Category: Economic News

Can the relationship between Europe and Africa stand the test of time?

The signing of the Treaty of Rome, which established the European Economic Community (EEC) 60 years ago in March 1957, came at a tumultuous time in relations between Europe and Africa.

Just weeks earlier Kwame Nkrumah had declared Ghana a republic, an event which was a turning point in the decolonisation of sub-Saharan Africa.

Nkrumah remarked that the treaty’s inclusion of colonial territories was to neocolonialism what the Berlin Treaty of 1885 had been to colonialism.

He had a point. Two of the six founding members of the EEC – Belgium and France – still held substantial colonial interests on the continent. Accession to the community thus posed the crucial question of what to do about them.

The question became contentious enough to threaten the collapse of the entire Treaty of Rome negotiation process. The other four members of the EEC were Germany, Italy, Luxembourg and the Netherlands.

France in particular was steadfast that its colonies be “associated” with the community. Paris envisaged that its preferential colonial terms of trade would be extended to the entire EEC. But Germany and the Netherlands were opposed, wary of being forced to share the financial and political responsibilities that came with trading with former colonies.

The French argument ultimately won, albeit with some compromises. The treaty’s association agreement would last five years and the preferences France enjoyed from its colonies would be gradually expanded to the rest of the EEC.

The agreement, inscribed into articles 131-136 of the treaty, served as the originator of Europe’s subsequent relationship with the African, Caribbean and Pacific Group of States (ACP). This was codified in the Yaoundé Agreements, the Lomé Convention and today’s Cotonou Agreement.

So this 60th anniversary is not just about Europe. The treaty created a framework for multilateral relations between Europe and Africa.

The principles of trade and aid enshrined in the treaty’s association agreement form the basis of Europe’s development agenda in Africa to this day, even though relations have expanded into many more areas in the 21st century.

A common future

The Treaty of Rome laid out the blueprint for the creation of the world’s largest single market. It also contributed to the post World War II process of cooperation and reconciliation in Europe.

The push for European unity persisted for 37 years, culminating in the creation of the European Union (EU) under the Maastricht Treaty in 1993.

Although difficult to imagine amid the doom and gloom of Brexit, rising populism and the migration crisis, there is still reason to celebrate when you consider the region’s relationship with Africa.

The EU, for all of its troubles, has generally been a progressive partner to Africa, especially with respect to the establishment of the Joint Africa-EU Strategy and the unique programming efforts it has generated.

This of course does not negate instances of neocolonialism, nor the damage done by the clumsy promotion of the European Partnership Agreements (EPAs).

The EPAs in particular remain a sore point. Indeed, the preferential trade terms given to African countries by EU member states have been judged discriminatory and in contravention of World Trade Organisation rules.

Beyond the EPA debate, a number of factors have contributed to challenges facing some of the original asymmetries between the two sides.

For one, the global South, and China in particular, continues to alter global trade dynamics. African countries and regional organisations now have more trading partners to turn to.

In addition, Africa is in the middle of constructive upheaval, brought on by more than 20 years of robust growth.

The Africa of today is not the Africa of 1957. The African Union is also a more robust partner than its predecessor, the Organisation of Africa Unity.

Trade and aid

Back in 1957, the Treaty of Rome laid down the twin principles of EU-Africa relations throughout the 20th century and beyond: trade and aid. These principles were framed within the larger idea of development cooperation.

The association agreement provided reciprocal trading arrangements between 31 ‘overseas territories’ – including 18 African ones – and the ECC countries. An overseas development fund was also created, with all six EEC members contributing to it.

Controversially, the agreement served to perpetuate African dependency on Europe. Even the Lome Convention’s much touted “non-reciprocal” principle, which was supposed to nurture African industries, further attached them to Europe.

The convention eventually met strong criticism as a system of “collective clientelism”, which was perpetuating dependency and “elite capture” in Africa.

This contradictory relationship between dependency and progressive thinking has made Africans understandably circumspect.

What next for Europe and Africa?

The twin principles of trade and aid still exist. But the growth of the EU-Africa partnership since 2000 – outside of EU-ACP channels – has broadened the relationship into less traditional areas such as science and technology, higher education, private investment, infrastructure and continental integration.

