Angel Investing in Finland: An Analysis Based on Agency Theory and the Incomplete Contracting Theory

Wealthy individuals - business angels who invest a share of their net worth in entrepreneurial ventures - form an essential part of an informal venture capital market that can secure funding for entrepreneurial ventures. In Finland, business angels represent an untapped pool of capital that can contribute to fostering entrepreneurial development. In addition, business angels can bridge knowledge gaps in new business ventures by means of making their human capital available. This study has two objectives. The first is to gain an understanding of the characteristics and investment behaviour of Finnish business angels. The strongest focus here is on the due diligence procedures and their involvement post investment. The second objective is to assess whether agency theory and the incomplete contacting theory are useful theoretical lenses in the arena of business angels. To achieve the second objective, this study investigates i) how risk is mitigated in the investment process, ii) how uncertainty influences the comprehensiveness of due diligence as well as iii) how control is allocated post investment. Research hypotheses are derived from assumptions underlying agency theory and the incomplete contacting theory. The data for this study comprise interviews with 53 business angels. In terms of sample size this is the largest on Finnish business angels. The research hypotheses in this study are tested using regression analysis. This study suggests that the Finnish informal venture capital market appears to be comprised of a limited number of business angels whose style of investing much resembles their formal counterparts’. Much focus is placed on managing risks prior to making the investment by strong selectiveness and by a relatively comprehensive due diligence. The involvement is rarely on a day-to-day basis and many business angels seem to see board membership as a more suitable alternative than involvement in the operations of an entrepreneurial venture. The uncertainty involved does not seem to drive an increase in due diligence. On the contrary, it would appear that due diligence is more rigorous in safer later stage investments and when the business angels have considerable previous experience as investors. Finnish business angels’ involvement post investment is best explained by their degree of ownership in the entrepreneurial venture. It seems that when investors feel they are sufficiently rewarded, in terms of an adequate equity stake, they are willing to involve themselves actively in their investments. The lack of support for a relationship between increased uncertainty and the comprehensiveness of due diligence may partly be explained by an increasing trend towards portfolio diversification. This is triggered by a taxation system that favours investments through investment companies rather than direct investments. Many business angels appear to have substituted a specialization strategy that builds on reducing uncertainty for a diversification strategy that builds on reducing firm specific (idiosyncratic) risk by holding shares in ventures whose returns are not expected to exhibit a strong positive correlation.

Real Estate Investment and Uncertainty: Econometric Modelling using Finnish Data

The purpose of this paper is to test for the effect of uncertainty in a model of real estate investment in Finland during the hihhly cyclical period of 1975 to 1998. We use two alternative measures of uncertainty. The first measure is the volatility of stock market returns and the second measure is the heterogeneity in the answers of the quarterly business survey of the Confederation of Finnish Industry and Employers. The econometric analysis is based on the autoregressive distributed lag (ADL) model and the paper applies a 'general-to-specific' modelling approach. We find that the measure of heterogeneity is significant in the model, but the volatility of stock market returns is not. The empirical results give some evidence of an uncertainty-induced threshold slowing down real estate investment in Finland.

