School of Business and Economics Bi-Annual Magazine

// issue 2 // Summer 2011

Bespoke Programmes for the Health Protection Agency Preparing for Emergency

Banking ON REFORM p8 international Learning partnerships P10 The UK Inflation dilema p16

www.lboro.ac.uk/sbe Editor: Ondine Barry Assistant Editor: Karen Roxborough Designer: Ian Jepson Photographer: Phil Wilson 41782 D&P Nov 10 Loughborough University School of Business and Economics Bi-Annual Magazine 03

Welcome

I’m delighted to welcome you to the We can be in no doubt that we will have to work hard in second edition of Inspire, the magazine of communicating the value of our programmes to potential the School of Business and Economics students and employers as well as in continually updating not only the content of our programmes but at Loughborough. also the way we deliver them.

There is little doubt that as a School we, to borrow In handling these challenges the School is fortunate the old Chinese saying, “live in interesting times”. in having a world-class staff. Staff who are at the The reverberations of the global financial crisis are cutting edge of many of the major research questions Angus Laing challenging many of the assumptions that have we confront. Staff who are at the cutting edge of underpinned our established business models and pedagogical thinking and with vision to transform public policy. education from undergraduate to As an educational institution we are inextricably caught executive levels. up in these shifting sands. They raise challenging yet It is not only our staff who are going to be critical fascinating new research questions, ranging from the in successfully responding to these challenges, our regulation of complex international financial systems, network of alumni across the world are equally going through the changing nature of professional work in to be critical. Through promoting the School, though contemporary society, to the changing relationship supporting placement and mentoring opportunities, between the old developed economies and the emergent through providing financial support to students, and economic powers of China and India. through engaging with our research agenda our alumni These shifting sands also raise challenges in terms of community will be increasingly important to the future how to ensure that the education we deliver is relevant success of the School. to this unfolding environment, of providing students with I trust this edition of Inspire will give you a stimulating the knowledge and skills that will serve them throughout insight into a range of the School’s activities, from their career. research and teaching to the experiences of our alumni. Such challenges, however, offer us the opportunity I hope, too – as the title suggests – that it inspires you to to build on the core strengths of the School and of get involved in our work. Loughborough: relevance and engagement with the world of practice. Sincerely Yours, Institutionally, we are not immune from the fall-out of the global financial crisis. The pace of the UK government’s commitment to addressing the budget deficit has placed university funding at the forefront of the political agenda.

The introduction of student fees of up to £9000 per year and the removal of all public funding for programmes in Angus Laing business and economics is transforming the environment Dean, School of Business and Economics within which universities in this country operate. Loughborough University Student expectations are going to change dramatically. Competition is going to widen and intensify. The pressure to manage costs is going to be intense. Interesting times indeed.

However, for the School of Business and Economics this environment also offers potential opportunities. The nature of our programmes, in particular their outstanding levels of graduate employment, provides the School with an excellent base for competing in this new world. 04 News

School launches new Research Centre and new Joint Venture at 2011 Corporate Games Loughborough University is hosting the UK Corporate Games this Daniels and Dr Samir Dani will run a workshop outlining their holistic year. The multi-sport festival, starting 14 July 2011, will bring approach to organisational resilience, demonstrating how companies together up to 4,000 competitors, representing 200 companies. can get involved to address “the grand challenge of sustainability in The 22 events range from football and cricket to dragon boat racing business – practice, process and people”. They will be promoting the and ten pin bowling. new Centre’s mission to research sustainable systems that will help organisations innovate and adapt to complex new challenges. Not all the focus is on sport, however. Running in parallel with the Games, the University will host the “Profit From Sustainability” Also launching at the event is the new joint business venture between conference on Friday 15 July. This programme of workshops looks the School of Business and Economics and imago. The partnership at the ways organisations such as Coca Cola and Santander have offers short tailored courses delivered at the Burleigh Court attempted to balance economic success with an ethical approach. conference and training centre. It aims to appeal to organisations seeking training solutions that offer quality and maximum return of It will also highlight the leading research coming out of Loughborough investment for minimum disruption. University into areas like workplace health, renewable energy, sustainable transport, and the reduction of environmental and social Delegates are encouraged to visit the School of Business and impact through innovation. Economics stand for more information during the conference.

The conference will see the launch of the University’s new Centre for Organisational Resilience (COR). Centre leader Professor Kevin

2011 a very good year! 40 years management education and 20 years retail education at Loughborough. 1991 1971 Watch this space for 2011 upcoming celebrations. Loughborough University School of Business and Economics Bi-Annual Magazine 05 News

School of Business and Economics launches new Research Centres Further cementing Loughborough University’s reputation for internationally recognised research, the coming months see the official launch of two new research centres within the School of Business and Economics.

Continuing the tradition of producing “research that matters”, it is hoped the new centres will be instrumental in shaping policy and practice across both the public and private sector.

The Centre for Professional Work and Careers, led by Professor Laurie Cohen, will lead research into the impact on people’s careers of Loughborough globalisation-led transformations in the workplace. The Centre will look to develop projects and engage with key partners Tops Student Poll for in areas ranging from the offshore outsourcing of professional work to health and social care. A launch seminar is being planned for 28 Fifth Year Running September, so be sure to bookmark www.lboro.ac.uk/cpwc for the latest details. Loughborough University has once again been voted the UK’s Best Student Experience in the annual survey conducted by Times Higher Education.

13,000 undergraduates were asked to rate their place of education on the 21 different attributes that matter to them most, from the quality of teaching and facilities to the non-academic aspects of student life that make up the overall experience.

For the fifth year in succession, Loughborough achieved first place, ahead of prestigious universities like Oxford and Cambridge. The poll shows that Loughborough excelled for its sports facilities and social life on campus, as well as its teaching quality and connections to industry. The Centre for Organisational Resilience will research ways in which organisations can protect themselves against adverse and Commenting on the results, Professor Shirley Pearce, the University’s challenging conditions through innovation. Specific areas of Vice Chancellor, said: “This is an absolutely fantastic achievement. interest for the researchers relate to systems engineering, supply We work closely with our Students’ Union to ensure we provide an chain management, operations management, small businesses all-round experience that equips our students for every aspect of their and entrepreneurship. life and career.” Professor Kevin Daniels and Dr Samir Dani will be promoting Observers believe the poll will become increasingly important as the Centre’s mission at the upcoming Profit From Sustainability student funding issues force prospective students to think more conference on 15 July. Please visit www.lboro.ac.uk/cor for more carefully about where to study. detail about the centre, or www.lboro.ac.uk/enterprise/sustainability to register for the event. Lucy Hopkins, President of Loughborough Students’ Union explained: “Increasingly, as well as academic excellence, universities must offer extra-curricular and volunteering opportunities that enable students to develop as people. I am proud that Loughborough has such a recognised track-record of producing well-rounded students who have the skills and experience to set them up for life.”