But Kwame Nkurumah’s 1957 criticism is still being levied at the EU today for its alleged neocolonial promotion of the EPAs. Pundits in East and Central Africa have been vociferous in their opposition to the agreements.

However, EU officials have a dramatically different interpretation. The EU Commissioner for International Cooperation and Development, Neven Mimica, described the 2016 EPA with six Southern African Development Community (SADC) members as helping to tap the economic potential of the private sector and increase trade.

With such contrasting perceptions, it is perhaps unsurprising that SADC is the only regional body to have signed an EPA with the EU despite more than 10 years of negotiation.

What is crucial is that both sides recognise how far they have come since the Treaty of Rome. And that they accept that a more equitable partnership requires continued commitment to cooperation.

John Kotsopoulos, Research Fellow at the Centre for the Study of Governance Innovation, University of Pretoria

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This article was originally published on The Conversation. Read the original article.

Will baristas be replaced by robot baristas?

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We’ve been monitoring how the marketplace has been responding to economic policies like the minimum wage. We’ve seen restaurants in San Diego respond to minimum wage increases with 3 percent surcharges.

Rather than layoff workers or cut benefits, restaurant owners in San Diego settled for the surcharge. But not all business owners are taking this route.

We’ve also been monitoring the marketplace for new innovative technologies that might change the labor force in some dramatic ways. For example, Café X, which has just opened in San Francisco, is now using a fully automated barista system. Here’s the link to KRON 4’s report:

Tech Report: First robotic cafe opens in U.S. and it’s in the Bay Area

This ingenious invention by Henry Hu gives new meaning to barista. Instead of ordering a cafe drink of choice from a living, breating, tax paying, human being, this new automated system cuts out the service worker, i.e., “the middle man,” and directly links the customer with the technology.

It’s a rather fascinating prospect for business owners. Instead of paying labor costs, worker’s compensation, and other labor expenses, it now appears as though coffee shops can go fully automated if they want to. But will they? And will this technology catch on?

In many cases, businesses will probably use it. But over the course of the next few years, it will more than likely diversify the marketplace. This is because there are a lot of consumers who will continue to prefer the human touch.

How are those automated checkout lines at Target and Walmart working for you?

Either way, it will be interesting to see how the market plays out with this new technology. Will businesses follow Café X’s new business model? Will businesses keep the classical model and continue to cover labor costs? Or will businesses diversify in their use of this new technology and provide an environment where both the barista and automated barista work side by side?

In the end, and as the reader knows, these answers will be determined by supply and demand in the marketplace.

What do you think?

 

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What were the unemployment rates by race in 2016?

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The good news is the unemployment rates for all American groups have been trending downward since the Great Recession. However, discrepancies in unemployment rates still exist. That is, if Asian unemployment is compared to black unemployment, for example, one can see a staunched difference in unemployment rates over the course of the year.

january-monthly-unemployment-rate-by-race-graph-dwm

Upon closer review, Asian unemployment was the lowest throughout the year and ended in December with a 2.6 unemployment rate, which was one and half times lower than white unemployment. Asian umemployment was also more than two times lower than Hispanic unemployment, and three times lower than black unemployment.

White unemployment followed with a close second throughout the year and finished with a 4.3 unemployment rate. And finally, Hispanic unemployment was consistently third while black unemployment was the highest throughout 2016.

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However, it should be noted these are national monthly rates and do not describe and make distinctions between unemployment rates between federal and state levels, between federal and city levels, and between state and city levels, although this website will make such distinctions in future articles.

And of course, this doesn’t take into account the national montly unemployment rate, which was 4.7 in December, for example.

If one wanted to make a distinction between the national monthly unemployment rate and the unemployment rates provided in the graph, one would see that Asian and white unemployment rates were below the December national monthly unemployment rate of 4.7; whereas, black and Hispanic unemployment rates were above the December national montly unemployment rate of 4.7

 

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Is Italy about to feel the Trump effect? Matteo Renzi’s referendum and the populist threat

The election of Donald Trump to the American presidency is causing turmoil in Italian politics in the run-up to a constitutional referendum to be held on December 4.

The referendum sets the stage for Italy to host the third major anti-establishment protest shock of 2016 before we’ve even had the chance fully to digest the news of Trump and Brexit.