Political Risk in Credit Evaluation: Empirical Studies and Survey Results

Financing trade between economic agents located in different countries is affected by many types of risks, resulting from incomplete information about the debtor, the problems of enforcing international contracts, or the prevalence of political and financial crises. Trade is important for economic development and the availability of trade finance is essential, especially for developing countries. Relatively few studies treat the topic of political risk, particularly in the context of international lending. This thesis explores new ground to identify links between political risk and international debt defaults. The core hypothesis of the study is that the default probability of debt increases with increasing political risk in the country of the borrower. The thesis consists of three essays that support the hypothesis from different angles of the credit evaluation process. The first essay takes the point of view of an international lender assessing the credit risk of a public borrower. The second investigates creditworthiness assessment of companies. The obtained results are substantiated in the third essay that deals with an extensive political risk survey among finance professionals in developing countries. The financial instruments of core interest are export credit guaranteed debt initiated between the Export Credit Agency of Finland and buyers in 145 countries between 1975 and 2006. Default events of the foreign credit counterparts are conditioned on country-specific macroeconomic variables, corporate-specific accounting information as well as political risk indicators from various international sources. Essay 1 examines debt issued to government controlled institutions and conditions public default events on traditional macroeconomic fundamentals, in addition to selected political and institutional risk factors. Confirming previous research, the study finds country indebtedness and the GDP growth rate to be significant indicators of public default. Further, it is shown that public defaults respond to various political risk factors. However, the impact of the risk varies between countries at different stages of economic development. Essay 2 proceeds by investigating political risk factors as conveivable drivers of corporate default and uses traditional accounting variables together with new political risk indicators in the credit evaluation of private debtors. The study finds links between corporate default and leverage, as well as between corporate default and the general investment climate and measeures of conflict in the debtor country. Essay 3 concludes the thesis by offering survey evidence on the impact of political risk on debt default, as perceived and experienced by 103 finance professionals in 38 developing countries. Taken together, the results of the thesis suggest that various forms of political risk are associated with international debt defaults and continue to pose great concerns for both international creditors and borrowers in developing countries. The study provides new insights on the importance of variable selection in country risk analysis, and shows how political risk is actually perceived and experienced in the riskier, often lower income countries of the global economy.

Multiple socioeconomic circumstances and health : associations and explanations among Finnish and British public sector employees

Socioeconomic health inequalities have been widely documented, with a lower social position being associated with poorer physical and general health and higher mortality. For mental health the results have been more varied. However, the mechanisms by which the various dimensions of socioeconomic circumstances are associated with different domains of health are not yet fully understood. This is related to a lack of studies tackling the interrelations and pathways between multiple dimensions of socioeconomic circumstances and domains of health. In particular, evidence from comparative studies of populations from different national contexts that consider the complexity of the causes of socioeconomic health inequalities is needed. The aim of this study was to examine the associations of multiple socioeconomic circumstances with physical and mental health, more specifically physical functioning and common mental disorders. This was done in a comparative setting of two cohorts of white-collar public sector employees, one from Finland and one from Britain. The study also sought to find explanations for the observed associations between economic difficulties and health by analysing the contribution of health behaviours, living arrangements and work-family conflicts. The survey data were derived from the Finnish Helsinki Health Study baseline surveys in 2000-2002 among the City of Helsinki employees aged 40-60 years, and from the fifth phase of the London-based Whitehall II study (1997-9) which is a prospective study of civil servants aged 35-55 years at the time of recruitment. The data collection in the two countries was harmonised to safeguard maximal comparability. Physical functioning was measured with the Short Form (SF-36) physical component summary and common mental disorders with the General Health Questionnaire (GHQ-12). Socioeconomic circumstances were parental education, childhood economic difficulties, own education, occupational class, household income, housing tenure, and current economic difficulties. Further explanatory factors were health behaviours, living arrangements and work-family conflicts. The main statistical method used was logistic regression analysis. Analyses were conducted separately for the two sexes and two cohorts. Childhood and current economic difficulties were associated with poorer physical functioning and common mental disorders generally in both cohorts and sexes. Conventional dimensions of socioeconomic circumstances i.e. education, occupational class and income were associated with physical functioning and mediated each other’s effects, but in different ways in the two cohorts: education was more important in Helsinki and occupational class in London. The associations of economic difficulties with health were partly explained by work-family conflicts and other socioeconomic circumstances in both cohorts and sexes. In conclusion, this study on two country-specific cohorts confirms that different dimensions of socioeconomic circumstances are related but not interchangeable. They are also somewhat differently associated with physical and mental domains of health. In addition to conventionally measured dimensions of past and present socioeconomic circumstances, economic difficulties should be taken into account in studies and attempts to reduce health inequalities. Further explanatory factors, particularly conflicts between work and family, should also be considered when aiming to reduce inequalities and maintain the health of employees.

