three students-economists are planning to continue their participation in the ongoing project after completing the master’s program. Another indicator of success is the fact that four out of five “biologist-economics” pairs defended their projects during innovation seminar “Project competition for scientific-technological valley” at LMSU as well as one of the pairs were selected in the competition for further participation in the accelerator of breakthrough projects “Biotech formula”. Additionally, 100% of the students who participated in the master’s program agree that this type of practical education can significantly contribute to creation of new biotechnology start-ups and biotechnology companies in LMSU. All innovation ecosystem stakeholders and employers also agree with this statement. However, one of the experts noted that currently there are no real examples of such cases. At the same time 84% of the surveyed students considered that these master’s programs have a positive effect on the development of applied biotechnology projects at LMSU. First of all, due to the fact that the programs introduce representatives of different departments to each other, and by the end of the program students receive the necessary skills “for conducting biotechnology business”. Interviewed representatives of IE of the university and potential employers tend to assess the impact of master’s programs with less optimism. Experts believe that the program will have a rather indirect impact on commercialization of scientific research in a manner of "preparing the environment" and "forming a critical mass of professionals who understand the peculiarities of the Russian biotech."

5. Discussion and conclusions The entrepreneurial university as a research framework and the model of innovative infrastructure of a classical Russian university proposed by Engovatova (2013), which takes into account the experience adapted to the Russian reality by Konstantinov and Filonovich (2007), made it possible to carry out the analysis. At the same time, just like in our previous study (Ivashchenko, Kiryushin and Engovatova, 2015), the concept has shown that it is necessary to develop a new approach that takes into account interdisciplinary features in order to assess the role of interdepartmental cooperation in the development of the university. It should be noted that, in general, all three hypotheses were confirmed. Indeed, the program MB contributes to: 1) attracting students to working in a knowledge-intensive industry, which uses biotechnology; 2) development of entrepreneurial skills that are important for getting jobs in high technology industries related to biotechnology; and 3) commercialization of high-tech biotechnology developments created on the basis of


Nataliya Ivashchenko, et al. the Faculty of Biology. However, the question still remains on how to assess the efficacy of the program's impact on the development of IE of the university through the system of internal and external audits. At the same time, our practical experience has shown that currently there are not many real employment opportunities in the field of biotechnology. This is also due to the fact that biotechnology market is still under development in Russia. On the other hand, the program has shown promising potential for development of entrepreneurial skills of students – students become motivated in doing business and developing joint projects, as well as integrating professionally in the field of biotechnology. Finally, the project "economist-biologist" pair format for commercialization of biotechnological projects also helps students to develop entrepreneurial skills and learn from best practice. At the same time, the possibility for real commercialization of these projects depends not only on the interest and desire of students, but also on other factors such as the real value of the technology, university infrastructure opportunities for its commercialization, including patenting and intellectual property, availability of financial resources, etc. According to the results of our research we assume the need to develop our MB master’s program not only as the interdepartmental project, but also as one of the most important elements of the emerging cluster of hightech business at LMSU in the field of biotechnology. It is important to note that this cluster can be associated with prospective areas such as biomedical, biopharmaceutical, perfumery and cosmetic. Such approach can help to increase competition for the MB program, because applicants will understand career prospects. Also it will provide an opportunity to network the Faculty of Economics and whole LMSU with the knowledge-intensive business in this field. In general, the experience of creating and implementing interfaculty programs at LMSU is important not only for the Faculty of Economics and Faculty of Biology, but also for other departments as well as for the university as a whole and, moreover, for other universities. This kind of interdisciplinary and interdepartmental collaboration is necessary to examine, generalize and distribute.

Acknowledgements We would like to extend our gratitude to Prof. Auzan A.A , Dean of the Faculty of Economics and Prof. Kirpichnikov M.P., Dean of the Faculty of Biology of LMSU. We would also like to thank the Russian Foundation for Basic Research that partially supported this research project (project No. 14-06-00385).

References Bobylev, S.N., Mikhailova, S.Yu. and Kiryushin, P.A. (2014) Bioeconomy: the Problems of Developing, Economy. Taxes. Law, No. 6, pp 20-25. Clark, B.R. (1998) Creating Entrepreneurial Universities: Organizational Pathways of Transformation, International Association of Universities and Elsevier Science, Paris and Oxford. Clark, B.R. (2004) Sustaining Change in Universities: Continuities in Case Studies and Concepts, Open University Press, Berkshire, England. Crow, M.M. and Dabars, W.B. (2015) Designing the new American university, Johns Hopkins University Press. Engovatova, A.A. (2013) Development of the Innovation Infrastructure Model for National Entrepreneurial Universities, Creative Economy, No.3, pp 9-14. Etzkowitz, H. (2003) Research Groups as Quasi-Firms: the Invention of the Entrepreneurial University, Research Policy, No. 32, pp 109-110. Etzkowitz, H. (2008) The Triple Helix: University-Industry-Government Innovation in Action, Routledge, London. European Commission (2008) Entrepreneurship in Higher Education, Especially Within Non-business Studies: Final Report of the Expert Group. 13, Frost & Sullivan (2014) An Overview of Biotechnology in the Russian Market and the Assessment of the Prospects of its Development, Fuller, S. (2005) What Makes Universities Unique? Updating the Ideal for an Entrepreneurial Age, Higher Education Management and Policy, Vol. 17, No. 3, pp 27-51. Gibb, A., Haskins, G. and Robertson, I. (2009) Leading the Entrepreneurial University: Meeting the Entrepreneurial Development Needs of Higher Education Institutions, National Council for Graduate Entrepreneurship, Birmingham. Guerrero, M. and Urbano, D. (2012) The Development of an Entrepreneurial University, The Journal of Technology Transfer, Vol. 32, No.1, pp 43-74.


Nataliya Ivashchenko, et al. Ivashchenko, N.P., Kiryushin, P.A. and Engavatova, A.A. (2015) The Role of Interdepartmental Collaboration in the Development of the Innovation Ecosystem of the Lomonosov Moscow State University, In Proceedings of The 10th European Conference on Innovation and Entrepreneurship, pp 303–333. Kirpichnikov, M. and Kanygin, P. (2012) Bioeconomy: background, current state in the world, Bulletin of the Federation Council, No. 12 (109), pp 54-57. Kiryushin, P., Mulloth, B., Iakovleva, T., and Solodov, V. (2013) The Role of Academia in the Development of Regional Innovation Systems: A Comparative Study of the Oresund and Moscow Regions, In Proceedings of the 6th International Conference for Entrepreneurship, Innovation and Regional Development, Regional Economic Resilence Through Innovation and Enterprise, ICEIRD 2013, pp 450–460. Lookus Scientific Istanbul, Turkey. Konstantinov, G.N. and Filonovich, S.R. (2007). What is the Entrepreneurial University? Education matters, No. 1, pp 49-62. Mainardes, E.W., Alves, H. and Raposo, M. (2011) The Process of Change in University Management: From the Ivory tower to Entrepreneurialism, Transylvanian Review of Administrative Sciences, No. 33, pp. 124-149. McCormick, K. and Kautto, N. (2013) The Bioeconomy in Europe: An Overview, Sustainability, Vol. 5, pp. 2589–2608. Mok, K.H. (2013) The Quest for the Entrepreneurial Universities in East Asia, Palgrave Macmillan, New York. Morris, L. (2009) The Innovation Infrastructure, International Journal of Innovation Science, Vol. 1, No.1, pp. 41-49. Nelson, A.R. and Wei, I.P. (2012) The Global University: Past, Present, and Future Perspectives, Palgrave Macmillan, New York. OECD (2009) The Bioeconomy to 2030: Designing a Policy Agenda, Main Findings and Policy Conclusions, Paris, 2009. Shane, S., (2004) Academic Entrepreneurship: University Spin-Offs and Wealth Creation, Edward Elgar, UK. Slaughter, S. and Leslie, L.L. (1997) Academic capitalism: Politics, policies and the entrepreneurial University, The Johns Hopkins University Press, Baltimore/London. Zolotina, O.A. (2015) Graduates with Majors in Economics on the Labor Market: Features of Lomonosov Moscow State Univeristy Faculty of Economics graduates, In Graduates with Majors in Economics on a Labor Market: Qualitative Researches in Economics and Demography, Ed. By Kalabikhina, I.E., Lomonosov Moscow State University, Faculty of Economics, No. 9 pp. 152-166.


A Research Framework for Adapting the Innovation Process to its Context Alexis Jacoby University of Antwerp, Belgium [email protected]

Abstract: The early innovation stages, prior to actual development, are often perceived as fuzzy, ill defined and therefore difficult to manage. Every specific innovation context requires a specific approach, adapted to the specific requirements of that context. Existing generic process models hardly bring into account the specific situation a firm is facing with regard to innovation: the novelty of the innovation required, the specific drivers such as technology or market, nor the specific context of developing product-service systems or experiences rather than hardware products. The impact of these early innovation stages, however, is known to be important for the competitive position of the firm in the long term. Prior research points at the importance of the innovation stages and the importance of adapting the process to its context, in order to gain efficiency and effectiveness for the overall innovation activities. Based on qualitative research we propose a multi-dimensional research framework that permits an improved understanding of the innovation process. It provides a base for specific process research and development and it supports building customized prescriptive process approaches in the Front-end of Innovation (FEI). The framework integrates four basic principles of design and product development methodology in a novel way. Essential in this approach is the integration of innovation abstraction levels. As a result, the framework tackles existing confusion in the early innovation stages. It helps to understand how an approach could be created for any given innovation context. Also, the framework unravels the Front-end of Innovation in such a way that it opens opportunities for researching the early stage design processes in a more detailed way. Distinct operational levels and distinct process steps on every level open these ill-defined approaches. This conceptual paper gives insights in the framework and the opportunities it could deliver for understanding the innovation process, both from a practitioner’s point of view and a research point of view. Keywords: front-end of innovation, methodology, adaptive approach, research framework

1. Introduction Innovation processes cover a wide range of activities. Activities performed in the early innovation stages are referred to as the Front-end of Innovation (FEI). Activities that focus on the actual development of new hardware are referred to as New Product Development (NPD) (Koen et al., 2001). The Front-end of Innovation (FEI) covers all activities that lead to the definition of future products or services prior to development in order to answer the question what product or service should be developed. It used sometimes to be referred to as the Fuzzy Front-End (Reinertsen, 1999; Reid & de Brentani, 2004) due to the fuzziness that is linked to these less formalized processes in the context of the firm. The New Product Development (NPD) phase is the actual development phase that leads to a fully developed product or service solution. The activities give an answer to ‘how’ a product should be designed (Koen et al., 2001). Although the FEI can be seen as a lightweight process compared to NPD when it comes to the use of resources, firm success on the long term largely depends on the success of the innovation activities in the FEI as first seeds for future developments are sown there. Many researchers have pointed at the importance of the early stages of the innovation process (Gupta & Wilemon, 1990; Smith & Reinertsen, 1992; Murphy & Kumar, 1997; Khurana & Rosenthal, 1998; Reid & de Brentani, 2004; Langerak, Hultink & Robben, 2004), and the opportunities for improvement of these early stage innovation activities (Backman et al., 2007; Cooper & Edgett, 2008; Verworn, 2009). Yet, a framework for a thorough research into these processes is only limited available, mainly due to a lack of common understanding of these early stages. Different studies have proposed models for the FEI (Koen, 2002; Sandmeier et al., 2004) and the transition of the FEI into the NPD-phase (Buijs & Valkenburg, 2005). These models propose process steps and sets of activities that would guide the FEI process. Nevertheless, the early stage innovation processes are in many occasions perceived as ill defined and therefore difficult to manage. They often lack structured processes, without any predefined milestones and defined deliverables (Jacoby, 2012).