The league table was published in Times Higher Education on 17 February 2011 06

by Charles Hancock Preparing for Emergency: Bespoke Programmes for the Health Protection Agency

Emergencies, whether man-made (such as road or rail disasters), natural (such as flooding or other extreme weather conditions) or the result of terrorism, have the potential to cause disruption for communities on a large scale and present major operational problems for the National Health Service and the independent healthcare sector. Organisations, both within the NHS and in the wider healthcare community, therefore need to plan and prepare for such emergencies.

The Civil Contingency Act (2004) imposes duties on all NHS bodies been awarded the contract. This contract will run for five years with regards to civil protection. Organisations will need to carry out until 2016. a risk assessment, ensure that emergency plans are sound and In practice, Loughborough will design the programme, create the proportionate to risks, maintain their plans and carry out training and supporting material, recruit and train the teachers and examiner, exercises to ensure that their plans are effective. identify suitable off-site locations and closely monitor results. The Royal Society of Public Health have for some years validated Working with the Loughborough team, which is headed up by Charles a qualification designed to provide an introduction to health Hancock, Director of Healthcare Management programmes, are emergency planning and the requirements and principles of working representatives from the HPA and the Department of Health. collaboratively with other organisations involved in emergency A selection panel consisting of Melissa Frewin of the HPA, Phil Storr planning. This was run previously by the Emergency Planning College of the Department of Health and Charles has begun the process on behalf of the Health Protection Agency (HPA). of recruiting the teachers and examiners. As a part of the selection However, in 2010 the syllabus was radically revised and the decision process, each applicant is required to lead a micro-teaching session was made that academic institutions as well as others should be lasting for 15 minutes on a subject related to emergency planning. invited to tender for the contract to run the programme. The School of Business and Economics has, for many years, run healthcare courses up to and including Masters programmes in which emergency planning was a significant element of the course. We therefore submitted a tender and in December were informed that we had Loughborough University School of Business and Economics Bi-Annual Magazine 07

The programme is divided into three levels:

1. healthcare Emergency Planning (HEP) Award, consisting Lindsey Beasley, Head of Emergency Planning at NHS East of two units – the basic entry-level qualification Midlands, says: “It is not feasible for the NHS to opt out of 2. heP Certificate, consisting of the Award plus a further emergency planning and response – the NHS must continue to four units, and provide its routine services and ensure high quality patient care, 3. heP Diploma, consisting of the Certificate plus a further but it must also be ready to respond to the current risks and three units. significant challenges such as winter weather, pandemic flu and mass casualty incidents. Innovative features of the programme include: “The NHS is an incredibly complex and dynamic organisation, n Being run off-site at a number of locations throughout England: the north east, the north west, the south east and currently undergoing radical reforms that will affect the way the south west. This is in order to reduce travelling time in which NHS services are commissioned and delivered. The and costs and to reduce further the need for NHS staff to interdependencies within the health sector are finely balanced, incur unnecessary expenditure relating to overnight and it is crucial for emergency planners to understand the accommodation. This means that lecturers from all over the principles of integrated emergency management and how this country will be involved in delivering the programme. applies to the health sector. n The inclusion of a bespoke virtual learning environment (VLE) “The Health Emergency Planning Programme at Loughborough created specifically for this programme. The VLE will provide brings together professionals working in emergency planning, a site for students, a site for lecturers and a host of exciting from a range of health organisations, providing an opportunity features such as chat rooms for students to discuss for learners to appreciate and understand integrated emergency coursework and experiences. (Naturally, since emergency management within the whole healthcare system. It is a valuable planning deals with sensitive and potentially confidential programme for any colleague working within NHS emergency information, access to the site will be restricted and closely monitored). planning and resilience.” Possibly the most significant aspect of this programme is that, provided a candidate has sufficient experience as an emergency Says Charles Hancock: “We live in times that are becoming planner and has undertaken a number of specific tasks during that increasingly uncertain. There are threats to our country, our time, they may be eligible to continue onto our Healthcare Emergency climate and our way of life that were unthinkable even 30 years Preparedness and Business Continuity Management Masters ago. We have a Health Service that was created as a result of Programme. They also may be eligible for up to 40 credit exemptions one of the biggest emergencies that the world has ever had to from the MSc component of the programme. cope with, the Second World War, and a Health Service in which we can be justifiably proud. Charles Hancock is Director for Postgraduate Programmes in “I joined the NHS in 1963 when the NHS was 15 years old. Over Healthcare Management and can be emailed at [email protected] the last 47 years I have seen the service grow in size and scope and efficiency. Standards of care and treatment have risen beyond all possible belief. However, it is now a service that will have to do its bit alongside the other public services if something catastrophic happens. Recently we have had devastating floods, fires and acts of terrorism on our home patch, all of which resulted in loss of life and property. “The continued pressure on resources means that there is less spare capacity within the NHS than ever before. In consequence, the NHS must become even more resourceful and versatile in the ways in which staff and facilities are employed and managed. Coping with adverse events, whether expected or not, is something that the NHS is renowned for. Now they have to do it better and smarter. “This programme, which will train 140 NHS staff from a variety of disciplines each year, is a major step forward in ensuring that whatever happens, our NHS will be able to keep the patients and the staff who care for them safe, secure and delivering and receiving the best of care.” 08

by Tom Weyman-Jones and David Llewellyn Banking on Reform

A View from the Centre for Financial Markets and Institutions

The UK Government set up in June 2010 the Independent Commission on Banking (ICB) to report recommendations to reform the banking system and promote competition. Professors David Llewellyn and Tom Weyman-Jones of the School of Business and Economics were amongst those who made substantial submissions to the ICB in response to its call for views: http://bankingcommission.independent.gov.uk/bankingcommission/

Our contribution focussed principally on the issue of competition. banking system were to be fostered. In particular, enhancing the role Competition is only effective in practice if consumers are able to of the mutual sector in retail financial services would be beneficial. make rational and informed choices between competitors, and to exercise choice at low transactions costs. Information is the major The degree of contestability in some banking and financial markets constraint to making rational choices, and transaction costs constrain has increased. Many of the traditional entry barriers have been executing them. Combined, they can have the effect of limiting lowered partly because of the impact of technology. The impact of the effectiveness of competition even in a market place which is new entrants is not measured by the market share they secure, which contestable or which has many competitors. may be quite limited. The biggest potential impact is actually how they force incumbents to behave differently. Banking is not a homogeneous business but a conglomeration of different businesses. Competition takes place in sub-markets rather Although entry barriers have declined in some banking markets, than generically between firms. It is necessary, therefore, to focus and as a result contestability has increased, this isn’t always the on the collection of narrowly-defined markets if the true nature of case and powerful excess returns and anti-competitive practices competitive conditions in the banking industry is to be understood. can be sustained. Reviewing the econometric evidence regarding competition and industrial structure in banking, we argued that Competition can be especially powerful when it develops from outside market power in the banking industry is not straightforward to sources. For this reason, competition would develop to consumer measure and that it has not been satisfactorily measured to date. advantage if entry barriers were to be lowered, and if diversity in the Economies of scale in banking (and hence the scope for market Loughborough University School of Business and Economics Bi-Annual Magazine 09

power) are determined by the rate of loan expansion, but this loan when triggered by a collapse in profits and market value. This expansion may reflect poor quality . practice has been particularly advocated by the Bank of England.

