A new business model?

The paper delivers an analysis of the “New Economy” focussing on the roles of new business models, the capital market and venture capital. The capital market created a double standard in the 1990s: A high return on capital was required from old economy firms whereas money was thrown at new economy firms which had a business idea that stimulated the fantasies of financial investors but no earnings. Through the gradual burst of the tech stock bubble since spring 2000 it has come to the eyes of the public that many new economy start ups were unable to recover their costs. This paper shows that business models related to the internet can only work under certain conditions. The sectoral distribution of power, for example, determines the prospects of the single firms to realise e-commerce in a profitable way. Digital technologies do not necessarily enhance profitability. On the contrary, they can increase competition and lead to lower profit rates. The limitation of competition appears to be a central condition of successful cost recovery. The venture capital cycle has been an important driving force of the new economy boom, but it can also be momentum of a longer crisis. Enormous amounts of money have been channeled to new economy start ups hoping that successful IPOs will one day give venture capitalists a high return. But the burst of the bubble has brought down the IPO activity and interrupted the valorisation cycle of venture capital. Financial investors have reacted to the crisis by shifting their capital to even riskier investments, as the come-back of hedge funds indicates. --

Private equity and the concept of brittle trust

This paper focuses on private equity in the UK and is set in the context of debates about transformations in the City of London and the financial services sector specifically. The article focuses on a particular concept of trust as expressed by senior members of the private equity sector. The argument developed is based on interviews with five senior founding partners of private equity firms who talked to us about their background and education, their understanding of how private equity worked and the basis for successful money making and their relationships with those inside and outside the organisation. All interviewees strongly asserted the need for absolute trust between senior partners as an essential condition for the successful operation of their business. At the same time, their description of trust in this context was that while it is deep, it is also easily broken, and that once broken, the breach cannot be forgiven. We call this ‘brittle trust:’ asserted to be simultaneously strong while extremely fragile. The paper argues, drawing on Diego Gambetta’s work on the Sicilian Mafia, that this concept of ‘trust’ reflects a particular understanding of the practice of private equity as a high risk, tough and unforgiving business that nevertheless requires high standards of personal integrity. The study allows us to understand something more about the social ideals that were built into this financial sector by its founders, which we argue formed a crucial part of the transformation of the financial sector.Peer reviewe

(How) does productivity matter in the foundational economy?

Academics and policy makers have increasingly recognised the importance of mundane economic activities – variously termed foundational or everyday – by academics and policy makers. The foundational or everyday economy is now featuring in local industrial strategy and economic action plans, because the desirable high-tech sectors on the ‘frontier’ cannot diffuse prosperity within and between regions. This paper aims to distinguish between several different approaches to the foundational or everyday economy and argues that a constructive approach needs to break with the preoccupation about improving productivity. This argument is developed in three stages. First, we distinguish between a social approach and a more technical economic approach to delimiting this other mundane economy; the defining feature of the foundational in the social approach is contribution to wellbeing and in the technical economic approach it is low productivity. The second section presents and explores productivity evidence on output per worker hour across a range of foundational activities and by region. Drawing out the implications of observed diversity and heterogeneity, the third section develops an argument about how productivity has limited relevance as measure and target in foundational activitie

Opportunity lost: Mystification, elite politics and financial reform in the UK

The first phase of the crisis in Britain – from the 2007 failure of Northern Rock to the post Lehman systemic crisis of autumn 2008 – was a demystifying moment, when finance sector alibis, technocratic expertise and the assumptions of the political classes were tested and found wanting under pressure of unanticipated events. The banking rescue of 2007-8 amounted to the socialization of banking losses at a cost to the UK taxpayer of up to £1,000 billion or more (if we include contingent liabilities and exclude quantitative easing). British taxpayers got very little in return. The challenge of a brief democratic moment was met by the restatement of old pre-crisis narratives about the importance of ‘flexible’, market responsive regulation, and about the social value of finance. The result so far is marginalisation of left and radical forces (or no change on the past twenty-five years). Against this background, this essay has two interlinked aims. First, it presents an analysis of political obstacles to democratic control and reform of the finance sector that caused the financial crisis of 2007-8; a crisis that, after extreme intervention to save banks and support markets, has by 2010-11 become a fiscal crisis for individual states and a sovereign debt crisis for the eurozone. Second, it addresses (in this context) the role of ‘ideology’ within the socio-political process by examining how discourses format the world through what is now called ‘performativity’. And it shows how this new kind of discursive description can be developed and integrated with more established kinds of institutional analysis so as to generate new insights into the political obstacles to reform. The argument below is illustrated with UK evidence and our aim is to provide an analysis of national peculiarities, but the issues raised are relevant to other jurisdictions (national and supra national). We hope to raise broad questions about the mechanisms of elite power in present day capitalism where the importance of narrative has intensified since Reagan and Thatcher. We also aim to encourage reflection on how narrative power could be challenged so as to deliver a more democratic reform of finance

Manchester’s transformation over the past 25 years: why we need a reset of city region policy

Since the abolition of Manchester’s city region government by Margaret Thatcher in the 1980s, councillors and officers have been sponsoring the transformation of the city by private property developers. Peter Folkman, Julie Froud, Sukhdev Johal, John Tomaney and Karel Williams explain the unrecognised and unintended consequences of this transformation

A new business model?