Alexis Jacoby

1.1 Adaptive approaches for contextual differences in the Front-end of Innovation There is not one innovation context. Instead, all kinds of parameters influence the approach for activities in the FEI. Front-end of Innovation processes are very dissimilar due to varying contextual factors. Van der Duin et al (2013) argued that an innovation process should be tailored to a specific context in order to improve process efficiency. They found the difference between radical and incremental innovation and the difference between market-driven and technology-driven innovation the most important elements for differentiating the innovation process. Existing process models hardly offer opportunities for bringing into account the different context parameters a firm is facing. Hence, the need for adaptive approaches and a framework that could lead to adaptivity.

1.2 The exploration-exploitation paradigm Front-end of Innovation is considered to be the process of generating new ideas for new products. Idea generation can be based on existing products or could start from a complete new perspective. This ambidextrous approach to innovation (O’Reilly III C, Harreld J, Tushman M (2009) is referred to as the exploration-exploitation paradigm (Benner & Tushman, 2003). It has never been clearly stated from a methodological point of view whether or not early innovation process models belong to the exploration or exploitation context. On the process side of the FEI, hardly any distinction is made between exploration and exploitation. That is partially because this paradigm finds his roots in innovation management literature, rather than in product development literature. We can consider this paradigm as a managerial issue, focusing on intent rather than result. Nevertheless, an approach for exploration compared to an approach for exploitation asks for a specific tool set and a better view on the deliverables required. Mixing both approaches could lead to confusion in the FEI (Jacoby, 2012).

1.3 Understanding rather than prescribing The main constituting elements of an idea generating process in the Front-end of Innovation are well-known and appear in many different models: idea generation, idea selection, search field generation, product definition, opportunity identification, opportunity analysis and so on. Although these process activities are commonly defined, our qualitative research pointed to the fact that practitioners tend to understand these processes the way they want to understand it (Jacoby, 2012). As a result, the real value of process models is being undermined with regard to effective use. In this paper, we suggest that the missing link to understand the rationale of a design process is to link design process steps to the basic product abstraction levels that are hidden underneath. By providing the most essential corner stones of the innovation process, we build a base of understanding that would eventually lead to the development of proper innovation processes, adapted to the specific needs of the situation.

2. Key components for the methodological rationale The methodological rationale that we propose for the Front-end of Innovation (FEI) is build on four essential elements: a) multidisciplinarity, b) divergent and convergent thinking, c) the base design cycle and d) the abstraction levels inherent to a conceptual context. These four components are essential elements from a methodological point of view for innovation and product development (Braet & Verhaert, 2006; Kim & Wilemon, 2002; Roozenburg & Eekels, 1995; Ullrich and Eppinger, 2008). Multidisciplinarity has been an important topic for innovation in different ways. Firstly, the aspect of collaborating in a cross-functional team has been proven to be a success factor for innovative effectiveness (Kim & Wilemon, 2002; Trott, 2002; Boeddrich, 2004). Secondly, any innovation process integrates all different aspect of a product: from technological aspects over human aspects to business-related aspects, as was mentioned by different scholars (Braet & Verhaert, 2006; Evanschitzky H et al., 2012). It is also one of the cornerstones of the design thinking paradigm where the overlap between the different aspects provides the best opportunity for real innovation (Brown, 2009), the so-called ‘sweet spot of innovation’ (figure 1).


Alexis Jacoby

Figure 1: The sweet spot of innovation, adapted from Brown, 2009 Several authors have described the concept of divergent and convergent thinking. Divergent thinking is referred to as the process phase where multiple ideas or concepts are generated (Seidel and Fixson, 2013). Convergent thinking refers to the activity of evaluating and selecting the right idea or concept. Basically, a good solution doesn’t exist. One can only evaluate by comparing different concepts. The succeeding process phases of divergence and convergence are often organized in an iterative way (Ullrich and Eppinger, 2008) switching from one to the other in a general converging direction to reach a final solutions after several iterations. This is the power of design thinking: the fact that one doesn’t elaborate on just one idea but dynamically explores different directions or opportunities.

Figure 2: The base cycle of design, adapted from Roozenburg & Eekels, 1995 The base cycle of design (Figure 2: Roozenburg & Eekels, 1995) refers to the different steps in any problemsolving situation: from analysis, over synthesis to simulation, evaluation and decision. These are the essential steps that are taken in any given context. Here, as well, the base cycle is presented in an optional iterative loop. If the solution generated provides an answer to the problem, one can proceed. Otherwise, the entire cycle is taken all over again. Every specific well-defined problem in general can be solved using this or a similar model.

Figure 3: Reasoning from function to solution. Adapted from Roozenburg & Eekels (1995)


Alexis Jacoby The abstraction levels are based on the product rationale as proposed by Roozenburg & Eekels (1995). This perspective represents a product as a physical system, having a lot of characteristics, such as weight, colour, strength and so on. The characteristics represent how a product is actually created. People choose a specific product because of these characteristics. Characteristics make every product or service specific compared to the competition. We know characteristics to have a rather mechanical nature. However, characteristics can also represent non-tangible issues such as the emotions they evoke or the impact a product or service has for its user. Although Roozenburg & Eekels started from a physical product rationale, the constituting elements also apply to services. Every product fulfils a function. That is what the product or service actually does. An airplane flies; a car drives or transports peoples and goods. A function is the main reason why we buy or use a product or service. We want to fly or drive or telephone and we buy or use a product or service to do so. Functions are based on needs. Our need is to get to our job or to communicate wireless with somebody. Users tend to have all kinds of needs that can be met using products or services. And doing so they fulfil the values they stand for like working or being communicative. Figure 3 (on the left side) gives the overview of this product rationale. The development of new products or services can be seen as a reasoning process starting from values to reach the physical representation of a product or service (Figure 3, right side). Any kind of innovation process covers this reasoning process partially or entirely. A typical design process can cover only the shape level and the characteristics. An incremental innovation can cover the process from side-function to shape. A very explorative process, with the intention to deliver really new products or services can cover the entire range of abstraction levels, starting with enquiries about the values to cover, discovering new needs, defining new functions and side-functions, leading to new products or services with specific characteristics. Roozenburg & Eekels (1995) already pointed at the product/service function as the essential link between predevelopment activities and development activities. The determination of a product function is the final deliverable of the pre-development phase. At the same time, the function determination is also the start of the development phase. The product or service function represents the base for further definition of the characteristics and the design phase of a product or service. The different levels as pointed out in Figure 3, can be seen as distinct abstraction levels. Thinking about human values and basic needs is more abstract than thinking about the shape a product ought to have. Every step down in this model is a step into a more concrete world. The most concrete is the ultimate product or service that is launched on the market. Moving from one abstraction level to another is an approach well known from a design perspective. In the search for new products or services, innovators tend to ask in terms of why-question: Why does this product look like this? Why do we use this product? Why is this function so essential with regard to our needs? Every time a whyquestion is asked, an innovator jumps an abstraction level higher. Hoping that a more high-level view will provide new insights in how a product should evolve or change.

3. Towards a multi-dimensional framework for innovation Based on the four essential cornerstones we propose a multi-dimensional framework (Figure 4) starting from the abstraction levels (on the vertical axis) and the process steps (on the horizontal axis). From an overall perspective, the innovation process can be considered to be a reasoning process from value to solution. However, the specific activities performed in an innovation process tend to happen on a specific abstraction level. They are key to understand what kinds of activities have to be performed. Analysis and synthesis and all the other generic process steps make part of every innovation process. Only, they have a completely different nature depending on the abstraction level they are part of.

3.1 Looking at abstraction levels rather than process steps The basis for this framework (Figure 4) is shaped with different process steps related to a specific abstraction level. Abstraction refers to the openness of the questions one is dealing with or the measure of detail one is


Alexis Jacoby applying with regard to the eventual product or service. Every level holds different deliverables, different starting points and different questions to be dealt with. Thinking of these different levels as abstraction levels changes the necessity to see the process in a vertical or linear direction. Rather, all kinds of innovation activities occur at a specific level. Every abstraction level is a broad working space and can cover multiple little process steps in order to achieve the desired outcome at that level. Once they are completed, one can get down to the next level. Prior research already pointed to the fact that design processes don’t follow a linear logic. They have a more iterative nature. Iterations are to be made on a specific level, rather than between levels. Nevertheless, many innovation processes require a switch of level more or less as a switch of mind-set. There are parallels between the abstraction levels and the prescriptive design process steps as we have seen in models presented by different authors. Considering values or detecting needs are activities related to the search field and opportunity generating activities (Sandmeier et al., 2004; Buijs & Valkenburg, 2005). Determining characteristics and sub-functions of future products are definitely a part of the product definition process. The level of product ideas might be considered the same level as the level of product or service functions. Any product development or product design model integrates the different essential elements of a product: technological issues (how to make it), human issues (how to use it) and economical issues (how to bring it to the market). It is the overlap between product viability, feasibility and usability that yields innovation. This integrations first occurs at the level of product ideas, where a new product idea exist only when one has defined in which way a specific function will be applied to a specific target group. Product ideas come forth at the moment somebody combines a new function with a target market and a possible technology to build it.

Figure 4: A multi-dimensional framework for innovation The integration of these three aspects is the most essential part in the product idea generation process. Everything prior to this integration is the search for problems and opportunities, and is mainly driven by one of the three aspects. The search for needs or opportunities doesn’t need to look into the integration yet. It is possible to start looking from the business side, the human side or the technology side. All entrances to define opportunities are optional. However, the strategic context of the firm or the strategic needs will drive this process to look into different opportunities.


Alexis Jacoby On lower levels than the product idea level all activities are driven by the integral approach for product or service development, integrating economical, technological and human aspects. The context of the firm and the use case cannot be ignored anymore. Defining the final product requirements in a product definition process is a multidisciplinary step, looking into the outcome from the three perspectives involved.

3.2 A specific outcome at every level Using abstraction levels implies that any activity can be performed at a given level but the way to organize it can differ, depending on the product or the context. However, the outcome at every level is clear and understandable to everyone. Base cycle process steps and divergent and convergent thinking activities can take place on every level. At the highest level, the most abstract one, the outcome can be any kind of element that would trigger the definition of a new product idea. That could be specific opportunities yielded by emerging trends, new upcoming needs detected in a user environment, a new upcoming technology becoming available, a change in regulation, sociological, political and ecological evolutions, and so on. Either referring to detected problems or detected opportunities. The product function level is a very important one. We have already stated that the level of product functions can be linked to the level of new product ideas, due to the fact that what a product really does (its function) is the main component. Nevertheless, an idea can only be considered a new product idea when the function is linked to a specific market or target group and there is some clarification on the way it will be realized. The level of product definition is the broadest. All kinds of deliverables can be expected on that level. The most essential ones are the product requirements, a business model, a product architecture and so on. On the design level, actual solutions are designed and tested.

3.3 Similarities and differences with current approaches Apart from current methodological approaches to the FEI, some strategic oriented canvas approaches are well known and reach a lot of potential users. The business model canvas (Osterwalder & Pigneur, 2009) focuses on the key components of a business model generating the links between a firm’s value proposition and the customer segments in order to determine how cost and revenue will get into balance. The big difference however between our abstraction level framework and the business model canvas is the fact that the latter requires an idea to start from. Once the product or service idea is known, the business model canvas supports the determination of the business components. Compared to our framework, the activities would only start from the level of functions and characteristics. One can only generate the business model canvas once the explicit context of the product or service is revealed. Nevertheless, due to its open character and ease of use, we have noticed that the business model canvas is also used in very varying circumstances, even for generating new business ideas. That way the canvas supports going through the different abstraction levels of our framework, trying to determine opportunities by focusing on customer segments, key resources, or specific value propositions. Whereas the canvas permits the results to be given in a very easy to understand overview, the abstraction framework focuses more on the underlying process needed to be able to fill in such a canvas, and the way to find an approach. Whereas the business model canvas uses the language of the business developer, the abstraction level framework focuses on the language of the product and service designer.

3.4 Product and service approach The framework opens potential paths for all kinds of innovations. Our research revealed that both product and service development follow the same logic. The big difference between both, however, lies in the fact that in service development several abstraction levels can be taken together in one process step. In specific service cases, limited complexity provides the opportunity to take the definition and development level together. The definitions of functions and characteristics could be delivered in one step and defining a service, in some cases, equals the development of the service.