The referendum is on a wide-ranging constitutional reform designed by prime minister Matteo Renzi and his government. It took more than two years to navigate through parliament and was put to the public vote once it had failed to win a two-thirds majority in parliament.

Renzi claims the reform will make Italian governments more stable and efficient. But the worry is that Trump’s election increases the likelihood that the reform will be rejected by voters.

That’s not because of the merits or flaws of the reform itself but because of the politics surrounding it. Renzi has effectively staked his all on the outcome of this referendum. In December 2015, with his personal poll ratings riding high, he announced, in De Gaullean style, that if he were to be defeated in the referendum he would resign.

This manoeuvre, which he assumed would convince any waverers to support the reform, turned out to be a catastrophic tactical misjudgement. It effectively turned the referendum into a plebiscite on Renzi.

That provided a theme for the anti-establishment Five Star Movement, which has campaigned vehemently for a No vote purely to remove Renzi from office.

The Five Star Movement has crowed Donald Trump’s election as evidence of a protest movement sweeping the West. It is calling on Italians to seize the opportunity of the referendum to join in. And indeed, support for the reform has consistently declined throughout the year. Polls now show a small majority in favor of voting No – although a large number of undecided voters leaves the outcome in the balance.

Monthly average poll of polls, created from a total of 95 polls throughout the year. Author provided

Renzi, since the summer, has attempted to change tack and depersonalize the referendum, separating its outcome from his own future. But the genie can’t be put back in the bottle. Polls indicate that over half of Italians intending to vote, view the referendum as a judgment on the Renzi government and not the reform.

Renzi will surely be thinking of former British prime minister David Cameron, who famously argued that he would not resign if he lost the Brexit referendum, even when most observers knew that it would be inevitable. A No vote in the referendum would signal not just the rejection of the reform but the end of the Renzi experiment.

A very big constitutional problem

If this is to be Renzi’s fate, the result will be instability, if not chaos. That’s not because the country will immediately go to an election, but rather because it will be unrealistic to do so.

To try and reinforce support for the constitutional reform, Renzi has also carried through an electoral reform of the lower house (the Chamber of Deputies), which came into effect in July. This new electoral law (the Italicum) was expressly designed to reinforce the constitutional reform, which reshapes the Senate, curtailing its powers compared to the Chamber of Deputies – the only house to be directly elected under the new scheme – by ensuring that a stable governing majority would always emerge from the ballot box.

However, if the constitutional reform is rejected, Italy would be left with two completely different electoral systems for the two parliamentary houses. It would provide the basis for two separate majorities in a system where both houses currently have identical powers.

The potential paralysis that this would create makes it inevitable that further electoral reform would immediately have to follow a rejection of the constitutional reform. And if Renzi resigned, it would mean bringing in yet another transitional government to implement such a reform.

This would probably be a “technical” or “institutional” government along the lines of those led by Renzi’s two immediate predecessors, Mario Monti and Enrico Letta. These administrations were installed under the auspices of the non-partisan Italian president with a specific program of reform to implement, based on the (fragile) support of different political forces in parliament. Yet, the divisions between the parties over the sort of electoral reform needed would cause months of negotiation, instability, lack of direction and possible stalemate.

The elections that would surely follow electoral reform could result in the Five Star Movement emerging as the largest party. Successive opinion polls reveal a situation of tripolarity, with Renzi’s Democratic Party, the Five Star Movement and the centre-right parties (Silvio Berlusconi’s Forza Italia, the Northern League and Brothers of Italy) commanding about 30% of the vote each.

Trumped?

All this will have reverberations beyond Italy because of the way Renzi has been able to convince international elites (most notably the European Union and President Obama) that the constitutional reform will increase Italy’s capacity to deliver on the EU’s economic agenda. Indeed, some of Renzi’s supporters in Italy are arguing that expectations abroad about the reform are now so high that its rejection would send a shock wave through international circles, damaging Italy’s credibility abroad and leaving it at the mercy of the markets.