There could be lessons to learn from other countries about the role This issue of the level of equity capital to total assets (capital ratio) of equity capital in the aftermath of banking crises. When a banking is particularly controversial at present: Meryvn King has summed up system is being recapitalised the implicit return on equity may be the key solution to the banking crisis as: “much, much more equity; very different from its long-run equilibrium, especially if the recovery much, much less short term debt” but major have argued that involves extensive deleveraging. this higher reliance on equity capital will raise their costs. cite the famous Modigliani-Miller theorem here to show that this Empirical research done at Loughborough has demonstrated counter argument does not hold up in an efficient capital market, that where banking systems have been massively recapitalised by although the empirical evidence does point to high adjustment costs the state, as has happened in Turkey after financial crisis, in China in moving from one regulatory state with low capital requirements to in anticipation of joining the World Organisation and as is another with higher capital requirements. happening right now in Greece, Ireland and Portugal, the true return on equity capital in the banking system can turn At this time, we are in the middle of a massive and controversial negative with damaging consequences for the recovery of banking debate about the future of the banking industry – it is engaging system productivity. the attention of specialists in industrial organisation, econometrics and above all banking theory. These are all areas where the School The key issues that are emerging in the debate started by the ICB of Business and Economics at Loughborough University has major are: break-up of large scale banks, living wills and ‘CoCos’ (contingent contributions to make, especially through its emerging Centre for convertibles) and regulatory ratios. Financial Markets and Institutions, which is currently being developed. The break-up issue concerns the role of investment banking activity alongside retail banking, and the Commission is known to be debating whether these functions should be separated as they have Professor Tom Weyman-Jones is a Professor of Industrial Economics. His research been in other countries and in the past. The major banks are waging focus is the field of efficiency and productivity analysis. He can be emailed at a serious campaign against this because investment banking is their [email protected] major source of profit, but the retail banking side helps to spread their risk. Professor David Llewellyn is Professor of Money and Banking at Loughborough University, Honorary Visiting Professor at CASS in and Visiting The issue of living wills and ‘CoCos’ concerns the treatment of Professor at the Vienna University of Economics and Business Administration. He can banks that are in crisis: how should they plan in good times for the be emailed at [email protected] procedures to handle downsizing in a financial crisis? CoCos or contingent convertible instruments are designed so that some of the bank’s debt converts into equity, automatically recapitalising the 10 Richard Hill Rolls Royce plc. Interview by Ondine Barry International Learning Partnerships that last

As Director of International Learning and Business Development at Rolls Royce plc, Richard Hill travels to around 50 different countries throughout the year to develop bespoke education and training packages for high-level Rolls-Royce clients. A recent addition to the School’s newly revamped Strategic Advisory Board, Richard discussed with us some of the bigger issues in today’s global provision of professional training.

Describe your role at Rolls Royce... Richard Hill: “Essentially my role is to develop learning strategies for both Rolls-Royce and its customers and external stakeholders. However, the majority of my time within this role is spent facing outside the company, talking to the boards and CEOs of companies and international governments to work out how we might best support them in developing their own organisational capability.

“Much of the focus of my international role is about establishing and developing relationships with key stakeholders. For that, I spend a lot of time working with potential and existing customers supporting them through educational initiatives on a long-term basis. I coined the phrase ‘learning partnership’ to describe the relationship we have with customers – a theme I’d like to explore more with the School of Business and Economics via the Advisory Board.

“In addition, I spend a lot of time also talking to international governments, working with them to see how Rolls-Royce might support their national educational and learning agendas. It is a means of demonstrating the company’s long-term commitment to a country – again back to relationships.” How do you develop these strategies when you’re working on the long- term partnerships? How long and involved a process is that? RH: “The initial relationship is usually diagnosed through our regional offices (in each of the major markets of the world we have a regional director in situ who is responsible for the position of Rolls-Royce in that region) who notionally determines the prime stakeholders with whom we should have a dialogue. Once that stakeholder mapping is put in place, I go in for the initial discussions. The combination of local knowledge and corporate capability means we usually have a well-crafted proposition to discuss even at this initial stage.” Loughborough University School of Business and Economics Bi-Annual Magazine 11