Alexis Jacoby

4. Research opportunities for the framework The framework offers a range of opportunities for researchers and practitioners, mainly by clarifying how things work in the early innovation stages. Different aspects can be mapped on this framework, giving insights on how to organize a proper innovation approach, given a specific context. From the research point of view, the framework offers the possibility to describe and map existing innovation approaches and compare them. The framework provides meaning to generic process steps. Starting from the base cycle of design, it is much more easy to define what analysis, synthesis, simulation and evaluation could mean on a specific abstraction level. Evaluation of a product idea, for instance, on the function level is different than evaluation of requirements on the characteristics level. Synthesis leads to a deliverable on a specific level. Due to the well-defined abstraction levels, one can define a process that eventually leads to the right deliverable. Prototyping is a way of simulating a proposed solution. Through the framework one could define what prototyping actually could mean on a specific level. A second opportunity can be found in the deployment of innovation tools. Many tools have been developed for innovators to use during their innovation process. However, confusion often occurs in the early innovation stages as it is not clear where and when a tool can be deployed and to which deliverables it should lead. The multidimensional framework provides a clear distinction with regard to the kind of process and the abstraction level. So, it provides the opportunity to exactly map existing tools on this framework. More generic tools can be deployed on different abstraction levels but it is also possible, once one understands the rationale, to develop or make use of a specific tool for a specific activity on a specific level.

Figure 5: Mapping innovation tracks on the framework The framework provides the possibility to explain both explorative and exploitative innovation tracks (Figure 5). The first one starts from the highest abstraction levels: a search for new values, new needs or other opportunities that might provide input for new product ideas. Every abstraction level can be the scene of an elaborated process consisting of the entire range of base design cycle activities. It can also be performed in a cyclical way, only jumping to the next level when the deliverables are met for that level. Exploitative processes start on a lower level, going slightly up to come down again, depending on the innovation challenge a firm is facing (Figure 5). In human-centred innovation, the connection with the customer during the innovation stages is perceived as essential. However, it is sometimes difficult to define the best way of organizing this interaction and what to expect from this customer involvement. Again, the framework offers the possibility to define how a connection could be made. From a more passive interaction on the highest level to a meaningful contribution on the lower


Alexis Jacoby levels in all kinds of analysis or simulation activities. A detailed user involvement strategy can be mapped on the framework.

5. Conclusions Our research revealed that Front-end activities often lead to confusion. It is very difficult in a research context to compare two innovation processes due to the fact that they operate in a different context and have probably to deal with different parameters. The framework opens opportunities for understanding the FEI in a better way, by using an aspect that can easily be understood: the specific deliverables at a specific abstraction level. The framework is not a prescriptive process model. Rather it provides opportunities to map innovation approaches in a comparable way. As such, it offers possibilities for research and education. It yields possibilities for creating overviews of different models in a comparable way and it provides a tool for analysis of process steps in the context of the firm.

5.1 Testing The framework is the result of a qualitative research involving 13 innovative companies (Jacoby, 2012). Based on semi-structured interviews with 23 people in these firms, 13 innovation processes have been compared. The big challenge in the comparison, however, could only be tackled using a multi-dimensional framework, providing the opportunity to compare processes having different innovation levels, in a qualitative way. This resulted in a preliminary framework, used in the case analysis. The framework was adapted, based on the results of the qualitative analysis to its current form and has been challenged in a qualitative way in two focus groups: one consisting of design students and one consisting of faculty staff members. Although the framework had proven its use in a research setting, this qualitative approach was chosen in order to detect issues on usability and usefulness for both non-experienced and experienced designers. The research objective was twofold: could the framework provide more clarity about the FEI-process compared to existing process models and could every single described innovation process be mapped on the framework accordingly? The focus groups could confirm both issues, although the framework was not self-explanatory for non-experienced designers. Secondly, the framework was used to describe research settings with regard to the front-end of innovation. Specific approaches in different innovation settings could be mapped on the framework in order to compare and to understand the differences and the opportunities for improvement. The framework mainly provided a common understanding between the research team members.

6. Limitations and future development The framework is built on the essentials of a product and services: the characteristics, the functions, the needs, … Therefore its focus is on product and service design rather than on business development in general. Nevertheless, the framework should be able to provide a link with business model innovation, or, alternatively, business elements should get a place in the framework. The challenges for future development are to be found in the way the framework can help practitioners understand their proper innovation challenge and build a proper approach that fits the context of the firm. In order to achieve this, extended mapping of existing processes and examples is necessary. Furthermore, the framework should be completed with overlays, explaining how specific issues, like the use of innovation tools, could be integrated.

References Backman M, Börjesson S, Setterberg S (2007) Working with concepts in the fuzzy front end: exploring the context for innovation for different types of concepts at volvo cars, R & D Management, 37, 1, 17-28. Benner M J, Tushman M L (2003) Exploitation, Exploration, and process management: the productivity dilemma revisited, Academy of Management review, Vol. 28, 2, 238-256.


Alexis Jacoby Braet J, Verhaert P (2007) The practice of new products and new business, Acco, Belgium. Brown T (2009) Change by design, HarperCollins Publishers, New York. Buijs J, Valkenburg R (2005) Integrale Productontwikkeling, Lemma, The Netherlands. Cooper R G, Edgett S J (2008): Maximizing productivity in product innovation, Research - Technology Management, MarchApril, 47-58. Eekels J, Poelman W, Industriële Productontwikkeling; deel 2, methodologie (1995) Lemma, The Netherlands. Evanschitzky H, Eisend M, Calantone R J, Jian Y (2012): Success Factors of Product Innovation: An updated meta-analysis, The journal of Product Innovation Management, 29: 21-37. Gupta A K, Wilemon D L (1990) Accelerating the development of technology-based new products, California Management Review, 32 (2):24-44. Jacoby A (2012) Performance in the Front-end of Innovation: linking strategy to requirements; PhD thesis, Kim J., Wilemon D. (2002) Focusing the fuzzy front-end in new product development, R & D Management, 32 (4): 269-279 Koen P, Ajamian G, Burkart R, Clamen A, Davidson J, D'Amore R, Elkins C, Herald K, Incorvia M, Johnson A, Karol R, Seibert R, Slavejkov A, Wagner K, (2001) Providing clarity and a common language to the Fuzzy Front End, Research Technology Management, 44 (2): 46-55. Khurana A, Rosenthal S R, (1997) Integrating the fuzzy front end of new product development, Sloan Management Review, 38 (2): 103-120. Khurana A, Rosenthal S R, (1998) Towards holistic front ends in new product development, The journal of Product Innovation Management, 15(1); 57-74. Murphy S A, Kumar V (1997): The Front-end of new product development: a canadian survey, R & D Management, 27, 515. O’Reilly III C A, Harreld J B, Tushman M L (2009) Organizational ambidexterity: IBM and emerging opportunities, California Management Review, Vol. 51, N° 4. Reid SE, de Brentani U, (2004) The fuzzy front end of new product development for discontinuous innovations: A theoretical model, The journal of Product Innovation Management, 21, (3); 170-184. Roozenburg N F M, Eekels J, (1995) Productontwerpen, structuur en methoden, Lemma, The Netherlands. Sandmeier P, Jamali N, Kobe C, Enkel E, Gassmann O, Meier M, (2004) Towards a structured and integrative Front-end of product innovation, conference paper, R&D management Conference, (RADMA), Lissabon, Portugal Smith P G, Reinertsen D G (1992) Shortening the product development cycle, Research - Technology Management, 35; p449. Trott Paul (2008) Innovation Management and New Product Development, 4th Edition, Prentice Hall. Van Der Duin P A, Ortt J R, Aarts W T M (2013), Contextual Innovation Management Using a Stage-Gate Platform: The Case of Philips Shaving and Beauty, The journal of Product Innovation Management, 2013;31(3). Verworn B (2009) A structural equation model of the impact of the ‘fuzzy-front-end’ on the success of new product development, Research Policy, 38; 1571-1581.


Virtual Spaces Impacting Real Places: Entrepreneurial Innovations in Trinidad and Tobago’s Tertiary Education Landscape Freddy James1, Sandra Figaro-Henry1 and Lisa Wickham 1The University of the West Indies, St. Augustine, Trinidad and Tobago, West Indies [email protected] [email protected] [email protected]

Abstract: In this study an innovative entrepreneurial approach was used to teach a postgraduate educational leadership course by incorporating digital tools to develop 21st century skills (creativity, collaboration, communication and critical thinking). Additionally, utilizing a practice-based approach facilitated learners operationalizing acquired skills within their institutions in real time and in the real world, thereby wedding knowledge, skills acquisition and dissemination in a way that had immediate impact and added value to the learner and The University of the West Indies School of Education (UWISOE) in Trinidad and Tobago (T&T). Global factors impacting the business of education have made it imperative for tertiary education providers worldwide to seek innovative entrepreneurial pathways to increase the skills base of their populations and capitalize on the full potential of individuals. New digital technologies have brought this imperative within reach, but it is not sufficient. The innovators are entrepreneurs: their integration of new pathways in tertiary education foster institution building, albeit intrapreneurs: they build collective capacity and transform the institution from the inside. (Coyne et al, (2001) and Hekkert et al, (2011) technological innovation systems (TIS), seven-step system functions, was used as a theoretical framework to assess the challenges and extent of the value-added. A qualitative interpretive approach was used in the study. The participants comprised thirty learners (school teachers, school leaders and educational organization leaders) enrolled in the course, the four lecturers who integrated 21st century skills in the course, and a fifth lecturer who acted as a participant observer of the course. Data collection methods included: participant observation, field notes, realtime videography of participants, interviews, blog posts, online and face-to-face focus groups and an online survey. A content analysis approach to data analysis was adopted, with the aid of the NVIVO 10 data analysis software. Research Questions: How has the entrepreneurial, innovative approach to teaching an educational leadership course utilizing digital tools aided the development of participants’ 21st century skills and capitalized on the potential of the individual’s learning? How has the entrepreneurial, innovative approach to teaching an educational leadership course utilizing digital tools added value to the UWISOE? How have participants in the course translated the gains from the course experience into their real world activity? Preliminary findings indicate that learners are navigating new spaces and ways of functioning within a blended learning environment. They are willing to do so because they feel the acquired 21st century skills are adding value to them personally and the practice-based approach allows them to use these skills to begin institutional transformation. These findings are important because they show that acquisition of 21st century skills provides learners with confidence to develop their institutions utilizing these skills, thereby adding value to the T&T educational system from the bottom up. From the UWISOE’s perspective the benefits were: 1) economic, as open-source digital tools were used and there is the potential for increased student intake, 2) administrative, as digital instruction and assessment frees up administrative resources. Keywords: entrepreneurship, innovation, Trinidad and Tobago, digital tools, tertiary education, 21st century skills, collective capacity building

1. Introduction Global factors impacting the business of education have made it imperative for tertiary education providers worldwide to seek innovative entrepreneurial pathways to increase the skills base of their populations and capitalize on the full potential of individuals (Schleicher, 2006). In response to the global environment, The University of the West Indies, St. Augustine (UWISA) 2012–2017, articulates a strategic objective to: “...provide multiple, flexible paths for all constituencies to pursue tertiary education over their lifetime” and to “enable technology solutions for teaching, learning and research” (University of the West Indies, 2012, p. 33). New digital technologies have brought this imperative within reach, but it is not sufficient. Entrepreneurial innovative approaches to the delivery of instruction and learning must be instituted within the tertiary education in T&T. In the current study an entrepreneurial innovative approach was used to teach a postgraduate educational leadership course by incorporating innovative digital tools to develop 21st century skills (curation, creativity, collaboration, communication and critical thinking). A multi-layered approach to technological infusion was adopted to engage 30 learners across two separate geographical locations (23 in Trinidad and 7 in Tobago): !

To use wired and wireless technologies to communicate during instruction


Freddy James, Sandra Figaro-Henry and Lisa Wickham !