For Renzi, there is bitter irony in the way this referendum has turned into an impending watershed for Italian politics. He stands to lose both the reform and possibly his political career on a wave of anti-establishment protest when his own emergence as the leader of the Democratic Party and then as Prime Minister was precisely on the basis of an anti-establishment program. He swept to power promising to scrap the old political class (rottamazione) and lay the foundations for a “new politics” in Italy. That was barely two years ago, but Renzi has learned to his cost that an anti-establishment profile does not last long once in office.

-Professor of Politics, University of Salford

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This article was originally published on The Conversation. Read the original article.

Trump’s Carrier coup reveals credibility gap between Twitter rhetoric and economic reality

In a political coup, President-elect Donald Trump says that his transition team has struck a deal with Carrier’s Indianapolis plant to keep 1,000 jobs in the state.

Big day on Thursday for Indiana and the great workers of that wonderful state.We will keep our companies and jobs in the U.S. Thanks Carrier

— Donald J. Trump (@realDonaldTrump) November 30, 2016

This builds on Trump’s recent tweets directed at the air-conditioner maker and Ford, as he sought to deliver on a campaign promise and reverse what his populist predecessor Ross Perot termed a NAFTA-spawned “giant sucking sound” of jobs leaving the Rust Belt.

To some degree, Carrier’s retreat may reflect its own concern for public opinion. Reports also suggest that Trump wielded sticks and carrots. Carrier depends on the government for approximately US $5.6 billion in military sales – a figure that dwarfs the $65 million in savings from moving the Indianapolis plant to Mexico, and executives may have had some fears of retaliation. Trump also could offer inducements – in the form of state tax breaks (as Vice President-elect Mike Pence is still the governor of Indiana) and pledges of an easier line on potential tax and tariff policies.

Yet, while likely to result in praise, these moves raise a number of questions. How legitimate is presidential “jawboning” of businesses? When are such measures effective in containing market abuses or achieving legitimate broader economic ends – as opposed to ineffective acts of political theater? When do they represent abuses of political power or authority? And what are the implications for the Trump administration’s broader economic policy?

Trump wouldn’t be the first occupant of the White House to try to bend individual companies to his will. Fortunately, economic history – and specifically an incident in 1962 I recount in a just-released book – offers some insights into these questions and their implications if this is to be Trump’s style going forward.

JFK squares off against US steel

Speaking to the issue of legitimacy, one might ask whether Trump’s stance represents a new power grab or a revival of a forgotten tradition.

In fact, there exists a long tradition marked by the use of presidential rhetoric to highlight public or “macro” interests in ostensibly private or “micro” corporate choices. Over the past century, such public interests have found expression across Theodore Roosevelt’s appeals for rail price controls, Franklin D. Roosevelt’s support for New Deal-era price codes and World War II-era “General Max” price guidelines.

This view reached its peak in the 1960s when President John F. Kennedy urged Americans to “ask not what your country can do for you – ask what you can do for your country.” This exhortation voiced a then-prevailing sentiment that a common good existed, one that “trumped” individual choices.

To advance such macro interests, presidents accordingly engaged in “jawboning” of labor and business leaders. For example, they often stressed their shared interests in wage-price restraint, and issued threats to both companies and unions, lest wages chase prices in an inflationary spiral that produced no real gains for anyone.

Perhaps the most famous such initiative revolved around a 1962 struggle between Kennedy and major steel producers. Given fears that steel price increases might spark renewed inflation, Kennedy put pressure on the steel companies, arguing – as one adviser put it – that “if you play ball on this, I’ll help get labor into a more receptive mood on a reasonable settlement in 1962.”

Indeed, Kennedy would deliver, as unions swore off wage increases. When steel negotiations concluded on March 31, 1962, the United Steelworkers union agreed to no wage hike, accepting only a 2.5 percent increase in fringe benefits.

Yet, peace would not last. As I recount in my book “Economic Ideas in Political Time,” U.S. Steel President Roger Blough visited the White House less than two weeks later to inform Kennedy that his company would hike steel prices by 3.5 percent. Kennedy exploded, accusing Blough of deceiving him.

The administration more broadly responded on a number of fronts, deploying antitrust threats, diverting contracts and most importantly using presidential rhetoric. Kennedy publicly condemned “a tiny handful of steel executives whose pursuit of private power and profit exceeds their sense of public responsibility” and noted that the identical price moves of large steel firms weren’t “the way we expect the competitive private enterprise system to always work.”