Do you get protocol lessons before you go in? being able to coach their teams. You can have all the business RH: (laughs) “I’ve been in this job a long time and have kind of acumen in the world but if you can’t transmit your messages…” learned on the fly. But take China for instance. I’ve been working with China for about 22 years now and have some basic Chinese. And your role here on the School of Business and Economics It seems obvious, but if you go into a country with some basic Advisory Board? knowledge – even to say “hello”, “thank you”, “goodbye” – it makes RH: “One of the reasons I accepted the invitation to be on the all the difference. It’s a sign that you’ve taken the trouble to try to Advisory Board is that I think Loughborough undersells itself on its understand the culture. I make an effort to get local briefing before potential to support and add value to business. There is a corpus of I go in, and when I’m in a country I always have a session with the talent here at Loughborough that’s not recognised nationally let alone regional director to get the briefing on the commercial side as well as internationally, and I think we can do so much more to develop the the cultural side; the do’s and don’ts. But a lot of it is common sense brand and the position of the School. And I believe the board will borne out of experience.” add a lot of value to the School. “I think the new Advisory Board has a number of roles – certainly to Has this role and the emphasis on creating long-term act as the commercial conscience of the School (how you address partnerships been a cultural shift for Rolls-Royce? the external market, are you providing students and business what RH: “I’d say for Rolls-Royce, in principle, no. For example, we’ve they need?). It’s about shaping your resources to meet the outside been working with China since 1963 and we’ve built long-term world and then positioning the proposition appropriately. If you’re relationships since then. All of our sectoral businesses – Civil looking at long-term survival or sustainability you have to develop Aerospace, Defence Aerospace, Marine, and Energy – are long-term your portfolio, otherwise you just become a static entity. If we in businesses with long-term lead times in terms of orders, deliveries, Rolls-Royce had remained static we’d have been overtaken by our usage, so the relationships are inherently long term. And in many competitors and would have disappeared in a generation. ways the whole notion of executive education and training generally is about Rolls-Royce supporting the customer throughout the “I think academics generally need to be a bit more focussed on partnership, developing capability through tailor-made solutions for the market – sometimes the learning has to have some form of that specific organisation. It really is a good way of building and application rather than just developing academic rigour. I do sustaining relationships. understand the intrinsic value of learning, but sometimes application is a fundamental corollary to it, especially with something like an “When I joined Rolls-Royce, it was a British company with a strong MBA. I’ve never directed either a Chinese or an Indian executive Atlantic focus, but over the years Rolls-Royce has acquired strong programme where the delegates haven’t said to me, ‘Can we have business divisions in North America, Mainland Europe and the Nordic more case studies and can we have more case studies of our countries, as well as enhancing our presence in South East Asia. We sector?’ It’s a very powerful message from the customer. clearly have strong hubs in the UK, mainland Europe, North America, but we also now have a real presence in about 50 different countries “Personally speaking, I have a strong commitment to Loughborough, with customers in around 160 countries. And so it’s changed, yes – having been a postgraduate here (on the MBA programme) and, the numbers change all the time, but a recent count had us at about having worked intermittently with the faculty here, I very much want to 40,000 strong, and of that 40,000 approaching half are now outside give something back to this place as it has so much to offer. As the the UK.” School embarks on its fresh start with a new advisory board, I think there is much to be optimistic about.” What is your favourite part of the job? RH: “The mixing and working with people from different cultures. One of the things I enjoy doing is presenting Rolls-Royce and education matters in a way that is accessible to business people. One of my prime personal interests is theatre, and I have a real thing for people being able to put over a point of view in a variety of cultures and be “The majority of my time within this interesting. My other big passion is sport – like many other people I role is spent facing outside the suppose. I’ve worked with Loughborough University a lot, using the benchmark of sport to transpose lessons from sport onto business – company, talking to the boards and it works all the time, particularly with international audiences. and CEOs of companies to work “For example, we brought a delegation from India to the English out how we might best support Cricket Board (on the Loughborough campus) to look at how the ECB them in their use of our products.” develop people, analyse competition, select and manage teams, etc. And then we transposed those lessons onto business. We’ve done it with a group of European aviation executives – we had them managing a football tournament here at Loughborough, buying and selling, nurturing players, sacking players, developing tactics. It’s very powerful and easily transferrable, and in essence is about leaders 12 Richard Smith Interview by Ondine Barry All Eyes on Loughborough: Elite Sport & the 2012 Games As Great Britain prepares for next year’s Olympic and Paralympic Games and the media hype begins in earnest, eyes are increasingly starting to turn towards Loughborough. And for good reason: home to the UK’s best sporting and fitness University facilities and with close to 20 Team GB hopefuls studying or based on campus, the University is already playing a major role in the 2012 Games. We spoke to one Team GB hopeful, Richard ‘Smudge’ Smith, an MSc Business Analysis and Management student at the School and a candidate for the Men’s Hockey Squad, about his aspirations and concerns as he prepares for the big draw this summer…

You’ve been playing hockey at a senior international level Did you become part of Loughborough Student Team since 2009 and have more than 50 caps now under your belt, at that point? helping England win Silver at last year’s Champions Games RS: “The hockey world isn’t so big in this country that people who and Gold at the Europeans – but how did you get into hockey are involved in under-18 and under-21 set-ups would be unnoticed in the first place? - the head coaches will all be aware of them. And so it was a case of getting in contact with the head coach (then, David Ralph who’s Richard Smith: “I began playing hockey in my junior school and now Head Coach for England’s U21), and making him aware that you decided I wanted to play some more and so went down to City of want to come and he then facilitates you coming.” Portsmouth hockey club. I was playing football at the same time, but I really enjoyed hockey and saw how they had better structure in the sport – if you were successful and wanted to strive for the top, you could do because if you were good at club level you could go to county trials, if you were good at county level you could go to regional trials, if you were good at regional level you could go to national trials. With football it was a case of one in a million hoping to be seen by a scout.

“I also enjoyed the crowd - we had quite a good group at the City of Portsmouth and were quite successful, and so it was a bit addictive I guess. And then I went to play for Guildford for two years, which was a really good stepping stone, before coming up to here for university where I gained a Maths & Sports Science BSc.”

Why Loughborough? RS: “I knew for a couple of years before coming to Loughborough that I wanted to be here. I had friends who were involved in the England set-up that I knew were here, and with a top-quality hockey pitch 100 metres from halls, it’s a pretty good place to balance the whole athlete-student thing.” Loughborough University School of Business and Economics Bi-Annual Magazine 13

Andy Borrie, Deputy Director of Sport (Coaching & Performance), in the University’s Sport Development Centre SDC, said: “Loughborough University’s philosophy is to deliver sporting excellence and support academic achievement. The University has always recognised the dual demands placed upon student- athletes and sees a responsibility in assisting them to meet these demands. We view the student-athlete as a whole person and work to help them remain balanced and grounded.”

How was it as an undergrad balancing studies with sport? the European Cup this summer – we’re defending the title, so it’ll be RS: “It took me a while to grasp it and get the right balance. It’s quite exciting… The GB and England squads aren’t too dissimilar, so very hard when you first come to uni, because there’s no one we can prepare for that and develop GB things at the same time.” standing over you making you do your work. Now, over the five years here, it’s finding a more appropriate balance, which I’ve thankfully You’re finishing up on your MSc this year – how will you managed to do.” manage writing your thesis with your hockey commitments? RS: “Because I’m a 2012 Scholar, I was able to get a fairly flexible Did you take any time off between getting your BSc and programme structure, stretched over two years rather than one so starting your MSc in Business Analysis and Management? I could fit in the sports side. The first year was fairly intense, but it RS: “No. I had a great three years here at undergraduate level and was quite good. I enjoyed the full-on student-athlete life, because knew it was a good place for me to stay for the next two years. every day that first semester I was in and I was training or studying I wanted to continue my studies to supplement my career options and utilising and maximising everything I was doing. Now I’ve got parallel to my hockey commitments and am really pleased I took three modules to do this semester and then one to finish. I might on the MSc – the 2012 scholarship made the whole decision about potentially have to push one exam back, but the School’s been studying for an MSc a lot simpler.” amazingly flexible. I’ll just have to wait and see how it is when I start training in a couple of weeks and see how it all balances.” And it’s just got more full-on since then… RS: “The focus is totally tied to Great Britain…and it’s true of the What’s the plan after 2012? whole squad. We meet once a week, and now we’re looking at a RS: “In hockey you can’t build a life around the money you get, it’s two-month block of training before a tournament that we leave for on quite a sacrifice. The most professional you can be in hockey in the the 1st of May – the Sultan Azlan Shah Cup in Malaysia, a 7-nation UK at the moment is government funded – which is the level I’m tournament (Australia, India, Korea, China, Malaysia, Great Britain currently at. That’s fine for now, but if you want to make it your career, and New Zealand) – all teams in the top 12/13 in the world. It’s a you need to have other jobs to supplement your income. You can chance to play some countries we don’t play as regularly and find play in Holland where bigger sponsorship means you can make a out more about them before the Games. The Asian teams we don’t decent living. But honestly, I’m in the ideal situation. I’ll finish my know as well and they’re different to play against – they’re dangerous MSc this summer and by then will know whether I have a real shot teams. Thinking ahead to the Olympics, if any are in our pool they at making the Olympic team for 2012 and whether I should push on could be a sort of banana skin for us. with my hockey and have a year of working towards that.