To immerse the learners in the 21st century tools, to facilitate their acquisition of these 21st century skills to enhance their practice


To facilitate learner interaction during face to face and online classes


To create the framework for the learners to implement the use of these technologies in their institutions


To spark discussions towards identifying and closing the technological gap that exists in the learners’ institutions


To foster communication and group work among learners and across the geographic locations, thereby building a professional learning community


To use videography to collect data for research purposes, curation and to capture student interactions during class

Additionally, utilizing a practice-based approach facilitated learners operationalizing acquired skills within their institutions in real time and in the real world, thereby wedding knowledge, skills acquisition and dissemination in a way that had immediate impact and added value to the learner and the University of the West Indies School of Education (UWISOE) in Trinidad and Tobago (T&T). Utilizing the practice-based approach as a model of learning supports entrepreneurial action (Brush et al, 2015). This current study builds on a previous innovation introduced to the UWISOE, which involved the use of the Bring Your Own Device (BYOD) mobile learning technology to enhance instructional delivery and flexibility (Figaro-Henry and James, 2015). Innovations were used to add value in the following areas: UWISOE, students, instruction, tool selection, communication, accessibility and flexibility (Hekkert et al, 2011).

2. Theoretical frameworks The increasing role of ICT in the global economy and the eminence of the knowledge economy are propelling higher education institutions to reconfigure research and learning in more creative, innovative and entrepreneurial ways (Gibb et al, 2013; Mok, 2005 & Kitagawa, 2004). To remain relevant, competitive and keep pace within this knowledge economy, higher education institutions must find ways to serve all constituents of society, particularly those who may not have had access to higher education previously (Schleicher, 2006 and Kitagawa, 2004). Further, higher education institutions must become more responsive to the needs of its stakeholders, improve administrative efficiency and this can be done by promoting entrepreneurship and innovation (Gibb et al, 2013). In the context of this study the term entrepreneurial means organizing, managing and assuming the risks of a business enterprise and the term innovative means introducing or using new ideas or methods. The researchers drew from Hekkert et al (2011) whose ideas on technological innovation systems (TIS), provided a fitting conceptual framework to guide the entrepreneurial and innovative instructional and evaluative approaches regarding value added to both the institution and learners. This framework was used to assess the value-added and resulting challenges from innovation integration to practice. The TIS frame, facilitated a structure and process for charting, recording and assessing the extent of the entrepreneurial value-added while pointing out obstructions, due to the innovations’ integration into the course’s enactment. The following evaluative system functions assess who or what is active in the system, whether what is being done is enough and the success of the innovation which aids the evaluative process. The system’s success comprises qualitative and quantitative measures of the key stakeholders active in the innovation system. Indicators of success, inclusive of the integration of the 21st century skill, are identified and measured by answers to the following: !

What are the intrapreneurial activities? Identify those that are valuable and add value.


How does knowledge development take place and how is it measured? Examine how the actors in the innovation ecosystem interacted.


How does knowledge exchange occur? Explain how knowledge is exchanged across the networks.


How is the search guided? Identify a clear vision and policies.


How are markets formed? Ensure the size of the education market does not form a barrier for development of the innovation system.


Are all the resources mobilized? Examine the physical, infrastructure and other resources to ensure they support the diffusion of the technological entrepreneurial innovation.


Freddy James, Sandra Figaro-Henry and Lisa Wickham !

Is there a lot of resistance towards the new technology? Evaluate to minimize resistance to change so as to facilitate the diffusion of the innovations.

The framework views an innovation as a collective activity and thus an entrepreneurial innovation is thought to take place within a wider system called the “innovation ecosystem” (Hekkert et al, 2011, p. 3). This study’s “innovative ecosystem” consisted of the digital interactive innovations used amid the blended infrastructure. The practice-based approach to curriculum enactment was also part of the ecosystem. It embodied entrepreneurial and sustainable benefits to the students’ and organization’s economic, political, administrative, social, cultural and technological systems functioning. The TIS frame identifies four components of an innovative ecosystem. Firstly, the actors who are the people or organizations contributing to the technological innovations. Secondly, the institutional structures for example the formal policies and informal interactions that guide the activities of the actors. The networks that facilitate the global and local communications are the third component. The technological factors or techno-economic infrastructure in which the artifacts are integrated constitute the fourth component. Some examples of the techno-economic infrastructure are costs, reliability and safety (Hekkert et al, 2011). In finding solutions to effect the innovations’ diffusion within the innovation system, Hekkert et al (2011) sees benefits in incorporating a large amount of practice or experiences in the learning. Billett (2010) also agrees that a practice-based approach for novice practitioners in higher education is not only beneficial in initial educational or occupational preparations and practice, but also provides continued development across learners’ working life. He is convinced that “ ...the experiences provided in practice settings, usually workplaces or work settings, are essential for developing the knowledge required to effectively practice occupations” (Billett, 2010, p. 1). As such, the researchers incorporated the learning and thinking skills identified by the Partnership for 21stcentury skills (2016), within the face-to-face and distance instructional and practice segments, for learners who worked in multi-occupational environments to effect innovative intrapreneurial elements to the course. Having conceptualized the innovation as a new and improved educational service and the process modelled after Meissner and Kotsemir (2016, p. 3) who purport that “innovation activities can more or less correctly be described and visualized in process models,” the researchers sought to effect and evaluate the innovative entrepreneurial outcomes. They also integrated an innovative entrepreneurial instructional practice with a view to addressing a need to harness a creative, value-added, economically sustainable future for higher education in their institution and country (Stephens et al, 2013; Blass and Hayward, 2014 and Carmeli and Paulus, 2015). Additionally, the researchers were guided by Higgs (2011) framework for practice-based education, which suggests that the instructional design should be configured in alignment with the answers to the following questions: !

What is the practice of this occupation?


What capabilities does the student need to develop to enter this practice community?


What is the context of the course and what resources and opportunities does it provide?


Who will be the key role models and educators to reflect the standards and expectations of the profession?


How can authentic and relevant relationships and learning activities be created to foster students’ learning


and socialisation?

3. Methodological approach A qualitative interpretive approach was used in the study. The participants comprised 30 learners (school teachers, school leaders and educational organization leaders) enrolled in the course, the 4 lecturers who taught the course and a fifth lecturer who acted as a participant observer of the course. The participants situational and practice contexts varied as follows. There was one participant whose practice context was an Urban High School in The United States of America; there were 23 students from the island of Trinidad and seven from the island of Tobago. Further, participants represented various educational levels in the system, ranging from early childhood care and education teachers, and principals; primary school teachers, vice principals and principals; secondary school teachers, middle managers, vice principals and principals and one participant from a nonschool educational organization.


Freddy James, Sandra Figaro-Henry and Lisa Wickham Data collection methods included: participant observation, field notes, interviews, blog posts, online and face to face focus groups, an online survey and realtime videography of participants. Videography served the purpose of recording the students as they utilized the actual tools, for example, students using multiple devices and technologies simultaneously. A content analysis approach to data analysis was adopted, with the aid of the NVIVO 10 data analysis software.

4. Findings Research question 1: How has the entrepreneurial, innovative approach to teaching an educational leadership course utilizing digital tools aided the development of participants’ 21st century skills and capitalized on the potential of the individual’s learning? The findings show that the entrepreneurial, innovative approach adopted in teaching the educational leadership course, utilizing digital tools aided the development of 21st century skills and capitalized on the potential of their individual learning in a number of ways. Collectively they indicated that they had learnt the following new digital tools: Moxtra, Padlet, Blogs, Weebly website and NVIVO. More significantly, they identified a number of new skills, digital and otherwise that they were learning because of the practice-based approach utilized in the course delivery. There was consensus among the participants that they learnt new skills because of: “The style of delivery by lecturers, course design and content and flexibility of the course, e.g the use of the blog to respond to issues and discussion during class and the Moxtra meet on school improvement.” Overall the learners indicated that using the digital tools during the course allowed them to learn many skills: collaboration (virtual and face-to-face), team-work, affective learning, problem solving, networking, research, using google docs to collaborate, setting up Moxtra meetings, creating Padlets, using Skype to communicate, posting to a blog, navigating the Weebly website, emotional intelligence, leadership and critical thinking. The ways in which using new media/digital tools have capitalized on the learners’ potential are detailed below. The virtual and face-to-face classroom environment facilitated the development of the learners collaboration skills. On the one hand the learners engaged in virtual collaboration for group-work during classes and away from classes. These groups comprised students located in Trinidad and students located in Tobago. On the other hand, the expressed view was that collaboration enriched the relationships among learners, fostering emotional intelligence and building professional learning communities. According to one learner: “This course has enhanced my collaborative and communicative skills through group work. Working in groups, during class and out of class has helped me in being more sensitive to what I say to others and how I say it. Again the group dynamics has brought our class together and has fostered greater communication with our classmates in Tobago. I belong to two different groups and this has helped me to build a better relationship with my classmates. Last term I didn't know a lot of people - mainly the people I sat with. This term I got to know everyone in my class. Thanks to our lecturers who threw us into confusion at first with these different groups which eventually brought us together as a class.” Learners’ expressed that the course fostered the development of their communication skills. Active engagement in the course, for example, group-work built learners listening skills. Additionally, having to present their findings from activities, whether individually or in groups enhanced the learners’ presentation skills. Further, the learners reported that the use of digital tools afforded more effective communication, in that they didn’t have to meet physically to get work done. Still further, the evidence indicates that a deeper transmission of communication skills took place as a result of learning by modelling. That is, in their instructional delivery, the lecturers demonstrated the behaviours and skills that they wanted the learners to inculcate and the learners effectively modelled these behaviours and skills. Thus, the findings show that communication is learnt at both the tacit and explicit levels. Following are some of the comments the learners made with regard to communication and modelling: “Group work and group presentation have helped facilitate communication and collaboration skills. Also, encouragement and techniques used by leaders of the course have also helped with communication. Having me work with others who are skilled with ICT use and motivation by tutor had given me confidence to try new and challenging areas.”


Freddy James, Sandra Figaro-Henry and Lisa Wickham “It is much easier to collaborate with group members without having to meet physically on campus…I now see that there are so many possibilities for greater collaboration amongst teachers and students and tools to assist.” The quality, accessibility and availability of course materials via the course website enhanced the learners’ experience and participation during the course. Learners attributed a number of benefits to having the course materials available online. These included having 24/7 access to materials from any location provided that there was Internet. One learner adequately sums up the benefits as follows: “the allowance of flexibility, userfriendliness, convenience and ease of retrieval of material on my hectic day to day work schedule.” Other benefits mentioned were that it made reviewing and revision easier, and the paperless delivery according to one learner meant that “materials could not be misplaced.” Additionally learners stated: “I have benefited tremendously because it is easy for me to access and read the content. It also means that I can engage fully in classes and not have to concentrate on writing notes.” “This has been quite effective for us as we are operating in Tobago and it allows for full participation despite the distance, having to interact with the ICT has presented me with the opportunity to learn new skills.” The learners consistently acknowledge that it was not only the use of digital tools that realized and advanced their learning potential, but the way the lecturers delivered the course. The evidence suggests that the practicebased approach adopted in the delivery of the course helped learners to gain a deeper understanding of leadership, and their role as leaders in their institutions and organizations. The words of one learner succinctly captures this point in the statement: “the reading material and theories discussed come to life and feel more practical,” and another expressed: “It has allowed for greater diagnosing, action planning and implementing solutions through a collaborative approach. Discussions and activities have contributed immensely by applying theory to problems, scenarios etc. as opposed to having the course strictly lecture based and boring. Good use of time and variety of methods utilized to marry theory with practice.” There is agreement among the learners that quite apart from the soundness of the course content and the effectiveness of the course delivery, leadership skill acquisition was also derived through modelling the lecturers. One learner stated: “...The professors decision to use different tools weekly was a leader and teacher by example.” The key leadership skills that learners acquired during the course were creating a vision for an institution/organization, problem solving, emotional intelligence, collaboration, communication, being a reflective practitioner, being analytical and evaluative in making decisions, thinking creatively and critically and capacity building. The evidence also indicates that the learners acquired leadership dispositions as a result of engaging in the course. These dispositions include: self-confidence, motivation, being solution driven, empathetic and being reflective. The evidence suggests that the ability to share ideas, reflect on issues and discuss with colleagues, both in class and away from class was pivotal in making the learners become more solution driven. “It has caused me to be more reflective…evaluate multiple responses to resolving situations before acting. I am even more self motivated to succeed and turn my school around.” “Many of the problems were real and currently what we experience. I enjoyed the relevance to on the job situations and my interest peaked as a result. The diversity lesson was good to me as the influx of immigrants is a real issue that I had not actually considered carefully until after that class.” Further, learners expressed the view that the practice-based approach moved them out of their comfort zone into areas that enhanced their critical and creative thinking skills and made them empathetic: “The first assignment encouraged the use of creative and critical thinking skills. As a teacher I’m never asked to think like an administrator. The assignment forced me to imagine myself in a new role and how [to] attempt to solve the issue. I think I got a better understanding of how principals address issues, something that I had never considered before.” The findings for this research question indicate that significant development of the learners took place, through the use of digital tools, the quality of the course content and the positive learning environment created through the entrepreneurial innovative approach used in the course delivery.