Prevalence and Forms of Bullying among Business Professionals: A Comparison of Two Different Strategies for Measuring Bullying

The aim of this study was to analyse the prevalence and forms of workplace bullying among business professionals holding predominantly managerial or expert positions. A cross-sectional survey study was conducted among Finnish professionals with a university degree in business studies. In the study two different strategies for measuring bullying were used and compared. When provided a definition of bullying, 8.8% of the respondents reported that they had at least occasionally been bullied during the past 12 months. However, when using a slightly modified version of the Negative Acts Questionnaire (Einarsen & Hoel 2001), containing a list of 32 predefined negative and potentially harassing acts, as many as 24.1% of the respondents reported that they had been subjected to at least one of the negative acts on a weekly basis. The respondents had experienced predominantly work-related negative acts, e.g. that their opinions and views were ignored, that they were given unreasonable deadlines or that information was withheld. Although the prevalence rates reported with the two strategies varied considerably, there was still consistency between the two strategies in the sense that those who had classified themselves as bullied also reported higher exposure rates to almost all of the negative acts included.

Between West and East: A Social History of Business Journalism in Cold War Finland

The Cold War era was characterized by ideological struggles that had a major impact on economic decision-making, and also on management practice. To date, however, these ideological struggles have received little attention from management and organizational scholars. To partially fill this research gap, we focus on the role of the media in these ideological struggles. Our starting point is that the media both reflect more general societal debates but also act as an agency promoting specific kinds of ideas and ideologies. In this sense, the media exercise significant power in society; this influece, however, is often subtle and easily dismissed in historical analyses focusing on political and corporate decision-making. In this article, we focus on the role of business journalism in the ideological struggles of the Cold War era. Our case in point is Finland, which is arguably a particularly interesting example due to its geo-political position between East and West. Our approach is socio-historical: we focus on the emergence and development of business journalism in the context of the specific struggles in the Finnish political and economic fields. Our analysis shows how the business journalists struggled between nationalist, pro-Soviet and pro-West political forces, but gradually developed into an increasingly influential force promoting neo-liberal ideology.

Adaptation in a Business Network Cooperation Context (summary section only)

In today’s business one can say that competition does not take place inside the network, but between networks. Change and dynamics are central issues in network studies, and a company, due its changing environment, can identify opportunities and threats and respond to them accordingly. These opportunities are vital, but also complex and demanding for the management. Earlier research has identified a shortcoming in explanations of how the micro-level interactions to macro-level patterns are connected. The IMP-group has been trying to fill this research gap with research on interactions within business networks. In this area of research lies the focus of research on relationships between organizations. Adaptation in cooperation is a central concept within business network research. Adaptation has been dealt with in previous literature, but the focus of the studies has mainly been outside this phenomenon, and it has mostly had a supporting role. Most literature has also described the buyers' point of view in studied supply networks, whereas much less attention has been paid to the suppliers' view on them. This study focuses on this research gap. The results of the study stress that adaptation should be included to a greater extent in the strategy work of companies. The adaptations should be carefully planned and, as far as possible, made consciously. Conscious, well-planned adaptations can be seen as investments into present and future relationships, and resources should be invested into something that does not increase the company’s dependence, but divides the power in the relationship between the companies. Adaptations should be planned so that they result in a more offensive way of responding to the demands that are placed upon the companies. In this way, the actions can be viewed and analyzed in accordance with whether the actions make the company weaker or stronger.

Workplace Bullying among Business Professionals - Prevalence, Organisational Antecedents and Gender Differences (summary section only)

Workplace bullying can be defined as repeated and persistent negative acts that involve a power imbalance and create a hostile work environment. Partly because of the many negative consequences associated with the phenomenon, bullying has recently become the focus of many studies by contemporary organisational researchers. Drawing on a survey, this thesis provides information on the prevalence and forms of bullying among business professionals, a group of employees neglected in previous bullying research. The thesis follows a tradition among Nordic researchers that emphasises the role of the psychosocial work environment in bullying. In particular, it illustrates how high internal competition and a high degree of organisational politics in business life may lead employees to use bullying as a tactic to gain benefits over their colleagues. Furthermore, it explores the significance of gender in bullying in male-dominated work environments, with women tending to be subjected to more negative acts, tending to feel less capable to defend themselves in these situations, and tending to feel less reluctant to classify these experiences as bullying. In addition to the introductory essay, this thesis consists of a book chapter and four articles. These five papers address particular aspects of workplace bullying: the prevalence and forms of bullying, the significance of gender in bullying, and organisational antecedents of bullying.