“Following that there’ll be some more GB training throughout the summer but it’ll then filter a little bit back into an England focus with 14 Richard Smith Interview by Ondine Barry

“Ultimately, I want to use my business education even if I ended up playing professional hockey in a different country. So it’ll be a combination of both I think. I always thought I would want something Performance Sport at Loughborough that was still developing me aside from hockey, but being a year away from the Olympics and with now a decent amount of funding in the Loughborough University is deservedly renowned for sport, programme, it’s really a case of head down and doing everything I offering arguably the highest level of sports and fitness can training wise.” facilities, training grounds and coaching to athletes in the UK. Do you think the popularity of hockey will change if Great Complementing the academic departments involved in sport, with its reputation for excellence in research and teaching Britain brings home a medal in 2012? in sports contexts, the Sports Development Centre (SDC) RS: “I imagine so. I imagine we could move up to a profile which is facilitates all other sports operations with which the University maybe something like athletics – major tournaments on TV, bigger is involved. sponsorship – but it wouldn’t ever jump to say the heights of football or cricket and rugby… And that’s the problem here in the UK as The SDC supports and complements the Students Athletic opposed to Europe; it’s why we struggle to get media love, because Union Clubs by providing facilities, coaches, programmes, there are so many sports in this country…” athlete support services and administrative support for Performance Sport at Loughborough, where students and I guess there’s a lot riding on this year… student teams are performing at national and international RS: “Yes. I’ll find out about the Olympic Team in June – and it’s a tight level. SDC’s Performance Sport team also operates squad. All I can do is maintain my fitness and keep improving myself, partnerships with the English Institute of Sport and a number which is what I’ve been focussing on. If I do everything I can then of National Governing Bodies for Sport. even if I’m not selected I can take satisfaction in that fact. Loughborough also recently launched the Loughborough “There’s also a really exciting four years after the Olympics, with Sporting Club, with one of Loughborough’s most famous the Europeans the following summer and the Hockey World Cup – graduates, Lord Sebastian Coe as President of the Club. Lord which is going to be in Holland where it’ll be treated like a football Coe is also one of the first 21 inductees to be selected into the tournament – in 2014, and then you’re only two years away from the Loughborough University Sport Hall of Fame. Rio Olympics…”

And in terms of a professional career post-hockey? RS: “I’m getting help from the EIS Performance Lifestyle Group, a professional service that runs our strength and conditioning programmes, who are also pushing to set up connections with big businesses to try and get flexible jobs for athletes who are training. I’ve been accepted to an interview with a major company so far, so it’ll be a case of at the interview discussing with them the opportunities available and figuring out what might work for me. Loughborough’s Sporting SAuccesslumni

“From brief discussions I’ve had about a business career post-degree, Sebastian Coe Gerald Davies Bob Wilson possibly business consultancy, on the analysis side of things. I Clive Woodward Fran Cotton David Moorcroft always try to push for the best in any situation and effectively problem solve to find the best way to improve any given situation. If I really Paula Radcliffe Tanni Grey Thompson believe in something I’m involved in, like I am with hockey, I will give it my all to take it forward and make it better…”

Loughborough’s Sporting Success Loughborough University at the London 2012 Games At the 2008 Beijing Olympic and Paralympics Games, 48 past and present Loughborough students competed. 19 of these Loughborough University is the official preparation camp athletes reached finals and broke 15 national and 2 European headquarters for Team GB and Japan. You can find out records, winning a silver and bronze medal. more about the University’s activities in the build up to the The 2010 Delhi Commonwealth Games saw 80 past and Games through our new London 2012 website: present Loughborough athletes compete, with 44 of them winning medals. If Loughborough had been a country we would have been placed 8th in the overall medal table. www.lboro.ac.uk/london2012 Loughborough University School of Business and Economics Bi-Annual Magazine 15

Supporting Intellectual Excellence and

Innovation by Professor Angus Laing

This year marks the 40th year of Management Education In order to achieve our vision we also face challenges in: at Loughborough. In this time we have developed a comprehensive and highly regarded research programme n Ensuring that the most talented and able students, regardless and achieved many top ten rankings for our teaching quality. of their social or economic circumstances can study business These qualities together with Loughborough’s award for ‘Best and economics at Loughborough. Student Experience’ for five years running, ensures that we n Continuing to sustain the resources and opportunities to help remain a popular choice for talented people wishing to study such talented people realise their full potential in the global business and economics in higher education. economy of the 21st century.

Today the newly formed School of Business and Economics and its As we begin the next stage of the School’s development it has activities lie at the very core of Loughborough University. Through become increasingly important that we develop our relationships with multiple connections across all parts of the University the School the business community and our graduates to support our activities. contributes to and draws on the intellectual community that is Our alumni are very important to us and can help us in many ways Loughborough University. including supporting School events, providing work placements and careers advice for students and engaging with research projects. We have ambitious plans that continue to build on these excellent foundations to establish Loughborough as a leading international As part of our development programme for the School we have university that delivers world class research and education that established the Fund for Excellence. This fund aims to support shapes individuals, businesses and society. We want to sit at teaching and research programmes in the School of Business and the intersection of contemporary intellectual debate and the real Economics to ensure that the most talented young people can challenges confronting the business community. continue to study here and to enrich the academic life of the school.

The Fund for Excellence will be an extremely important resource to allow us to enhance teaching and research activities and encourage Our vision is to be a School that genuinely innovative thinking. In the face of this rapidly changing global economy in which we operate this fund will help us to ensure via all its activities and its pivotal that Loughborough University continues to make major contributions position in the University develops to the world of business. I hope you will join me in supporting this responsible leaders, enhances fund and in doing so, help to develop the entrepreneurs, business leaders and innovators of the future. organisational performance, and promotes sustainable growth. Professor Angus Laing is Dean of Business and Economics at Loughborough University. For more information about how to support the Fund for Excellence please contact Leah Graham at [email protected] or call 01509 223418. 16

The UK by Eric Pentecost Inflation Dilemma From February 2010 to February 2011 the annual rate of inflation in the UK stood at twice the government’s target rate, at 4.3%, some 1.3% higher than the same time period for 2009/10. In this article, Professor Eric Pentecost discusses the principal causes of this increase and the effect it is having on UK authorities.