Freddy James, Sandra Figaro-Henry and Lisa Wickham Research Question 2: How has the entrepreneurial, innovative approach to teaching an educational leadership course utilizing digital tools added value to the UWISOE? Value was added to the UWISOE economically, technologically, administratively and socio-culturally and in terms of building collective capacity. Economically, the entrepreneurial innovation was the use of the Internet and Intranet and the overall value added gains are as follows. The use of blended learning and BYOD allowed for instructional and learning opportunities, which saved time and reduced organizational costs because less technical equipment was needed and therefore less money spent on acquiring technological resources. All the tools used were Open Educational Resources (OERs) which were free and open source, thereby bringing economic and financial gains for the UWISOE. Additionally, there were cost-savings through the application of a paperless delivery model. Administratively, there were savings from a human resource perspective, in that no time had to be allocated to copying, which meant that time could be utilized in more value adding activities. Additionally, face-to-face meeting spaces were freed-up due to the blended approach making more physical space available for scheduling other UWISOE activities. Technologically, the course added knowledge onto the Web. The curated digital spaces aided continued online and mobile interactions. The acquired digital collaboration skills facilitated everyone’s ability to work together and pool ideas for problem-solving. Further, divergent views fostered the expansion of ideas and contributed to a broader exchange and asynchronous interactions facilitated deep thought processing. Another gain was that the use of digital tools like Padlet facilitated brainstorming and immediate and spontaneous idea generation, easily retrieved and curated. Socio-culturally gains were achieved through the innovative entrepreneurial approach that promotes collaboration and communication using digital tools. As mentioned in findings for research question 1, sensitive content like migration was ventilated through the use of social networking tools and in so doing the goals of differentiated instruction were achieved. This approach promotes reciprocal learning as students are encouraged to interact, rather than take individual notes, with the resultant effect being: team interaction, intra and inter island engagement and collaboration across gender, ethnic, geographic and hierarchical lines, (various levels of work positions) One learner stated: “During class - by listening to the experiences of fellow classmates especially those currently in administrative leadership positions, allowing me, someone fairly new to administration, the opportunity to be exposed to day to day issues at their schools and possible strategies on how to handle them.” Perhaps the biggest socio-cultural value added to the UWISOE was the blurring of cultural and geographic barriers to teaching the Trinidad students and the Tobago students as a homogenous group. “The group tasks have encouraged greater collaboration between the students. We are mixed with Tobago students which was out of the box for us and each task is completed by a new mixture of participants.” Research Question 3: How have participants in the course translated the gains from the course experience into their real world activity? The learners benefitted from the course in such a way that the 21st century knowledge and skills acquired could have been immediately applied to the real world activity in their respective institutions and organisations. The learners indicated practical ways in which they had started to share and implement some of the leadership theories and practices they learned as follows: “Challenging teachers to reflect on their practice. reflecting on my practice and attempting to make relevant changes. Building capacity.” “... a parent group was made via WhatsApp as a means to keep parents informed about their child's development and assignments.” “These tools assist me in maintaining contact and collaborating, even brainstorming at times. I have created a WhatsApp group with staff for this purpose.”


Freddy James, Sandra Figaro-Henry and Lisa Wickham “Technical skills are used to help me communicate with staff members. Knowledge of leadership traits etc. help to mould me into becoming a better leader. I try to listen to the input of others much more. I also share readings with management team.” More than indicating specific actions that were applied in their respective work environments, a deep sense of self reflection come through in the findings. “This course has made me become a more reflective person so that I am able to look at challenges in another way and find solutions that would have been very reactive before. I am now more highly motivated to attack issues that I would not have done before.” It is noteworthy that as a result of the skills and knowledge acquired on the course, learners were able to positively influence not only their peers, but their superiors at their institutions to engender change. One learner indicated that this was done through: “sharing of materials in department meetings and changing the discussion topics in the staff room to school improvement.” Another stated: “The use of encouraging media tools at my school has influenced my administrator to get interested and involved in technology or media tools as she was not exposed to smartphones and the use of the technology before... as a result she has gotten a smartphone.”

5. Challenges The greatest challenge faced by the learners and lecturers was technical, for example, inconsistencies with Internet connectivity and video conferencing. At the individual level for some learners using the new tools was a challenge, but they all indicated that with practice and help from colleagues they were able to surmount that challenge. One learner captures the sentiment of the others in the following statement: “Challenges I faced when using Moxtra was that it was the first time I was using the tool and as a result I was fumbling around and this had me uneasy. For instance, when we had to set up the Moxtra connection the first time it took a long time and I was becoming frustrated but with persistence and help we got through.” While being in mixed level groups worked for most persons, for one learner it presented a challenge: “Not so much a challenge but drawback for me many times in not being able to contribute in discussions and solutions which I attribute to my lack of experience in being an administrator”

6. Discussion and conclusion The use of digital tools to capture and share material facilitates more meaningful engagement within the learning environment and among peers. This implies that the quality of interaction as well as the quality of the content derived would have been more substantial. Shared notes in the digital landscape provides the opportunity for simultaneous enhancement of thought as learners can contribute to each other’s notes in real time thereby adding to the process and capitalizing on collaboration. The findings imply that significant work remains to be done with regard to the integration of 21st Century tools and new media skills into both the operations of and course delivery at the UWISOE. This gap presents an opportunity to move the eco-systems to a place where learners are better able to navigate the digital landscape. The value that learners derived from the course experience extended beyond the acquisition of learning and applying 21st century digital skills. For example, some learners appear to have benefitted from improved communication skills as a result of the collaborative processes employed. Still, with regard to the use of online tools for collaborating, it was clear that without a strong infrastructural backbone the entire process can be thwarted because once the Internet became unreliable the learning process was affected and the learning stunted. Clearly there are benefits to be derived from creating spaces and opportunities for participants in the educational system to collaborate and cross function, not only in intra regional groups but across Tobago and Trinidad thereby creating opportunities in the digital landscape for teams to meet on a regular basis, to address real world issues and challenges. The research sought to find out how an entrepreneurial innovative approach, using new media tools and a practice-based instructional design to teach a postgraduate educational leadership course brought value for the


Freddy James, Sandra Figaro-Henry and Lisa Wickham learners and the tertiary institution. Additionally, the research sought to investigate how the learners had incorporated their newly acquired skills and knowledge in their real world work spaces, thereby bringing value and innovation to those institutions. The evidence in this study, which speaks to relationship building, collaboration, capacity building, teamwork and shared values, leads to the conclusion that the learners in the course have been building a Professional Learning Community (PLC). Even more so, it would seem that the digital tools they have learnt during the course has provided a pathway to make the PCL sustainable beyond the course. It can also be concluded that the application of new media technology to the learning environment significantly enhances the experience of and adds value to both the learners as well as the lecturers and administrators. It redounds to the benefit of the learning institution via economic, socio-cultural and financial gains and to the benefit of the learners through a greater understanding of self-worth and transformational skills not only in their respective work environment but in the wider society.

References Billett, S. (2010). The Practices of Learning through Occupations. In S. Billett (Ed.), Learning Through Practice: Models, Traditions, Orientations and Approaches Dordrecht, Springer, Netherlands, pp 59-81. Brush, C., Neck, H., and Greene, P. (2015). A Practice-Based Approach to Entrepreneurship Education Evolving Entrepreneurial Education: Innovation in the Babson Classroom, pp. 35. Blass, E. and Hayward, P. (2014) “Innovation in higher education; will there be a role for “the academe/university” in 2025?” European Journal of Futures Research, Vol 2, No .1, pp 1-9. Carmeli, A. and Paulus, P. B. (2015) ”CEO Ideational Facilitation Leadership and Team Creativity: The Mediating Role of Knowledge Sharing”. The Journal of Creative Behavior, Vol 49, No.1, pp 53-75. Coyne, K. P. and Nielsen, J. (2001) How to conduct usability evaluations for accessibility methodology guidelines for testing websites and intranets with users who use assistive technology,[online], University of Syracuse, Figaro-Henry, S. and James, F. (2015) “Mobile Learning in the 21st Century Higher Education Classroom: Readiness Experiences and Challenges”, Caribbean Curriculum, Vol 23, pp 99-120. Gibb, A., Haskins, G. and Robertson, I. (2013) Leading the Entrepreneurial University: Meeting the Entrepreneurial Development Needs of Higher Education Institutions. In A. Altmann and B. Egersberger (Eds.), Universities in Change Managing Higer Education Institutions in the Age of Globalization. Sprin ger, New York, pp 9-45. Hekkert, M., Negro, S., Heimeriks, G. and Harmsen, R. (2011). “Technological innovation system analysis”, [online] Utrecht University, Kitagawa, F. (2004) Universities and Regional Advantage: Higher Education and Innovation Policies in English Regions. European Planning Studies, Vol 12, No. 6, pp 835-852. DOI:10.1080/0965431042000251882 Higgs, J. (2011) Practice-Based Education: A Framework for Professional Education, Sydney: Australian Learning and Teaching Council. Meissner, D. and Kotsemir, M. (2016) Conceptualizing the innovation process towards the ‘active innovation paradigm’— trends and outlook. Journal of Innovation and Entrepreneurship, Vol 5, No.1, pp 1-18. doi:10.1186/s13731-016-0042z. Mok. K. M. (2005) Fostering Entrepreneurship: Changing Role of Government and Higher Education Governance in Hong Kong. Research Policy Vol 34, No. 4, pp 537–554. doi:10.1016/j.respol.2005.03.003 Partnership for 21st-century skills. (2016) “Framework for 21st-century learning”, [online], Partnership for Century Learning, Schleicher, A. (2011) Skills, Education and Employment: Europe’s Next Frontier. Lisbon Council Policy Brief An Action Plan for Europe 2020: Strategic Advice for the Post-Crisis World, [online], The Lisbon Council think Tank for the 21 st century, Stephens, H. M., Partridge, M. D. and Faggian, A. (2013) Innovation, Entrepreneurship, and Economic Growth in Lagging Regions. Journal of Regional Science, Vol53 No.5, pp 778-812. University of the West Indies. (2012) “Strategic plan 2012 – 2017”, [online], Universityof the West Indies,].


