Leading an entrepreneurial family

1595.jpgOctober 2008 | By Cristina Cruz, Professor of Entrepreneurship at IE Business School.

The world has changed and family businesses must change with it if they are to avoid high mortality rates. But this transformation has to come from the top, from the company leader.

Millionaire grandfather, spendthrift son, beggar grandson, or so the Spanish saying goes. In other words, grandfather founds company, comfortable son rests on his laurels, and by the time the third generation comes along thereâ??s nothing left. This particular saying describes the problem facing family businesses on a daily basis.

Only 30% of family businesses reach the second generation and only 15% carry on to the third. The statistics are universal and the phenomenon is repeated everywhere in the world despite cultural differences. Why do family businesses disappear? Problems related to the lack of understanding between members of the family who own the business, the company´s incapacity to adapt to environmental changes, the lack of professionalization and/or the lack of commitment of subsequent generations are some of the most frequent reasons mentioned by family entrepreneurs and researchers. Behind all these reasons lies one common denominator: an inappropriate substitution of leadership which means there is no effective leader to help the company successfully overcome the transitions it is faces. Hence, if leadership is a critical factor for any company´s success, the evidence points to its being even more important for family businesses.

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IE University will be one of Europe´s most prestigious centres of learning: Rector Santiago Iniguez

zaryn-dentzel-y-santiago-iniguez-web.jpgThe University inaugurates its first academic year with two new degrees in Architecture and Communication that are fully compliant with the European Higher Education Area (EHEA). In his address during the inauguration of the first academic year of the new international university model launched by IE in April of this year, Santiago Iñiguez de Onzoño, Rector of IE University  stated that â??The university we are building will be one of Europeâ??s most prestigious centers of learning, in line with the achievements of our business schoolâ?.
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The Rector described IE University as â??A private institution with a public mission: that of educating global citizens, entrepreneurs who are committed to society and have an excellent working knowledge of their fields.â? He went on to underscore the fact that IE Universityâ??s innovative, market-oriented programs will also equip graduates with a solid grounding in humanities and management, given that â??humanities are the binding agent that integrate other knowledge, and the base for shaping individuals in the fullest sense of the wordâ?. Iñiguez de Onzoño also spoke about how behind every good business practice there is a good management practice, which is why IE University graduatesâ?? education will be equivalent to that of an MBA graduate, in that they will be entrepreneurial in their fields, change agents in their profession, and generators of value and social well-being.

After speaking about the Universityâ??s  two new degree programs  in Architecture and Communication launched at the beginning of the academic year, both of which are adapted to the European Higher Education Area, Íñiguez de Onzoño announced that in the next academic year, following the receipt of the pertinent approval, IE Universityâ??s Santa Cruz la Real campus is set to launch new degrees in Business Administration,  Biology, Law, History of Art, Construction Engineering, Journalism and Audiovisual Communication, Psychology, Tourism Management, and Systems and Technologies. â??One of the key features of these new degree programs will be their markedly international slant in terms of content, student profile, Spanish and English versions, strategic alliances and exchanges with leading international universities, and relations with global business organizations and institutions.

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The way Darwin would see it

1594.jpgOctober 2008 | By Antonio Rivela, Professor at IE Business School

One of the collateral effects of the crisis is a purge of the entire system as Darwinâ??s famous survival of the fittest kicks in. But should all species be left to fend for themselves?

What should the central banks do to combat the recession? That is the question asked constantly by investment banks, politicians, legislators and people on the street. Many players on the market will see a digital answer to the question.

Should they inject funds indiscriminately into the system from the public treasury to correct the upset caused by the investment banks? Or should they be allowed to fall in pure Darwinian survival-of-the-fittest style? On this particular occasion I happen to think that it depends on each case.

There are banks which, owing to their status, help the financial system on a structural scale. They can be compared with the age-old trees that form a basis for an ecosystem. Without them, no animal would be able to exist. The latest examples are the agencies that support the mortgage system in the United States, affectionately known as Freddie Mac and Fannie Mae, since their initials are unpronounceable, believe me. I think it is blatantly obvious that these institutions should be helped in order to avoid a potential collapse of the United States property market, which could have been comparable with the 1929 recession. In these two cases, the Fed was correct to inject $100 billion into each institution.

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Over 150 Spanish and international companies will be participating in the 8th edition of the IE Business School Careers Fair to recruit executive talent for their organizations. The fair will serve as a platform for recruiting companies to give presentations on their strategic development at the IE campus, and to hold interviews with 800 students…

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Investment Trends

1569.jpgSeptember 2008 | By Ignacio de la Torre, Professor of Finance and Academic Director of IE’s Master in Finance.

Except for the odd diehard, nobody is denying that we are facing a credit crisis that is affecting the mainstream economy. The question is: Where do we go from here?

In the city of Boston in the 1920s, an Italian immigrant, Roberto Ponzi, convinced hundreds of people that investing in Spanish and Italian stamps with guaranteed profitability levels was a better option than buying traditional products, such as bonds and shares, whose high prices had rendered them less profitable. Of course, the promised levels of profitability came from the revenue generated by those who were the last to buy the stamps, which is why the English term for this type of con trick is “Ponzi scheme”, which made Roberto eternally famous.

Does this sound familiar?

A scenario of economic expansion with controlled inflation, as took place in the 1920s or, more recently, since 2004, eventually leads to a heavy increase in the money supply. This leads to increases in the real prices of assets (fixed assets, stock exchanges, bonds), dampening their implicit profitability. Investors look for alternative products that can give them greater profitability, causing successive “bubbles” in said assets as they attract investments (in 2006, the JP Morgan index for emerging bonds offered profit levels that were only 1.3% higher than the North American bond). Paradoxically, as pointed out by the economist Hyman Minski in the 1970s, trust in the central bank´s success can involve a disproportionate expansion of credit, which, in turn, brings about greater falls in default (since the refinancing of the debt is easy in this kind of environment), giving rise to a vicious circle. The circle is blown to pieces when a significant event (such as the non-payment of the subprime mortgages) leads the market to reconsider its appetite for risk and this reconsideration brings about a fall in credit, which is quickly transferred to the real economy with the threat of a possible recession (which is where we are today).

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