So why has inflation risen in 2010-11? The Consumer Price Index (CPI) measure of inflation is a price index made up of a ‘shopping basket’ of goods and services on which people typically spend their money. The price of every good and service is weighted, according to its importance in a total households’ expenditure, so changes in the indices reflect the change in the average cost of the typical household’s shopping basket from month to month. The current weighting of these twelve broad categories depicting our ‘shopping basket’ can be seen on the following page. Loughborough University School of Business and Economics Bi-Annual Magazine 17

Andy Borrie, Deputy Director of Sport (Coaching & Performance), in the University’s Sport Development Centre SDC, said: Given“Loughborough that the target for inflation University’s is 2 per cent p hiperl annum,osop hywhy CPI Weights has the Bank of England’s Monetary Policy Committee (MPC), not raisedis to the deBankliver rate? s porting excellence and Food & non-alcoholic Beverages 10.8 The MPC hassu resistedpport raising academic the Bank rate achievement. so far for two main The Alcohol & tobacco 4.0 reasons. Firstly, demand for goods and services in the UK is still very weak followingUniversity the sharpest has post-war alw recessionays recognised in 2008-9. During the Clothing & footware 5.6 this time thedua UKl has demands also seen a sharpplaced rise in unemployment,upon student- which Housing & household services 12.9 is currently standing at 2.53 million, the highest level since 1994 (8 per centath of theletes economically and sees active population). a responsibi Secondly,l ityif in Furniture & household goods 6.4 expectationsassisting of inflation them a year to to twomeet years these ahead remain demands. subdued, Health 2.2 then Wethere viewill bew littlethe upward student-ath pressure on wagelete settlements as a w whichhol e in turn would lead to higher increases in future wages and prices, Transport 16.4 makingp ersonit more costly and for the w orkMPC to to bring he inflationlp them back toremain the target Communication 2.5 in the future. This suggests bathatl anyanced rises in theand Bank grounded.” rate will be delayed as long as possible by the Bank and when they do occur they Recreation & leisure 15.0 will be small, something of the order of 0.25 to 0.5 per cent. Education 1.9 The dilemma the Bank of England faces, however, is that as actual Restaurants & hotels 12.6 inflation persistently runs ahead of the Government’s declared target rate, the Bank loses its ‘credibility’ as an institution that will deliver low Miscellaneous goods & services 9.7 inflation. Yet to show it is serious about maintaining low inflation by raising interest rates it may damage the fragile recovery. Rises in prices of items with larger CPI weights are more important for the CPI index than those with smaller weights. So rises in the cost The MPC Minutes for January identify three reasons for inflation of transport, housing and household services and food and non- remaining above target for the medium term: (i) recent increases in alcoholic drinks are the most important categories and these are the commodities prices might continue; (ii) general inflationary pressures categories which have seen the largest price rises in recent months. in emerging economies could lead to higher UK import prices; and (iii) prices of domestically produced goods and services would rise According the Office forN ational Statistics, between November and further in the aftermath of sterling’s depreciation as the economy December 2010: recovered. Given that (i) and (ii) are beyond the authority’s control, n air fares rose by 42% compared to the same period in 2009 the Bank of England has wisely decided to wait on events.  n fuels and lubricants rose by 2.8% (the largest monthly rise In contrast the European Central Bank (ECB) raised its Repo rate since 1996) in April, by 0.25 per cent to 1.25 per cent, because inflation in the  n food prices (especially vegetables, bread, cereals, milk, cheese eurozone touched 2.6 per cent, despite this adding to the risk of debt and eggs) rose by 1.6 per cent - the largest ever one month default in three member states (Greece, Ireland and Portugal) whose recorded rise economies do not suffer from overheating. This extremely cautious approach to inflation is a very good reason for the UK to remain  n petrol prices as recorded by the CPI, stood at £1.22 a outside the eurozone. litre in December 2010, a record high, but with the political unrest in the Middle East it has been approaching £1.35 a A recent survey of Marketmakers suggests that Bank rate will be at litre since March 2011 1.5 per cent by May 2012. Such a small rise is likely to have little Between January and February 2011: direct impact on inflation or demand, but the Bank will hope that it will be sufficient to signal its concern about inflation and that as a n domestic heating costs, particularly gas - average bills rose by result inflation expectations will remain subdued and the recovery will 0.4 per cent (compared to a fall of 2.8 per cent a year ago) not be jeopardised, notwithstanding the massive fiscal contraction n clothing and footwear prices rose by 3.6 per cent following about to be imposed by the Coalition government. the January sales which was a record movement between January and February The principal cause of the rise in inflation during the second half of 2010 and early 2011 has been rising global costs, largely outside the control of the UK authorities. For example, since July 2010, oil and other commodity prices have risen by over a third. Despite this, Professor Eric Pentecost is a Professor of Economics and can be emailed as the chart shows, UK inflation is still low by historical standards. at [email protected] 18

by Ondine Barry Managing Innovation at Loughborough Staff at the School of Business and The Managing Innovation module, now compulsory for all Loughborough MBA students, was launched in 2005 after Economics have initiated a truly unique Dr Grahame Boocock’s work saw him visit NCSU to explore module for Loughborough MBA students that the detailed content of their Technology, Entrepreneurship and engages with local technologists in the use Commercialisation (TEC) Algorithm. of an algorithm, developed at North Carolina The Algorithm is designed specifically for the assessment of innovations with high growth potential, and to date, ventures State University (NCSU) in the 1990s, to associated with this TEC Algorithm have created more than 350 jobs provide a detailed framework for evaluating and attracted more than US $200m in venture capital in the US. the commercial value of a venture. At the core of the process is a set of analytical tools used to assess the potential value of technologies developed in universities or in local/regional companies. This set of tools is applied in multidisciplinary teams, supported by the lecturing team, mentors from the local SME community and other advisers, who are recruited as necessary for their expertise in intellectual property, science and technology, venture capital etc. The Algorithm does not offer a Loughborough University School of Business and Economics Bi-Annual Magazine 19