"The paper delivers an analysis of the 'New Economy' focussing on the roles of new business models, the capital market and venture capital. The capital market created a double standard in the 1990s: A high return on capital was required from old economy firms whereas money was thrown at new economy firms which had a business idea that stimulated the fantasies of financial investors but no earnings. Through the gradual burst of the tech stock bubble since spring 2000 it has come to the eyes of the public that many new economy start ups were unable to recover their costs. This paper shows that business models related to the internet can only work under certain conditions. The sectoral distribution of power, for example, determines the prospects of the single firms to realise e-commerce in a profitable way. Digital technologies do not necessarily enhance profitability. On the contrary, they can increase competition and lead to lower profit rates. The limitation of competition appears to be a central condition of successful cost recovery. The venture capital cycle has been an important driving force of the new economy boom, but it can also be momentum of a longer crisis. Enormous amounts of money have been channeled to new economy start ups hoping that successful IPOs will one day give venture capitalists a high return. But the burst of the bubble has brought down the IPO activity and interrupted the valorisation cycle of venture capital. Financial investors have reacted to the crisis by shifting their capital to even riskier investments, as the come-back of hedge funds indicates." (author's abstract)"Die Autoren liefern einen Beitrag zum Verständnis der 'New Economy', indem sie die Bedeutung neuer Geschäftsmodelle, nämlich des Kapitalmarkts und des Risikokapitals, herausarbeiten. Der Kapitalmarkt operierte in den 1990er Jahren mit zweierlei Maß: Von Unternehmen der 'Old Economy' wurden hohe Kapitalrenditen gefordert, während Unternehmen der 'New Economy' es leicht hatten, Geld zu bekommen, sofern sie nur eine Geschäftsidee hatten, die die Phantasie der Finanzinvestoren stimulierte. Durch den Kursverfall der 'Technologieaktien' seit dem Frühjahr 2000 wurde deutlich, daß viele 'Start-up'-Unternehmen der New Economy unfähig waren, ihre Kosten zu decken. Die Autoren zeigen, daß Geschäftsmodelle, die sich auf das Internet beziehen, nur unter bestimmten Bedingungen profitabel sind. Die sektorale Machtverteilung entscheidet beispielsweise über die Chancen von Unternehmen, den E-Commerce in profitabler Weise zu nutzen. Digitale Technologien können auch die Konkurrenz verschärfen und zu sinkenden Profitraten führen. Die Begrenzung der Konkurrenz ist eine zentrale Voraussetzung erfolgreicher Kostendeckung. Der Zyklus der Risikokapitalinvestitionen war eine wichtige Triebkraft des New- Economy-Booms, aber er könnte sich ebenso als Moment einer länger andauernden Krise erweisen. Enorme Beträge wurden in der Hoffnung in die 'Start-ups' der New Economy gelenkt, daß erfolgreiche Börsengänge den Risikokapitalisten eines Tages hohe Gewinne bescheren würden. Seitdem die spekulative Blase an den Aktienmärkten geplatzt ist, gibt es kaum noch Börsengänge, so daß der Verwertungszyklus des Risikokapitals unterbrochen ist. Finanzinvestoren haben auf die Krise reagiert, indem sie ihr Kapital auf noch riskantere Investments verlagert haben, wie das Comeback der Hedgefonds zeigt." (Autorenreferat

Emergence dynamics of barnyardgrass and jimsonweed from two depths when switching from conventional to reduced and no-till conditions

A cylinder experiment was conducted in northern Greece during 2005 and 2006 to assess emergence dynamics of barnyardgrass (Echinochloa crus-galli (L.) Beauv.) and jimsonweed (Datura stramonium L.) in the case of a switch from conventional to conservation tillage systems (CT). Emergence was surveyed from two burial depths (5 and 10 cm) and with simulation of reduced tillage (i.e. by soil disturbance) and no-till conditions. Barnyardgrass emergence was significantly affected by burial depth, having greater emergence from 5 cm depth (96%) although even 78% of seedlings emerged from 10 cm depth after the two years of study. Emergence of barnyardgrass was stable across years from the different depths and tillage regimes. Jimsonweed seeds showed lower germination than barnyardgrass during the study period, whereas its emergence was significantly affected by soil disturbance having 41% compared to 28% without disturbance. A burial depth x soil disturbance interaction was also determined, which showed higher emergence from 10 cm depth with soil disturbance. Jimsonweed was found to have significantly higher emergence from 10 cm depth with soil disturbance in Year 2. Seasonal emergence timing of barnyardgrass did not vary between the different burial depth and soil disturbance regimes, as it started in April and lasted until end of May in both years. Jimsonweed showed a bimodal pattern, with first emergence starting end of April until mid-May and the second ranging from mid-June to mid-August from 10 cm burial depth and from mid-July to mid-August from 5 cm depth, irrespective of soil disturbance in both cases

Foundational economy and foundational politics

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