Given national outrage, the steel companies rescinded the increase within days. Kennedy had won.

So does it work?

How effective are such measures over time?

One thing worth noting is that such measures must be part of a sustained effort to promote self-reinforcing expectations. If people think they will work, they will work. If people think they will fail, they will fail. The political context matters.

In this light, it should be emphasized that after the steel confrontation, business more broadly moved to oppose Kennedy, suggesting that his measures posed threats to economic efficiency and political liberties. Chamber of Commerce President Richard Wagner noted, following the confrontation, that “dictators in other lands usually come to power under accepted constitutional procedures.”

While Kennedy was initially able to use his bully pulpit to get businesses to toe the line, steel companies eventually became adept at playing the expectations game. They would often announce excessive price increases and then quickly accept sham “compromises.” Or they would simply stagger announcements of price hikes or job cuts, revealing them in dribs and drabs or waiting until the holidays when even presidential denunciations might go unheard.

In terms of economic criticisms, free-market economist Milton Friedman denounced Kennedy’s “fundamentally subversive doctrine,” noting that the steel crisis had demonstrated “how much of the power needed for a police state was already available.” Rather than highlight the notion of a uniquely public interest, Friedman warned that the steel crisis had shown that “if the price of steel is a public decision, as the doctrine of social responsibility declares, then it cannot be permitted to be made privately.”

In this way, at the height of the Keynesian era, one can see the reaction against appeals to limit private abuses of the public good that foreshadowed today’s neoliberalism, which sees private choices as largely equating with the public good. Friedman’s counterargument marked the acceleration of a shift to a belief that – as Margaret Thatcher put it – “there is no such thing as society,” but only “individual men and women.” Expressing a classically liberal suspicion of public power, Ronald Reagan put it best in 1981 when he said that “government is not the solution to our problem; government is the problem.

What it means for Trump

These historical parallels, therefore offer grounds for a skeptical view of the efficacy of Trump’s exhortation – and highlight the possible difficulties a Trump administration might find as it pursues Carrier-styled interventions.

First, Trump’s ideology – if not the wider culture – is marked less by a Keynesian-Kennedy commitment to regulation in the “macro” interest than to a Friedman-Reagan styled aversion to regulations that distort “private” choices. This increases the difficulty for Trump of enabling any self-reinforcing shift in business attitudes away from cost-cutting and in support of higher wages – even if this were his goal. And it’s more likely to encourage other companies to threaten to move employees in order to get more benefits – even if they have no intention of leaving.

Moreover, even if Trump’s sentiments had not been in accord with a neoliberal stress on liberating private choices, he would face opposition from a Republican Congress in any effort at reshaping business attitudes. House Speaker Paul Ryan has himself stressed the need to deregulate industry further.

Theoretically, Trump’s rhetoric might be married to a policy agenda like that of Bernie Sanders – who has proposed an “Outsourcing Prevention Act” to limit access to federal contracts, tax benefits, and grants or loans to companies found to have been engaged in outsourcing.

Given these tensions, Trump’s act in saving the Carrier jobs might foreshadow a revived Keynesian stress on raising wages – or be revealed as a rhetorical diversion that obscures a reinforced neoliberal stress on profits.

If Trump is serious about working class concerns, he must offer appeals that go beyond tweets and promote regulatory initiatives resistant to corporate “gaming.” Put differently, as impressive as this early rhetorical success may be, observers should wait to see how it accords with Trump’s policy “reality.”

-Australian Research Council Future Fellow, Griffith University

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This article was originally published on The Conversation. Read the original article.

‘Gut feelings’ help make more successful financial traders

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‘Gut feelings’ – known technically as interoceptive sensations – are sensations that carry information to the brain from many tissues of the body, including the heart and lungs, as well as the gut. They can report anything from body temperature to breathlessness, racing heart, fullness from the gut, bladder and bowel, and they underpin states such as hunger, thirst, pain, and anxiety.

We are often not conscious – or at least barely aware – of this information, but it provides valuable inputs in risky decision making. High-risk choices are accompanied by rapid and subtle physiological changes that feed back to the brain, affecting our decisions, and steering us away from gambles that are likely to lead to loss and towards those that are likely to lead to profit. This can enable people to make important decisions even before they are able to articulate the reasons for their choices.