definitive success/failure prediction for a given technology, but it is a The folder demonstrates to the technologist that students have powerful decision-supporting tool. explored a variety of alternative opportunities generated by a given technology, without jumping to a market ‘solution’ too early. This The use of the Algorithm at Loughborough, in an adapted form, activity enables them to engage in research, rethink ideas and comprises four phases: change direction throughout the process. n ‘Search & Ideation’ Phase – this phase generates potential The technologies assessed at Loughborough have been drawn products from pre-selected platform technologies from the fields of biology, medicine, telecommunications, electronic The capacity for multiple uses from a technology is a primary engineering, automotive engineering, solar power and sports driver of high-growth businesses in this field. technology. Specific projects have included the use of drive-by-wire n The ‘Assessment’ and ‘Analysis’ Phases – these phases systems in cars, the introduction of cooled ceiling tiles in construction consider a product’s potential commercial viability in relation and other areas, an investigation of multiple uses for pomegranate to a number of functional areas, including legal implications, juice, and the potential for capturing and storing solar power. marketing and operations. Product ideas with ‘fatal flaws’ are eliminated. The module, currently delivered by Drs Grahame Boocock and Regina Frank, and supported by Dr Julie Holland, is also planned to be n The ‘Commercialisation Strategy’ Phase – this phase used in the future with alternative audiences, such as PhD students involves choosing a route to commercialisation (licensing, and local/regional entrepreneurs. The module will also feature manufacturing, selling and joint venturing), and thinking about strongly in the planned full-time MBA and Sports Management MBA pre-launch issues – such as obtaining access to capital. This programmes to be offered by the School in the near future. is the final phase taught at Loughborough. The School will continue to working closely with the University’s At NCSU, their students are taught a fifth phase, ‘Commercialisation Enterprise Office and also the Sports Technology Institute, to ensure Implementation’, as the time devoted to the programme there is that academic researchers in the science and technology fields get almost twice as long as at Loughborough, and the clear goal is that the opportunity to test out their ideas using the Algorithm. students should aim to start their own high-technology business. In addition, Drs Boocock and Frank (Principal Investigator) have However, students on the Loughborough MBA are mainly in well-paid, recently secured substantial EU funding to develop a network of secure employment, with good prospects for advancement within technology entrepreneurship educators, in cooperation with other EU their organisations or highly employable by others. Such individuals and US institutions. In essence, this will ensure that Loughborough are less likely to take on the risks associated with start-ups MBA students are part of a worldwide network of students engaged (especially in the high-technology field). At Loughborough, therefore, in technology commercialisation: a real USP for the programme and the emphasis has switched from new venture creation (incorporating the School. full investor activity), to the development of a commercialisation strategy. As part of strategy development, students are required to The module has received external recognition from major produce a folder that comprises a viable business proposal for a accountancy firms (currently Ernst and Young) who have offered product or service, with supporting market analysis, market entry and prizes for the best oral presentation and folder on the module. expansion strategies. 20

by Huw Edwards, Tulio Cravo, Todd Landman and David Kernohan The International Political Economy of Human Rights Recent months have seen dictatorships overthrown in Tunisia and Egypt and unrest spread across North Africa and the Middle East as disenfranchised people took to the streets for democracy and human rights. But, while the study of human rights has long been dominated by the disciplines of law and political science, it has yet to find comparable coverage in the economics arena – something economists at Loughborough University are seeking to change.

Working alongside the Institute for Democracy and Conflict Resolution The second idea being explored is that human rights are partly (IDCR) and Middlesex Business School, researchers in Loughborough’s location dependent. This originates from econometric analysis which School of Business and Economics are exploring a number of human shows a strong pattern of spatial correlation between one country’s rights issues through quantitative analysis. The data comes from a human rights and those of its neighbours. recently completed index that details such human rights violations as arbitrary detention, extra-judicial killings, disappearances and torture. Current examples of this idea exist in the ‘Arab spring’ with the overthrowing of tyrants in the Arab states. Indeed, pressure for The notion of relative human rights stems from the view that good democracy and human rights across the North of Africa and the Middle governance within a country helps to promote economic prosperity in East is subsequently continuing to grow. the longer run, while acknowledging that good governance can also build from economic prosperity. In the case of trying to promote good human From this work, the researchers have been able to establish a rights provision within poorer countries, it is particularly important to league table of good and bad location-relative human rights focus on – and reward – countries that are providing good human rights performers, taking into account not only a country’s low income relative to their level of income. levels, ethnic fractionalisation and domestic conflicts, but also its geographical neighbours: Loughborough University School of Business and Economics Bi-Annual Magazine 21

Countries with the worst location-relative Absolute Relative Human Rights HR HR Colombia -1.80 -1.60 China -1.41 -1.43 Israel -1.18 -1.36 Haiti -1.54 -1.23 Cote d'Ivoire -1.54 -1.15 Nigeria -1.17 -0.86 Algeria -0.80 -0.86 Indonesia -1.17 -0.86 Egypt -0.92 -0.83 Bangladesh -1.17 -0.79 Ethiopia -1.29 -0.71 Libyan Arab Jamahiriya -0.67 -0.70 Philippines -1.05 -0.70 Iran (Islamic Republic of) -0.70 -0.68

Syrian Arab Republic -0.79 -0.67 In relation to those countries that perform poorly, it is worth noting, with Brazil -0.69 -0.56 relation to the current situation in North Africa and the Middle East, Pakistan -1.04 -0.55 that several countries in this region are prominent in the table of bad human rights performers. It is perhaps even more notable that the India -0.93 -0.54 rising economic giants, China and India, also do relatively poorly. This is Saudi Arabia -0.67 -0.53 important as these are large fast-growing countries, whose poor human rights record is likely to have a strong negative effect on other countries in their region. The bottom of the league table would almost certainly feature the complex countries of Zimbabwe, Iraq and North Korea if the Countries with the best location-relative Absolute Relative data were available. Human Rights HR HR Chile 1.30 1.35 At the other end of the scale, expected good performers such as Scandinavia, Canada and New Zealand are also joined by a number Senegal 0.81 1.15 of countries that do well despite lower income levels and ‘unfortunate’ New Zealand 1.42 1.02 neighbours. Ghana 0.43 0.96 From this data it could be suggested that the increasing improvement Uruguay 1.05 0.94 in human rights over the last 25 years for countries such as Chile and Sierra Leone 0.31 0.87 Uruguay, and relative improvements for neighbours Brazil and Mexico, has Congo Brazzaville 0.19 0.83 been an easier process due to the proximity of each country. Mongolia 0.43 0.81 This perhaps is a sign of hope for the North African/Middle Eastern Burkina Faso 0.44 0.78 countries in turmoil today. Canada 1.42 0.77 Malawi 0.06 0.76 Dr Terence Huw Edwards is a Lecturer in Economics. His research focuses on Liberia 0.06 0.75 applied general equilibrium modelling, international trade and transition economies. Madagascar 0.39 0.74 Tulio Cravo is an Economics PhD student at Loughborough Universiy. Professor Todd Sweden 1.54 0.74 Landman is Director of the Institute for Democracy and Conflict Resolution (IDCR) at the University of Essex. Dr David Kernohan is Head of Department for Economics and Panama 0.63 0.73 Statistics at Middlesex Business School. For more information on this research, Finland 1.54 0.71 please contact Dr Terence Huw Edwards on [email protected] 22

International Negotiations: Co-operation and Conflict Between Haggling, Hurrying and Holding Out by Ursula Ott A former Ford manager and a HP manager, use of ‘no’ was not an answer to a question; even so it preceded a in the middle of a bargaining experiment, statement of disagreement.) suddenly begin haggling as if they are trying to Silent periods during negotiations process were more frequent in the Japanese interactions (5.5/30 minutes) than with either American get the best price in a street market. Why? (3.5/30 minutes) or Brazilian (none were discovered).