Interactions Among Open Innovation Activities, Organizational Learning and Competence in Business and Public Organizations: Issues of Measuring Brigita Janiunaite and Monika Petraite Kaunas University of Technology, Lithuania [email protected] [email protected]

Abstract: The changing nature of innovation modes requires a different focus in innovation process organization and monitoring in order to ensure innovation management effectiveness, speed, and maintain strategic focus. At this level it is important to understand the link between open innovation processes and innovation micro foundations in the organization (supporting learning and knowledge exchanges for open innovation) and organizing and monitoring practices. In this context the important question how to measure the above-mentioned activities of open innovations and their interaction with particularly relevant components of open innovations – organizational learning and the acceptable set of competences required – remains. Therefore, this paper addresses the following questions: how open innovation activities at organizations in different sectors interact with the dominant learning processes and sets of competencies? How to measure activities of open innovation, learning and competencies while searching for interactions among them? Interactions have to allow measuring the above-mentioned variables in different type organizations irrespective of whether they are of business, or public sector? These questions are addressed drawing on the research carried out in the frame of the project AISTIS. The project AISTIS aims to develop a complex methodology for the evaluation of national innovation system with reference to its evolution towards open innovation ecosystem. The research is based on a new methodology for the measurement and evaluation methodology on the level of innovation systems, sectors and organizations. Keywords: open innovation, organizational learning, competence, public and business sector

1. Introduction Open Innovation (OI) has emerged as an umbrella concept between the macro and micro levels of innovation studies (Huizingh, 2011). OI refers to a setting where the focal company strives for innovation by purposefully seeking to tap into available knowledge residing outside its boundaries, while simultaneously allowing for own unused knowledge to outflow and be exploited by third parties (Chesbrough, 2003). The theoretical foundations of OI can thus be seen as a firm-level mirroring of the innovation systems literature in that OI conceptualizes innovation as taking place between companies and other relevant actors who exchange knowledge and codevelop products and services in loosely coupled networks where business models are dynamically created, reshaped, dissolved and recreated in order to continuously enhance innovation competency (Chesbrough, 2003; Chesbrough, 2006; Chesbrough & Bogers, 2014). After more than a decade of extensive scholarship and practice development in Open Innovation, since the publication of the book Open Innovation (Chesbrough, 2003), Chesbrough & Bogers (2014) propose the following synthesis definition of the concept, quoted in West et al. (2014, p. 806): ‘We define open innovation as a distributed innovation process based on purposively managed knowledge flows across organizational boundaries, using pecuniary and non-pecuniary mechanisms in line with the organization’s business model’. Hence, OI can encompass a wide range of forms and degrees of openness in the innovation process (Laursen & Salter, 2006). Companies can engage in outbound innovation by either revealing or selling ideas, knowledge or technologies, in inbound innovation by either sourcing or acquiring such innovation assets from outside (Dahlander & Gann, 2010), or in both, by coupling external knowledge sources and outbound commercialization activities (Chesbrough & Bogers, 2014). Activities of open innovation management in organization’s level, progress of innovative activity, maturity of open innovation application in an organization, profile and importance of national and international partners in open innovation activity and alike can be attributed to ‘hard’ dimensions; organizational learning, competencies, strategic orientation of organization’s innovative activity to solve challenges for wellbeing of the society, guidelines for open innovation responsibility evaluation and ethical principles of partners’ choice, etc. – to ‘soft’ ones. Different measurement instruments are applied to measure some dimensions; however, it is based on complex standpoint as well as the appropriate valid instrument, which would allow evaluating interactions of particular ‘hard’ and ‘soft’ dimensions. Evaluation of such interactions is important both for business and also


Brigita Janiunaite and Monika Petraite for public sectors. This paper strives for these goals; its structure presents the systematic standpoint to open innovation ecosystem; further on essential ‘hard’ and ‘soft’ dimensions are analyzed by distinguishing aggregated groups and their variables important for measurement in them. Having performed measurements in organizations of different sectors, the measurement instrument’s reliability and validity are presented in the final part of the paper.

2. Ecosystem of open innovation: The concept and model Adner (2006), when integrating the perspective of organization’s innovation strategy, treats innovation ecosystems as partner agreements, by which companies combines individual suggestions into a united decision for a customer. Wang (2009) defines innovation ecosystems as innovation networks as well as individuals and organizations’ communities, which interact by generating and using innovations or, as Oksanen and Hautamaki (2014) state, dynamic, interactive networks, which ‘breed’ innovations. Open innovation ecosystem is defined as the network of market and non-market agents interrelated by meaningful relationship and actively exchanging knowledge and experience, which is oriented towards generation of innovations and value added that is based on open flows of incoming and outgoing knowledge. This definition is referred to in the paper. Thus the approach of open innovation ecosystems focuses the analysis attention not only to an individual innovator, but also pursues to create a value for all agents of the ecosystem (suppliers, customers, society groups), who also solve own challenges of innovations (Adner and Kapoor, 2009). Referring to the above presented analysis, the model of open innovation ecosystem’s research, which incorporates intraorganizational, organizational, extra- and intra-organizational processes of open innovations in sectorial, national and international level, was substantiated. The model refers to reference orientation of innovative activity towards the solution of challenges for formation of welfare society (social, environment protection, sustainable economic development) as collective responsibility of innovative activity that encourages companies, organizations and stakeholders to join open innovation networks and proactively function in open innovation ecosystems. The latter orientation of innovative activity is realised through open innovation activities initiated by an innovative organization at the intra-organizational level (from outside to organization’s inside, from inside to outside and mixed) as well as integration of open innovations into parameters of organizational level, such as goals of organization’s innovative activity, formation of organization’s structure for open innovations, organizational competences and learning processes in order to productively integrate flows of open knowledge into innovative activity as well as such ‘soft’ components of organizational structure as openness, flexibility of organization culture, abilities and competences of open innovations as well as learning processes for open innovations. Extra- and inter-organizational level form the level of open innovation interactions’ analysis when it is sought to know interactions of open innovation ecosystem’s knowledge through efforts of ecosystem’s agents to generate, transfer (absorb) and use generated knowledge in open innovation networks to achieve an innovative result. Tangible elements of this level are defined by indicators of subsystems of innovation system knowledge creation, dissemination and use, complex formations and partner networks and orientation of innovative activity towards R&D system, value creation systems, society or communities, or entrepreneurship as well as open innovation platforms being generated by entrepreneurship ecosystems through purposeful choice of partners at national and international level; this allows retiring from the framework determined both by national innovations and business system. Qualitative ‘soft’ parameters of this level cognition are defined by implementation of trust and coordination mechanisms, involvement of stakeholders into open innovative process, formation of extra- and inter-organizational open teams to solve innovation problems. National and international context determines interaction of intra-organizational, organizational, and extra as well as inter-organizational open innovations’ dimensions. Further on the article concentrates on three essential variables related to the activity of open innovations in organizations and among organizations, detection of the essence and substantiation measurement criteria (aggregated groups and variables).


Brigita Janiunaite and Monika Petraite

3. Substantiation of aggregated groups and variables of open innovation activity expression in an organization Concept of open innovations refers to purposeful use of knowledge incoming into the organization and outgoing from it while striving to encourage internal innovations, accelerate their creation and expand markets for external use of innovations (Chesbrough, 2003). In the latter decade the development of research on open innovations allowed to properly enough typologize and distinguish dominating types of open innovations, which should be related to higher or lower degree of openness of internal innovation processes, which manifests through the type of interaction with external innovation partners and communities. In modern global knowledge economy integration of technologies and intellectual property into internal innovative activities is most prevailing (technological and intellectual input of open innovations) and, by analogy, the shift of unused technologies and intellectual property to participants of innovation ecosystem on the basis value chain relations (technological and intellectual output of open innovations). Such open innovation activity is defined as open transfer and interception of technologies and intellectual property (Chesbrough, Vanhaverbeke, West, 2014). The latter group of variables consists of the activity to manage typical input and output of open innovations related to the following indicators: acquisition of intellectual property, licences; sale of intellectual property, licences; acquisition of external technologies and technological solutions; sale of unused technological solutions. Another, more complex and hardly tangible activity of open innovations refers to different collaboration in attaining goals of innovative activity. In this case an organization purposefully creates different activities of collaboration by pursuing to acquire specific knowledge of open innovations, such as integration of customer’s needs into an innovative solution, research and cyclic development of experimental activity in order to create and develop innovative products and processes, management of technological integration while pursuing to integrate into dominating technological and social platforms as well as to ensure technological and social compatibility of innovations being generated. In summary the latter activity forms the group of variables of open innovation activities in collaborating with value chain partners and customers, which involves collaboration with customers and consumers in creating innovations and performing researches as well as purchase of R&D services from partners. The third group of open innovative activity is formed by open networking and active community interactions. Organizations when attempting to envisage and influence innovative solutions being formed strive to open innovative activities at the maximum, and later to institutionalize their results; this would ensure the return of innovative activity investments in long-term perspective. Usually such activities refer to active search for ideas and open communities of innovative solutions’ generation, as well as they require particularly smart management of the voluminous and diversity network of distant enough agents and interested agents as well as capacities of result integration. The entirety of the open innovation activity forms the group of open innovation activities by interacting in open communities of interactions, which is formed by such indicators as innovation generation at competitions of ideas and startups, public announcement of the problem while pursuing for crowdsourcing; search for ideas in different external sources, open free display of innovations to external parties (e.g., ideas, intellectual property) as well as participation in creating and influencing certified or publicly accepted standards.

4. Substantiation of aggregated groups and variables in the context of open innovations of organizational learning Open innovations can be treated as organization’s competency, which has to be developed in long-term period. Open innovations encompass not only resource attracting and sharing. As Enkel, Bell and Hogenkamp (2011) state, open innovations are basically related to organization’s becoming a learning organization (Argyris, 1999; Senge, 1990). Qualities of a learning organization are related to knowledge management and organizational learning. Scientists (Argyris, Putman and McLain Smith, 1985; Senge, 1990; Senge et al., 1994; Nonaka and Takeuchi, 1995; Longworth, 2006; Juceviciene, 2007) distinguish two levels of learning, which can take place in an organization: individual and collective. Individual learning is important and necessary for an organization; however, the level of collective learning renders the greatest profit for effectiveness of organization’s activity when employees’ groups functioning in the organization pursue for collective knowing, i.e. ‘something more than general sum of individuals’ knowing’ (Durkheim, 1974, cit. from Juceviciene, 2007, p. 304).


Brigita Janiunaite and Monika Petraite Processes of individual and collective level learning have to be enabled in an organization while pursuing for constant organizational learning important for the organization. The result of this activity is created new organizational knowledge. A learning organization creates certain conditions in order that the above-mentioned learning processes would be enabled. In a learning organization the complex of certain means, conditions, possibilities, which ensures constant organizational learning, is functioning. Researchers of knowledge management (Krogh, Roos, 1995; Choo, 1998; Bukowitz, Williams, 2000; Gamble, Blackwell, 2001; Sanchez, 2003; Probst, Raub, Romhardt, 2003; Waltz, 2003 and others) treat organizational learning as knowledge creation both at individual and collective levels. Organizational learning is considered to be such individual and collective learning of employees when it is institutionalized by this organization, i.e. it is supported; and the knowledge created while learning in the activity and after the activity (by reflecting) is consolidated in rules, systems, structures and culture of an organization. Innovative activity, especially that of open innovations is first of all characterized by fast consolidation and reconfiguration of the knowledge generated by most agents of the network when no organization is able to possess all necessary knowledge in its inside (Powel, Grodal, 2005). Referring to the above-mentioned insights, the following variables are distinguished in this aggregated group: internal platform of organizational knowledge creation oriented to learning by open innovations; organizational learning determined by external partnerships for open innovations.

5. Substantiation of aggregated groups and variables in the context for competencies for open innovation From its particular focus on various forms of collaboration, mutual working relationships, and sharing of innovation opportunities and risks, Open Innovation brings new challenges at the level of the human side of innovation teams (du Chatenier et al., 2010), which, however, are difficult for managers both to define and to find in new recruits (Dabrowska & Podmetina, 2014). Researchers have recently turned to the concept of competencies in order to identify the particular skills and behaviors that are essential to find, develop and cultivate in the work force in order to succeed in OI endeavors (du Chatenier et al, 2010; Dabrowska & Podmetina, 2014; Hafkesbrink & Schroll, 2014). Competence, in this perspective, is defined as an integrated set of knowledge, attitudes and skills of a person (Mulder, 2007), which results in effective and/or superior performance in a job (Boyatzis, 1982). Based on an extant literature review, Soderquist et al. (2010) identified three analytical perspectives that help understand the meaning and applicability of different types of competencies for HRM: !