Adaptation in triadic business relationship settings: A study in corporate travel management

ANNE HOLMA ADAPTATION IN TRIADIC BUSINESS RELATIONSHIP SETTINGS – A STUDY IN CORPORATE TRAVEL MANAGEMENT Business-to-business relationships form complicated networks that function in an increasingly dynamic business environment. This study addresses the complexity of business relationships, both when it comes to the core phenomenon under investigation, adaptation, and the structural context of the research, a triadic relationship setting. In business research, adaptation is generally regarded as a dyadic phenomenon, even though it is well recognised that dyads do not exist isolated from the wider network. The triadic approach to business relationships is especially relevant in cases where an intermediary is involved, and where all three actors are directly connected with each other. However, only a few business studies apply the triadic approach. In this study, the three dyadic relationships in triadic relationship settings are investigated in the context of the other two dyads to which each is connected. The focus is on the triads as such, and on the connections between its actors. Theoretically, the study takes its stand in relationship marketing. The study integrates theories and concepts from two approaches, the industrial network approach by the Industrial marketing and purchasing group, and the Service marketing and management approach by the Nordic School. Sociological theories are used to understand the triadic relationship setting. The empirical context of the study is corporate travel management. The study is a retrospective case study, where the data is collected by in-depth interviews with key informants from an industrial enterprise and its travel agency and service supplier partners. The main theoretical contribution of the study concerns opening a new research area in relationship marketing by investigating adaptation in business relationships with a new perspective, and in a new context. This study provides a comprehensive framework to analyse adaptation in triadic business relationship settings. The analysis framework was created with the help of a systematic combining approach, which is based on abductive logic and continuous iteration between the theory and the case study results. The framework describes how adaptations initiate, and how they progress. The framework also takes into account how adaptations spread in triadic relationship settings, i.e. how adaptations attain all three actors of the triad. Furthermore, the framework helps to investigate the outcomes of the adaptations for individual firms, for dyadic relationships, and for the triads. The study also provides concepts and classification that can be used when evaluating adaptation and relationship development in both dyadic and triadic relationships.

The Politics and Policies of Reproductive Agency

This study examines the politics and policies of reproductive agency through a redescription of three Finnish policy documents dealing with the declining birth rate: the Government report on the future 'Finland for people of all ages' (2004), Business and Policy Forum EVA report 'Condemned to Diminish?' (Tuomitut vähenemään?) (2003), and the Family Federation's 'Population Policy Program' (2004). The redescription is done with the help of the notion of reproductive agency, which draws on Drucilla Cornell's concepts of the imaginary domain and bodily integrity. The imaginary domain is the moral and psychic space people need in order to form their personality, which is created in constant identificatory processes. The aim of the processes is imaginary coherence. As the personality is embodied, forming one s imaginary coherence always includes attempts for bodily integrity, also entailing attempts to arrive at an understanding of one's procreative capacities. Besides Cornell, I draw on Judith Butler's thinking and comprehend gender performatively as doing, and in relation to that agency as part of the performative process of one's personality. Reproductive agency is understood in this study as the possibilities to live differently the hegemonic forms of procreative life. I deal with three redescriptive themes: the family, economics and gender. The family is a central element in that it is considered the main location of reproduction. With regard to reproductive agency, the documents include problematic conceptions of the family. It is defined as a heterosexual, monogamous, conjugal relationship, which affects reproductive agency in that these notions do not allow for different modes of family life. The second prominent aspect, economics, features on two levels: the macroeconomic level of GDP, employment and competitiveness, and the level of family policies and concern about family finances. Macroeconomic-level argumentation is problematic in the context of reproductive agency because it implies that procreation is a duty of citizens, and thus has effects on values attached to reproductive potential. On the other hand, family policies may advance reproductive agency in supporting families financially. However, such policies also define how the family is understood, thereby affecting reproductive agency. The third theme, gender, intersects with many issues in the policy documents. All three texts consider the roles of men and women differently: women are primarily responsible for the family, and both men's and women's reproductive agency is affected in that the roles in the procreative process are predefined. EVA and the Family Federation see women as the main target of population policies, and consider it legitimate to try to change women s reproductive decisions. Implicit in the notion of reproductive agency is the idea that it should be possible to overcome and live differently the sex difference, but the three documents do not open up opportunities for that. The notion of reproductive agency makes it also possible to question the legitimacy of population policies in general and offers new perspectives on the vocabularies used in the three policy texts, providing insights into the values and logics that support the concepts.