My work proposes a theoretical framework for international negotiations To understand international negotiations from a procedural perspective, based on a game theoretical bargaining model combining different cultural we need to take into account the cultural differences with regard to their activity types tested on real-life observations. actions and strategies leading to an outcome. This asks us to find a less descriptive and more dynamic way of understanding cultural differences. Whether political or commercial, at the centre of each international negotiation is the conflict and co-operation between cultures. There are Translating cultural characteristics into bargaining rules is viewed as three categories – security, political and economic – but the dynamics of an important requirement for modeling. Using game theory provides international negotiations are relevant in all three areas and subject to the insights into bargaining relating to different cultural programming. The cultural cognitive bargaining patterns of the players involved. Empirical results of interactions between sellers and buyers of different activity research into culture shows that it ‘profoundly influences how people think, types show the cognitive cultural moves in international negotiations and communicate and behave, and it also affects the kinds of deals they make help us understand why political and business negotiations are prone to and the way they make them’ (Salacuse, 1999). stalemates and premature termination.

Using cultural activity types helps to translate bargaining characteristics into My research shows that bargaining longer than originally planned for strategies and moves that are relevant for a game theoretical analysis. There helps negotiators to come up with agreements that would otherwise be are three main cultural types: linear-active (task-oriented planners), multi- lost. This is particularly relevant for cultures (linear-active cultures such as active (people-oriented interlocutors) and reactive types (respect-oriented US-American and German players) with a short bargaining horizon. listeners), developed by Richard Lewis. Based on national culture, they offer an appropriate way to analyse the clash of cultures, consistent with the Over ten years in classroom experiments, the pattern emerged that observations of empirical negotiations research. the cognitive programming was very strong in the bargaining process. People tend to adapt to new cultural environments, but the procedure of John Graham’s 1980s study tests the bargaining strategies of US-American, offering, rejecting or accepting an offer, making counter-offers, the length Brazilian and Japanese negotiators. His three negotiation types have similar of the bargaining horizon and the use of price as a signal is determined features to the activity models that triggered my work. Particularly intriguing by cultural roots. was the observation that Brazilian bargainers asked for much more initially, and initial concessions appeared higher than for the Americans and the Observing and documenting these bargaining procedures showed Japanese. Additionally, Brazilians used the word ‘no’ more frequently. (The consistency with the scenarios developed in the theoretical work. Overall, Loughborough University School of Business and Economics Bi-Annual Magazine 23

Buyer-Seller Model for Different Cultures in Intercultural negotiations

Buyer (Player II) “When it comes to bargaining situations, there’s a very clear, deep- Linear-active Culture Multi-active Culture Reactive Culture rooted cognitive programme that is based on one’s nationality. Linear-active Similar cultural Seller linear-active Seller linear-active culture background with and buyer multi- and buyer reactive I’ve observed hundreds of negotiations, and each time, people go refinements active Scenario 5 back into the way they were brought up. For instance, when we, Scenario1 Scenario 4 Example: as linear-active Western Europeans, go into the grocery store we’re Example: Example: American Seller – not going to haggle about a loaf of bread. In cultures with a multi- American Seller – American Seller – Japanese buyer German buyer Brazilian buyer active background however, you would never do something ‘Time is Money’ – Approach without haggling. Seller Seller multi-active Similar cultural Seller multi-active (Player I) and buyer linear- background with and buyer reactive “I developed the mathematical formula out of game theory which active refinements Multi-active Scenario 7 was already there – everyone knows how to model the buyer-seller culture Scenario 6 Scenario 2 Example: situation, that’s a given. But I added the cultural perspective of the Example: Example: Brazilian Brazilian Seller – Brazilian Seller – Seller – Italian buyer Japanese buyer multi-actives, the reactives and the linear-actives and gave it that American buyer ‘Haggling’-Approach twist with the length of the bargaining horizon and the costs and Reactive Seller reactive Seller reactive Similar cultural the value of the whole bargaining situation, and through doing the Culture and buyer and buyer background with refinement subsequent proofs I found out that I could actually show it in the Linear-active Multi-active Scenario 3 diagrams, which was fascinating to see. Scenario 8 Scenario 9 Example: Example: Example: Japanese Seller – “I’ve started applying this formula to terrorist negotiations and Japanese Seller – Japanese Seller – Finnish buyer American buyer Brazilian buyer climate change negotiations as well as across wider negotiations. ‘Building trust’- Approach When looking at negotiation protocols I could often see a situation being inherently prone to disaster.” Source: Ott (2011)

the framework offers an anticipation of moves, strategies and outcomes journal in a Special Issue on Culture and Negotiation, can be seen as a for linear-active (Western players), multi-active (players from the Middle starting point in understanding one’s own cultural profile and the opponent’s East) and reactive (players from the Far East). The theoretical model cultural bargaining pattern to come up with more cooperative solutions. This supports the evidence found in empirical work and answers questions paper is going to be published as state of the art among the works of the raised in these publications. leading scholars in negotiations, including Jeanne Brett, Michele Gelfand, Wendi Adair, Catherine Tinsley. It has been recognised as seminal work in We return to the former Ford manager. He considered himself culture- the international business community with a nomination of the Journal of free and showed clear signs of linear-active bargaining behavior prior to International Business Studies/AIB Frontiers Award. the experiment yet started to haggle unbelievably during negotiations, as did the HP manager. In the debriefing session, it transpired that the first This framework has already been applied to buyer-seller negotiations, one actually grew up in Nigeria and the latter in Uganda, and both took multinational headquarter and subsidiary negotiations, as well as climate with them that cultural mental model of ‘negotiating as art’. change and terrorist negotiations. The potential for further research in this direction is vast and of particular interest for practitioners, governments and Similarly surprising was a Finnish Nuclear power plant manager who felt academics alike as clearly shown by collaborations with industry comfortable bargaining with a Chinese counterpart in an experiment. This and governments. is not untypical for this bargaining model as both Finnish and Chinese negotiators have a similar cultural profile of a reactive bargaining strategy.

In all experiments, linear-active players tried to finish off negotiations too early to make any significant gains. Overall, the culturally intelligent negotiator can anticipate and learn from moves in an actual bargaining situation, undoing their own culturally determined bargaining strategy and understanding the opponent’s way of reasoning.

My paper ‘The Influence of Cultural Activity Types on Buyer-Seller Dr Ursula Ott is a Lecturer in International Business and Management. Her research Negotiations – A Game Theoretical Framework for Intercultural centres on International Business Theory, Applied Game Theory, Cross-Cultural Negotiations’, which is forthcoming in the International Negotiation Negotiations and International Joint Ventures. She can be emailed at [email protected] School of Business and Economics Loughborough University Leicestershire LE11 3TU UK T: +44 (0)1509 222701

www.lboro.ac.uk/sbe 45020 D&P July 2011