Generic vs. organization-specific competencies, which refer to competencies identified within the context of a specific job, either generically, i.e. common to all individuals occupying a specific job, or specific to the job in a particular organization,


Managerial vs. operational competencies, which refer to competencies required for carrying out the functions of a specific role; managerial competencies relate to interpersonal interaction, such as action management, coordination, planning or motivation, while operational competencies refer to specific job positions and how to carry out successfully a specific job of operational nature,


Competencies as skills vs. competencies as behaviors, which refer to characteristics of individuals that are either learned and describe what an individual does, or fundamentally inherent and describe how people do their job.

This typology, consisting of a combination of the three identified couples, has a general applicability for competency management as it suggests an analytical 'scale' of competencies, ranging from the most specific 'Organization-Specific Operational Skills', to the most general 'Generic Management Behaviors'. This facilitates the identification, classification, understanding and balancing of the complex pattern of competencies that in practice appear on a continuum between the more specific and the more general (Soderquist et al., 2010). A central theoretical framework for further understanding and classifying the competency aspects of innovation management is the exploration/exploitation trade-off (March, 1991), which has evolved into the exploration/exploitation dichotomy affording co-existence (Benner & Tushman, 2003) and more recently into a focus on simultaneous integration through ambidexterity (Raish et al., 2009; Blindenbach-Driessen & van den


Brigita Janiunaite and Monika Petraite Ende, 2014). ‘Exploration includes things captured by terms such as search, variation, risk taking, experimentation, play, flexibility, discovery, innovation. Exploitation includes such things as refinement, choice, production, efficiency, selection, implementation, execution’ (March, 1991, p. 71). In innovation studies, exploration has become synonym with radical innovation, and exploitation with incremental innovation (Jansen et al, 2009). Ambidextrous organizations are ‘capable of simultaneously exploiting existing competencies and exploring new opportunities’ (Raish et al., 2009, p. 685). This translates into examining how exploration and exploitation work together to simultaneously achieve incremental and radical innovation, what could be referred to as innovation ambidexterity (Li et al., 2008). Ambidexterity is central for innovation performance (Blindenbach-Driessen & van den Ende, 2014), especially in an Open Innovation context characterized by intensive inter-organizational collaboration, knowledge transfer and learning (Li et al, 2008). Thus, the individual competences associated with both exploration and exploitation are essential for succeeding in OI (Hafkesbrink & Schroll, 2014), and many researchers claim that ambidexterity is rooted in an individual's ability to explore and exploit (Raish et al., 2009). Leaning on the dimensions of exploration, exploitation and ambidexterity, Hafkesbrink & Schroll (2014) proposes a comprehensive catalogue of both organizational and individual competencies for Open Innovation: !

Organizational competencies for the exploration phase of OI include: Ability to identify and assimilate knowledge, Ability for Outside-in Collaboration, Dynamic adaptability, Inventive capability, and Effectiveness.


Organizational competencies for the exploitation phase of OI include: Ability for transfer/valorization of knowledge, Ability for Inside-Out Collaboration, Routinization capability, Imitation/replication capability, and Efficiency.


Individual competencies that support exploration activities include: Combining and expanding knowledge (professional skills), Coping with complexity in the context of variety enhancement (methodical skills), Cooperation in the framework of interaction relationships (social skills), and Self-reflection in a personal action routines (personal skills).


Individual competencies that support exploitation activities include: Knowledge concentration (professional skills), Simplification and variety narrowing (methodical skills), Hierarchy for control of work processes (social skills), and Authority in the implementation of personal action (personal skills).


Individual ambidextrous competencies finally, include: knowledge brokerage, topsy-turvy-thinking, multitasking, dialectic thinking (methodical), diplomatic and rhetorical capabilities, tolerance to ambiguity, mediation, capabilities (social), and capability to combine alternative logics, emotional ambivalence, capability to think outside the box (personal).

Another attempt at classifying OI competencies –skills and attitudes – was generated from a study of large multinationals at the University of Cambridge's Institute for Manufacturing (Mortara et al., 2009). They propose four categories of skills for open innovation: introspective, extrospective, interactive and technical, accompanied by a set of desirable personal attributes (behaviours), including, among other, motivation, ability to learn, sociability, techno-business mind-set, leadership, entrepreneurial mind-set, adaptability and flexibility (Dabrowska & Podmetina, 2014). Du Chatenier et al. (2010) identified four clusters of OI competencies, based on a literature review and a qualitative validation through interviews and focus groups: !

Self Management, which is seen as the basis for achieving the central tasks related to OI,


Interpersonal Management, which is essential in order to manage the inter-organizational collaboration process,


Project Management, which is essential for managing the overall innovation process,


Content management, which is essential for creating new knowledge collaboratively.

Particular OI challenges that need to be addressed through appropriate competencies were also identified, including: High diversity and cognitive distances, Low social cohesion, High level of uncertainty, Low reciprocal commitment, and Absence of traditional hierarchical lines. Finally, with the objective of conducting a first larger-scale empirical research about competencies –knowledge, skills and attitudes- for Open Innovation across Europe, Dabrowska & Podmetina (2014) reviewed related


Brigita Janiunaite and Monika Petraite literature and collected data on job titles, job functions, and job offers. Based on this, they elaborated sets of competency related variables in two categories: Individual skills and competencies useful for OI professionals, and OI-specific skills and knowledge.

6. Validation of instrument for measuring interactions among open innovation activities, organizational learning and competence Referring to the above presented methodology, the indicators of particular aggregated groups and variables, which became the basis of research instrument – the questionnaire, were distinguished. The characteristic scale internal consistency was used to measure questionnaire’s reliability; it refers to correlation of separate questions making the questionnaire (diagnostic blocks of the questionnaire). The meaning of Cronbach’s Alpha coefficient, Corrected Item-Total Correlation, KMO, Bartlet’s Test, Communalities analysis was calculated for validity of the questionnaire, Total Variance Explained and Rotation Sums of Squared Loadings, Rotated Component Matrix tests were performed. Table 1: Validity of separate diagnostic blocks Diagnostic block OPEN INNOVATION ACTIVITIES ((Part A) OPEN INNOVATION ACTIVITIES (Part B) MANAGEMENT OF OPEN INNOVATION LEARNING FOR OPEN INNOVATION SET OF SKILLS AND COMPETENCES IN OPEN INNOVATION CONTEXT

Cronbach’s Alpha 0.899

N of Items 13



0.922 0.872 0.959

15 8 29

Thus it is seen (see Table 1) that the meaning of the Cronbach’s Alfa coefficient, which should be higher than 0.7 for a well-designed questionnaire (according to some authors – 0.6), ranges from 0.861 to 0.959; this shows that the constructed questionnaire is well-designed, its distinct blocks allow measuring particular variables and their interaction. Recommendations and suggestions for questionnaire’s structure and form as well as variables of diagnostic groups were provided after the pilot survey. All blocks with particular indicators, which distinguished in the theoretical analysis, remained (see Table 2). Table 2: Structure of main research instrument Diagnostic block


N of statements


Open innovations while collaborating with value chain partners and customers Open innovations while collaborating in open communities Open innovations while applying technology interception and transfer Present and desired level of open innovation activity intensity Acceptance of organization’s design and processes for open innovative activity Organization’s coordination mechanisms for open innovative activity Processes of open knowledge flow empowerment Internal platform of organization knowledge creation oriented to learning for open innovations Organizational learning for open innovations determined by external partnerships Collaboration abilities/capacities of open innovations Meta-collaboration abilities/capacities of open innovations Exploration abilities/capacities (critical) of abilities/capacities of open innovations








Brigita Janiunaite and Monika Petraite Diagnostic block

Indicators Eclectic abilities/capacities (combinative) of open innovations Transformational abilities/capacities of open innovations Exploitation abilities / capacities of open innovations

N of statements

7. Conclusions !

Open innovation ecosystem is defined as the network of market and non-market agents interrelated by meaningful relationship and actively exchanging knowledge and experience, which is oriented towards generation of innovations and value added that is based on open flows of incoming and outgoing knowledge.


The model of the research on open innovation ecosystem integrates intra-organizational, organizational, extra- and inter-organizational processes of open innovations in sectorial, national and international level. The construct of the model refers to reference orientation of innovative activity towards solution of challenges for formation of welfare society as collective responsibility of innovative activity that encourages companies, organizations and stakeholders to join open innovation networks and proactively function in open innovation ecosystems.


The substantiated aggregated groups and variables of ‘hard’ and ‘soft’ dimensions allowed constructing the indicators, which are valid to measure interactions among open innovation activities, organizational learning and competence in business and public organizations.

References Adner, R. (2006) Match your innovation strategy to your innovation ecosystem, Harvard business review, 84 (4), 98. Adner, R. and Kapoor, R. (2010) Value creationon in innovation ecosystems: How the structure of technological interdependence affects firm performance in new technology generations, Strategic management journal, 31 (3), 306-333. Argyris, C. (1992) On Organizational Learning, Blackwell Cambridge, Mass. Argyris, C., Putman, R. and McLain Smith, D. (1985) Action science, San Francisco, Jossey Bass, CA. Boyatzis, R.E. (1982) The Competent Manager: A Model of Effective Performance, NY, John Wiley & Sons. Bukowitz, W. and Williams, R.L. (2000) The knowledge management fieldbook, London, Prentice Hall. Chesbrough, H. (2003) Open innovation: The new imperative for creating and profiting from technology, Boston, Harvard Business School Press. Chesbrough, H. and Bogers, M. (2014) Explicating Open Innovation: Clarifying an Emerging Paradigm for Understanding Innovation, in Chesbrough, H., Vanhaverbeke, W. and West, J. (eds.), New Frontiers in Open Innovation, Oxford: Oxford University Press. Chesbrough, H. and Crowther, A.K. (2006) Beyond high tech: early adopters of open innovation in other industries, R&D Management, 36 (3), 229–236 Chesbrough, H., (2006) Open business models: How to thrive in the new innovation landscape, Boston, Harvard Business School Press. Chesbrough, H., Vanhaverbeke, W. and West J. (2014) New Frontiers in Open Innovation. Oxford, Oxford University Press. Choo, Ch.W. (1998) The knowing organization. How organizations use information to construct meaning, create knowledge, and make decisions, NY, Oxford University Press. Dabrowska, J. and Podmetina, D. (2014) Identification of Competences for Open Innovation, XXV ISPIM Conference – Innovation for Sustainable Economy & Society, Dublin, Ireland on 8-11 June. Dahlander, L. and Gann, D.M. (2010) How open is innovation? Research Policy, 39, 6, 699–709. du Chatenier, E., Verstegen, J.A., Biemans, H.J., Mulder, M. and Omta, O.S. (2010) Identification of competencies for professionals in open innovation teams, R&D Management, 40 (3), 271-280. Durkheim, E. (1974) Sociology and philosophy, NY, Free Press. Enkel, E., Bell, J. and Hogenkamp, H. (2011) Open innovation maturity framework, International Journal of Innovation Management, 15, 1161-1189. Gamble, P.R. and Blackwell, J. (2001), Knowledge management. A state of the art guide, London, Biddles Ltd, Guildford and King’s Lynn. Hafkesbring, J. and Schroll, M. (2014) Ambidextrous Organizational and Individual Competencies in Open Innovation: The Dawn of a New Research Agenda, Journal of Innovation Management, 2 (1), 9-46. Jucevičienė, P. (2007) Besimokantis miestas: monografija, Kaunas, Technologija. Laursen, K. and Salter, A. (2006) Open for Innovation: The Role of Openness in Explaining Innovation Performance among UK Manufacturing Firms, Strategic Management Journal, 27, 131–50. Longworth, N. (2006), Learning cities, Learning regions, Learning Communities: Lifelong learning and local government, London, Routledge.