Puunoston kehittäminen Stora Enso Metsän Helsingin palvelupisteessä

The operation environment in the roundwood trade in Finland in the 1990’s include several changes. They are changes in the structure of non-industrial private forest (NIPF) ownership, forest taxation, in forest legislation, in price recommendation agreement, diminishing resources of forestry extension services, etc. At the same time, the roundwood demand has been rising. All these developments cause uncertainty in wood procurement organisations, and call for research to find out how to adapt into the changing environment. The objective of this study is to produce information for roundwood purchasing planning and cus-tomer satisfaction management to be used by Stora Enso Metsä Customer Service, Helsinki. For this pur-pose, data needs to be gathered about the urban NIPFs and their forest estates, behaviour related to forestry and timber-selling, customer satisfaction in their latest timber selling transaction, and their opinions about Enso’s new customer service office and its service concept. To fulfil the objective of the study, a NIPF -owner -survey (N=1064, response rate 39,7%) was con-ducted in October 1998-January 1999. The sample was made on the basis of the marketing database of Stora Enso Oyj Forest Customer Service in Helsinki. In planning the frame of reference of the empirical study, the model of service quality by Grönroos was applied. The following aspects were included in the 7-page questionnaire: demographic, sosio-economic and forest estate background, relation to the forest service supply, behaviour related to forestry, timber-selling motives and behaviour, last contact organisation and its image in forestry business, expectations and percep-tions in the latest timber-selling transactions, and behavioural intentions. The results revealed that the share of women, pensioners and academically educated people among forest owners was quite high. The majority of the forest estates of the metropolitan forest owners were situ-ated in the provinces of South Finland and East Finland. The average forest estate area was considerably smaller than in a previous study. Economic and recreational objectives were most important in the use of forests. Forest Associations were involved in half of the roundwood sales transactions of the respondents in the metropolitan area. The wood quantity of transactions was considerably higher than the average in the whole country. Bank-organised forest-related activities, taxation infos and trips to the forest were the most popular activities. Among the services, silvicultural advices were needed mostly and stub treatment least. Brochure material related to stumpage timber sales and taxation were considered most important compared to material related to delivery sales. The service expectations were at highest for women and they were less satisfied with the service than men. 2nd and 3rd generation residents of the metropolitan area thought about the new customer service concept more positively than the 1st generation residents. Internet users under 60 years thought more positively about new satellite picture-based woodlot search concept. Cross-tabulation of factor scores against background variables indicated that women with relatively low education level a greater need to sell roundwood than entrepreneurs, white-collar workers and directors, and Internet users. Suspiciousness towards timber procurement organisations was relatively strong among women and those whose forest income share of the total income was either null or over 20 %. The average customer satisfaction score was negative in all nine questions. Statistical differences be-tween different companies did not exist in the average satisfaction scores. Stora Enso’s Helsinki forest cus-tomer service could choose the ability to purchase all timber grades as its competitive advantage. Out of nine service dimension included in the questionnaire, in this particular service dimension, Enso’s Helsinki forest customer service’s score exceeded most all organisations’ average customer satisfaction score. On the basis of importance – performance matrix, advice and quidance could have been provided more to the forest owners in their latest timber–selling transaction.