Traders and investors in the financial markets frequently talk of the importance of gut feelings for selecting profitable trades. To find out the extent to which this belief is correct, researchers from the Universities of Cambridge and Sussex in the UK and Queensland University of Technology in Australia compared the interoceptive abilities of financial traders against those of non-trader control subjects. Their results are published today in the journal Scientific Reports.

The researchers recruited 18 male traders from a hedge fund engaged in high frequency trading, which involves buying and selling futures contracts for only a short period of time – seconds or minutes, a few hours at the most. This form of trading requires an ability to assimilate large amounts of information flowing through news feeds, to rapidly recognize price patterns, and to make large and risky decisions with split-second timing. This niche of the financial markets is particularly unforgiving: while successful traders may earn in excess of £10 million per year, unprofitable ones do not survive for long.

The study took place during a particularly volatile period – the Eurozone crisis – so the performance of each trader reflected his ability to make money during periods of extreme uncertainty. The researchers measured individual differences in each trader’s capacity to detect subtle changes in the physiological state of their bodies by means of two established heartbeat detection tasks. These tasks test how accurately a person, when at rest, can count their heartbeats. Each trader was given a score which, essentially, measured the percentage of right answers, and these scores were compared against data from 48 students at the University of Sussex.

The researchers found that traders performed significantly better at the heart rate detection tasks compared to the controls: the mean score for traders was 78.2, compared to 66.9 for the controls. Even within the group of traders, those who were better at the heart rate detection tasks also performed better at trading, generating greater profits.

Strikingly, an individual’s interoceptive ability could be used to predict whether they would survive in the financial markets. The researchers plotted heartbeat detection scores against years of experience in the financial markets and found that a trader’s heartbeat counting score predicted the number of years he had survived as a trader.

“Traders in the financial world often speak of the importance of gut feelings for choosing profitable trades – they select from a range of possible trades the one that just ‘feels right’,” says Dr John Coates, a former research fellow in neuroscience and finance at the University of Cambridge, who also used to run a trading desk on Wall Street. “Our findings suggest they’re right – they manage to read real and valuable physiological trading signals, even if they are unaware they are doing so.”

Although the results are consistent with recent studies showing that heartbeat detection skills predict more effective risk taking, the researchers caution that there may be other interpretations. For example, one study has found that heartbeat detection ability increases during stress, so it could be argued that heartbeat detection skills correlated with years of survival merely because experienced traders, taking larger risks, are subjected to greater stresses. The authors of the current study think this unlikely – in trading, as in many other professions, experienced and successful individuals, being more in control, are commonly less stressed than beginners.

The findings also appear to contradict the influential ‘Efficient Markets Hypothesis’ of economic theory, which argues that the market is random, meaning that no trait or skill of an investor or trader – not their IQ, education, nor training – can improve their performance, any more than these traits and skills could improve their performance at flipping coins.

“A large part of a trader’s success and survival seems to be linked to their physiology. Such a finding has profound implications for how we understand financial markets,” adds Dr Mark Gurnell from the Wellcome Trust-Medical Research Council Institute of Metabolic Science at the University of Cambridge.

“In economics and finance most models analyse conscious reasoning and are based on psychology,” Dr Coates continues. “We’re looking instead at risk takers’ physiology – how good are they at sensing signals from their viscera? We should refocus on the body, or more exactly the interaction between body and brain. Medics find this obvious; economists don’t.”

 

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This article was originally published by the University of Cambridge

Study shows importance of universities in producing entrepreneurs

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The number of college graduates willing to start new businesses — the largest producer of private sector jobs over the past 25 years — could depend heavily on the entrepreneurial focus and structure of the universities from which they graduate, according to a new study.

The article in the Journal of Small Business Managementsuggests that experiential entrepreneurship education that guides students through the process of starting their own firm, as opposed to more theory-based curriculum, increases confidence and the likelihood they will become entrepreneurs. It also found that students graduating with higher levels of perceived self-efficacy were more likely to found their own firm than join an existing one.