Brigita Janiunaite and Monika Petraite Mortara, L., Napp, J., Slacik, J. and Minshall, T. (2009) How to implement open innovation: Lessons from studying large multinational companies, University of Cambridge Institute for Manufacturing. Mulder, M. (2007) Competence: the essence and use of the concept in ICVT, European Journal of Vocational Training, 40, 5–22. Nonaka, I. and Takeuchi, H. (1995), The Knowledge Creating Company, Oxford University Press. Oksanen, K. and Hautamäki, A. (2014) Transforming regions into innovation ecosystems—A model for renewing local industrial structure, The Innovation Journal: The Public Sector Innovation Journal, 19, (2). Powell, W.W. and Grodal, S. (2005) Networks of innovators, The Oxford Handbook of Innovation, 56-85. Probst, G.J.B. and Büchel, B.S.T. (1997) Organizational Learning: the Competetive Advantage of the Future, Great Britain, British Prentice Hall Europe. Sanchez, R. (2003) Knowledge management and organizational competence, Oxford, Oxford University Press. Senge, P.M. (1990) The Fifth Discipline, NY, Doubleday. Senge, P.M., Kleiner, A. and Roberts, Ch. (1994), The Fifth Discipline Fieldbook, London, Nicholas Brealey Publishing. von Krogh, G., and Roos, J. (1995) Organizational epistemology, NY, St. Martin’s Press.


On Using Games for Practicing Entrepreneurial Mindset Charlotta Johnsson1, Mari Suoranta2, Ikhlaq Sidhu3 and Ken Singer3 1Lund University, Sweden 2University of Jyvaskyla, Finland 3UC Berkeley, USA [email protected] [email protected] [email protected] [email protected]

Abstract: Today, innovation and entrepreneurship are key words for many universities, as it constitutes an important part of most universities’ public and scientific outreach task. Universities are striving to increase the number of innovations and entrepreneurs generated by the university. Teaching and learning entrepreneurship is therefore of importance and schools, colleges and universities can play an important role by including entrepreneurship and innovation in their curricula (Sidhu et al., 2015a). Some of the most crucial elements of entrepreneurship at the level of individuals are attitudes, skills and actions (Wennekers, 2005), i.e. the entrepreneurial mindset of the individual. This is an element that is seldom included in traditional classes at schools, colleges and universities. Creating entrepreneurial mindsets in students also calls for the use of innovative models and contents in teaching. As part of the Berkeley Method of Entrepreneurship (BMoE) research project, the entrepreneurial mindset has been studied and ten behaviors have been identified (Sidhu et al., 2015b). These are behaviors that are frequently found with successful entrepreneurs in the highly innovative and entrepreneurial area of Silicon Valley, California. Another part of the same research project has been to identify and design various games that can be used with the entrepreneurship students and that has the intension to advance the individual’s entrepreneurial mindset (Sidhu et al., 2015a). This paper describes two BMoE-games (Story-telling and Collaboration) and discusses experiences of using them for teaching and learning entrepreneurship in higher education. Reflections from both teachers and students are provided. Keywords: entrepreneurship, innovation, teaching and learning

1. Introduction This paper presents a fresh and innovative approach of how behavioral games can be used in entrepreneurship education. As pointed out by Phan, Siegel & Wright (2009), more research concerning good way to train students in entrepreneurship is needed, and Verzat, Byrne & Fayolle (2009) state that research investigating suitable pedagogical methods to attain requisite skills among higher education students is lacking. There is a notable lack of definitional consensus concerning the use of games in education, and current research with respect to the use of games has remained fragmented and underdeveloped. Following Verzat et al. (2009) we define a game as an educational device with discrete objectives with respect to the participants’ learning, used in the context of known boundaries. Currently, universities are expected to play a new role in society, in addition to research and teaching, by applying a ‘third mission’ of economic development (Etzkowitz et al., 2000). This development has been apparent at many US universities for decades, and is currently accelerating also in Europe. According to Rasmussen & Sorheim (2006) universities can contribute to entrepreneurship both indirectly, through education of candidates, and directly by commercialization of research and by being the seedbed for new ventures. The flow of candidates, or future innovators, constitutes a great potential and a responsibility for the universities to address the need for a more entrepreneurial workforce in general, and for highly qualified competence in this area. This paper starts with arguments why it is of importance for society to educate students who have entrepreneurial knowledge and skills. It describes current trends in teaching and learning as well as the special aspects of teaching and learning entrepreneurship. The paper further contains a description of the BMoE and the hypotheses on which it is based. The paper presents a set of behavioral patterns that characterize an entrepreneur and it discusses how these can be invoked by introducing games in the teaching and learning setting. The paper presents some ideas for further research related to entrepreneurship and management education in general and to the BMoE in particular. At last, the conclusions are drawn.


Charlotta Johnsson et al.

2. Need for entrepreneurial mindset in education Having entrepreneurial knowledge and skills as well as entrepreneurial mindset are often seen as prerequisites to creativity and innovation and as enablers of entrepreneurial actions that are essential in order to prepare students for a successful professional life (Täks, Tynjälä & Kukemelk, 2015). While traditional educational practices have involved the transmission of prescribed knowledge, entrepreneurial learning has been described as being something about unplanned and unpredictable ideas, the creation of new and non-existing ideas. According to Pittaway and Cope (2007) entrepreneurial learning includes learning by coping, experimenting, problem-solving, and learning from one’s own mistakes. Entrepreneurial learning can be seen as a way to encourage the development of creativity and innovation together with the individual’s ability to see new opportunities. It is also about making adequate business decisions and making decisions based on real-live situations and problems. As well as requiring the ability to reflect on one’s actions and learn from them. It has been stated that learning entrepreneurial skills requires combining both theoretical and practical pedagogies. As Gibb (2005; 2008) suggests and Täks et al. (2015) coincide idea of developing entrepreneurial competences among student does not necessarily mean that it is expected them to become entrepreneurs but to show alternatives for career options as well as preparing them for working life. Therefore we agree with Täks et al. (2015) that entrepreneurship education is not only to be the engine of economic growth and wellbeing through the creation of jobs and new ventures, but also to develop individuals who understand entrepreneurial processes and have entrepreneurial skills and ways of thinking. To teach and educate future entrepreneurs is orthogonal to traditional teaching in respect to how teaching is conducted. An instructor that wants to educate innovators should e.g. lead from the side as opposed to lead from the top, should inspire as opposed to direct, should trust and delegate instead of check and control, should treat the group members as colleagues and not as a subordinate (Mery, 2014). This is unconventional in teaching and learning situations and calls for a different mindset of the instructor. As the cases in Rasmussen & Sorheim (2006) study show entrepreneurship education focuses less on teaching individuals in a classroom setting and more on learning-by-doing activities in a group setting and a network context.

3. Using games in entrepreneurship education Entrepreneurial mindset and a skill set include, for example, ability of identifying opportunities, creative problem solving, negotiating, thinking strategically, networking, managing business situations holistically, making decisions intuitively in the face of uncertainty, being effective on a personal level and becoming more resilient to failures (Täks et al. 2015). Understandably providing students with these kinds of skills in a traditional learning environment might be difficult, often more student-centered, active environment is needed. Using games in management education was originally an outgrowth of war games, where the military had extensively used simulations to mirror real-world combat situations. Today, the entrepreneurship discipline draws heavily on developing and using simulations and experiential exercises as an integral component of the education process (Katz, Gundry, Low, & Starr, 1994). Verzat et al. (2009) state there is a notable lack of definitional consensus concerning the use of games in education, and current research with respect to the use of games has remained scant. A game may be described as an “artificial situation” in which players engage in an artificial conflict against one another or all together against other forces. Game objectives may be concerned with winning or losing, about being victorious against others, or even about taking revenge on adversaries. Purpose of an educational game is to create real-life learning environments and simulate real-life activities where unexpected events can occur and from which students can learn. Games are regulated by rules, which may take the form of procedures, controls, obstacles, or penalties. These rules structure the participants’ actions in striving to reach an objective. Games are examples of active-learning techniques (Benek-Rivera & Mathews, 2004). Games can create “imaginary worlds and hypothetical spaces where players can test ideas and experience their consequences” Squire & Jenkins, 2003, 8). Their value lies in their ability to promote collaboration and peer learning (Ruben, 1999). They are said to be particularly appropriate for today’s video-game generation, games add to class variety and are a creative way to attract and hold students’ attention (Benek-Rivera & Mathews, 2004). In entrepreneurship teaching and learning situations, it is essential that the student is able to develop a relationship to the subject itself. Games, as an active learning technique, constitute a suitable vehicle for this. In recent years, the general discussions about teaching has shifted from “how to present and transfer knowledge


Charlotta Johnsson et al. from a teacher to someone else” to “how information and knowledge provided is perceived by the receiver”, i.e. from a teacher-student-transfer focus in which the subject is only the transported goods, to the studentsubject-relation focus in which the teacher is only the medium used. The shift is illustrated in the didactic triangle in Figure 1 (Johnsson et al., 2014).

Figure 1: An interpretation of the Didactic Triangle showing a shift from the teacher-student-transfer focus (left) to the student-subject-relation focus (right)

4. Berkeley Method of Entrepreneurship At the University of California Berkeley a new method for teaching and learning entrepreneurship is under development (Sidhu et al., 2015b). The pedagogy is focused around learning rather than teaching (compare Figure 1) and the students are pushed to proactively develop their own understanding rather than waiting for someone to teach them what they need to know. The students are trained to frame problems and find ways to solve them and then reflect on what they've learned from the process. The method has already been used in practice at different occasions; boot camps, courses for undergraduate and graduate students, Global Venture Lab, conferences for academia and industry, and research activities. The method under development is referred to as the Berkeley Method of Entrepreneurship. The Berkeley Method of Entrepreneurship encompasses three main elements; networks, mindset, and frameworks. Networks and frameworks are elements found in many entrepreneurial courses and provide the students with knowledge and facts associated to entrepreneurship whereas mindset is an element often missing in traditional courses. Generally, the mindset is a way of thinking that influences the way someone sees and acts upon a situation; the mindset is reflected in the person’s behavioral patterns (Dweck, 2006). The Berkeley Method of Entrepreneurship is based on the hypothesis that the mindset of an entrepreneur can be characterized by a distinct set of behavioral patterns, and that an inductive game-based teaching approach is a successful vehicle for introducing and re-enforcing these. In the game-based teaching approach, students explore their current mindsets and can compare it with that of entrepreneurs. The Berkeley Method of Entrepreneurship further stresses the relationship between the student and the subject (compare Figure 1), i.e. how information, experiences and knowledge provided in the course is perceived by the student.

5. Ten behaviors of entrepreneurs The mindset of successful entrepreneurs has been studied and a proposal describing their most dominant characteristics is given through ten (10) behavioral patterns. The proposal is based on extensive interaction with entrepreneurs in the Silicon Valley area, and on literature reviews e.g. Rainforest by Hwang and Horowitt (2012). A distinct set of behavioral patterns is identified and listed in Table 1, the list includes e.g. communication and collaboration. The list of the behavioral patterns is also given in Sidhu et al. (2015b) in which a more detailed explanation and references are also provided. It is important to note that this is an ongoing research, which implies that the ten (10) behavioral patterns should be interpreted as best current status. It cannot be excluded that more patterns will be added, or current patterns modified and/or removed. The ten behavioral patterns describe the typical mindset of successful entrepreneurs. If everyone in a community acts like this, there will be a vibrant entrepreneurial culture. Table 1: Ten (10) behavioral patterns characterizing an entrepreneur. Nb 1 2 3

Behavior Pay It Forward “Agree that you will get help from others, and pay it forward.” Story Telling “Realize a something new by induction, and then learn to communicate the story with a new language.” Friend or Foe


Charlotta Johnsson et al. Nb 4 5 6 7 8 9 10

Behavior “If you can’t tell: Learn to trust others without expecting anything in return.” Seek Fairness “Make deals that seek fairness (in positive sum transactions), not advantage (in zero sum transactions.” Plan to Fail “It is necessary to be Wrong sometimes. Plan to Experiment. Plan to Fail. (Fail Fast) Analyze, Adapt and repeat. The smarter you think you are, the harder this is going to be.” Diversify “Diversify your networks. Connect to people you would not normally, then go and listen. Open Up. And connect them to others.” Role Model “Be a role model for other entrepreneurs and innovators.” Believe “Believe that you can change the world.” Good Enough “Perfection is no good but good enough is perfect.” Collaboration “Individual vs team and competitors vs partners”