Paradigms in Statistical Inference for Finite Populations; Up to the 1950s

Modern sample surveys started to spread after statistician at the U.S. Bureau of the Census in the 1940s had developed a sampling design for the Current Population Survey (CPS). A significant factor was also that digital computers became available for statisticians. In the beginning of 1950s, the theory was documented in textbooks on survey sampling. This thesis is about the development of the statistical inference for sample surveys. For the first time the idea of statistical inference was enunciated by a French scientist, P. S. Laplace. In 1781, he published a plan for a partial investigation in which he determined the sample size needed to reach the desired accuracy in estimation. The plan was based on Laplace s Principle of Inverse Probability and on his derivation of the Central Limit Theorem. They were published in a memoir in 1774 which is one of the origins of statistical inference. Laplace s inference model was based on Bernoulli trials and binominal probabilities. He assumed that populations were changing constantly. It was depicted by assuming a priori distributions for parameters. Laplace s inference model dominated statistical thinking for a century. Sample selection in Laplace s investigations was purposive. In 1894 in the International Statistical Institute meeting, Norwegian Anders Kiaer presented the idea of the Representative Method to draw samples. Its idea was that the sample would be a miniature of the population. It is still prevailing. The virtues of random sampling were known but practical problems of sample selection and data collection hindered its use. Arhtur Bowley realized the potentials of Kiaer s method and in the beginning of the 20th century carried out several surveys in the UK. He also developed the theory of statistical inference for finite populations. It was based on Laplace s inference model. R. A. Fisher contributions in the 1920 s constitute a watershed in the statistical science He revolutionized the theory of statistics. In addition, he introduced a new statistical inference model which is still the prevailing paradigm. The essential idea is to draw repeatedly samples from the same population and the assumption that population parameters are constants. Fisher s theory did not include a priori probabilities. Jerzy Neyman adopted Fisher s inference model and applied it to finite populations with the difference that Neyman s inference model does not include any assumptions of the distributions of the study variables. Applying Fisher s fiducial argument he developed the theory for confidence intervals. Neyman s last contribution to survey sampling presented a theory for double sampling. This gave the central idea for statisticians at the U.S. Census Bureau to develop the complex survey design for the CPS. Important criterion was to have a method in which the costs of data collection were acceptable, and which provided approximately equal interviewer workloads, besides sufficient accuracy in estimation.

Work/Family Reconciliation: Corporate Management, Family Policies, and Gender Equality in the Finnish Context

Work/family reconciliation is a crucial question for both personal well-being and on societal level for productivity and re-production throughout the Western world. This thesis examines work/family reconciliation on societal and organisational level in the Finnish context. The study is based on an initial framework, developing it further and analysing the results with help of it. The methodology of the study is plural, including varying epistemological emphasis and both quantitative and qualitative methods. Policy analysis from two different sectors is followed by a survey answered by 113 HR-managers, and then, based on quantitative analyses, interviews in four chosen case companies. The central findings of the thesis are that there indeed are written corporate level policies for reconciling work and family in companies operating in Finland, in spite of the strong state level involvement in creating a policy context in work/family reconciliation. Also, the existing policies vary in accessibility and use. The most frequently used work/family policies still are the statutory state level policies for family leave, taking place when a baby is born and during his or her first years. Still, there are new policies arising, such as a nurse for an employee’s child who has fallen ill, that are based on company activity only, which shows in both accessibility and use of the policy. Reasons for developing corporate level work/family policies vary among the so-called pro-active and re-active companies. In general, family law has a substantial effect for developing corporate level policies. Also headquarter gender equality strategies as well as employee demands are important. In regression analyses, it was found that corporate image and importance in recruitment are the foremost reasons for companies to develop policies, not for example the amount of female employees in the company. The reasons for policy development can be summarized into normative pressures, coercive pressures and mimetic pressures, in line with findings from institutional theory. This research, however, includes awareness of different stakeholder interests and recognizes that institutional theory needs to be complemented with notions of gender and family, which seem to play a part in perceived work/family conflict and need for further work/family policies both in managers’ personal lives and on the organisational level. A very central finding, demanding more attention, is the by HR managers perceived change in values towards work and commitment towards organisation at the youngest working generation, Generation Y. This combined with the need for key personnel has brought new challenges to companies especially in knowledge business and will presumably lead to further development of flexible practices in organisations. The accessibility to this flexibility seems to, however, be even more dependent on the specific knowledge and skills of the employee. How this generation will change the organisations remains to be seen in further research.