While previous studies have focused exclusively on the attributes of entrepreneurs and the reasons they start businesses, “Founder, Academic, or Employee? A Nuanced Study of Career Choice Intentions” compares the entrepreneurial intentions of students planning to become founders with those of students planning to work as an employee at an existing firm, and with those desiring to enter academia and become professors at colleges and universities.

“People become entrepreneurs because they think they are good at it and are going to be successful, but students don’t always feel that way when they graduate,” says Erik Monsen, the Steven Grossman Endowed Chair in Entrepreneurship at the University of Vermont. “Our findings show the need for more goal-specific programs that give students the confidence that founding one’s own firm can be a controllable and potentially successful career. Founding or working in start-ups is one possible solution to keeping our best and brightest here in Vermont. Colleges and universities can play an important role in convincing students that the non-corporate path is a viable option.”

Majority of students still planning to join existing firms

Overall, 55.1 percent of respondents said they planned to work for an existing firm; 32.3 percent aspired to start their own firm; and 12.6 percent wanted to become an academic. Using data from a survey of 15,866 college and university students from 13 European countries, Monsen and co-author Philipp Sieger, assistant professor at the University of St. Gallen in Switzerland, found that a strong desire to found a company, although critical, must be accompanied by the perception that a student can be successful at doing so and that they can control the outcome.

Monsen says these beliefs are acquired through hands-on experience in the classroom and fostered by faculty, family and friends who are encouraging of the founder option. “If you have never done something before it’s scary, so I try to give students a feeling of control by equipping them with tools that they can practice with in the classroom with real life technologies and researchers,” says Monsen who has students in his Entrepreneurship and Commercialization course hold a trade show.

Surprisingly, academic employment was also attractive to students with some entrepreneurial intentions and strong controllability perceptions, possibly due to the entrepreneurial aspects of academia such as conducting independent research, convincing funding organizations to provide the required financing, and the ability to create products and take them to market, despite repeated rejection from those who do not see the value in their radical new ideas.

“Founding one’s own firm likely involves high workload, responsibility burdens, and financial pressure, which might lead to stress, lack of a private life, the loss of psychological wellbeing, or even burnout,” writes Monsen. “These aspects are likely to decrease an individual’s freedom and self-directedness; consequently, students might perceive that being a founder might not necessarily allow one to control one’s own fate. This, in turn, lowers the founding option’s attractiveness for individuals with high perceived controllability.”

Practicing what you preach

Business schools across the country have been adding entrepreneurial-based courses to meet the desire of millennials to escape the yoke of big corporations and start their own independent firms. The percentage of students who start companies after graduation has increased significantly in recent years following a sharp drop off. Startups currently account for nearly all of the net new jobs and almost 20 percent of gross job creation in the U.S., according to the Ewing Marion Kauffman Foundation.

Monsen, a former aerospace engineer and entrepreneur, was hired to teach entrepreneurship to undergraduates and graduate students in UVM’s new MBA in Sustainable Entrepreneurship (SEMBA) program. Part of his hands-on approach involves students working on commercialization projects and as consultants for researchers on campus needing help bringing new technologies to market. For example, he collaborates with UVM SPARK VT program, which provides commercialization grants, as well as training and support, for innovative UVM researchers.

“This allows them to learn the process and say ‘wow’ this isn’t that bad after all. I think I can actually control the outcomes.”

As universities struggle to find new sources of revenue, Monsen sees value in teaching future professors, especially those in STEM fields, how to bring products to market to reap the rewards via intellectual property rights.

“Hiring entrepreneurial assistant professors is key because you want them to be able to get products out to market and have an impact on the world,” says Monsen. “As college revenue shifts to commercial revenue streams, for better or worse, we’re going down that path of corporatization of universities, and we need to equip our young professors and graduate students going into academia to deal with it better.”

Monsen adds that while many believe that entrepreneurship is about making money, the motivation to act entrepreneurially doesn’t necessarily have to be a profit-driven.

“Some academics feel better about non-profits, so if you can change how they see the world of entrepreneurship they might get excited about it and find something that fits their personality and allows them to do some social good,” says Monsen. “It’s a matter of finding a way of being entrepreneurial that is attractive to them. Maybe it’s just changing the value you are creating from financial to social.”

 

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This article was originally published by The University of Vermont