CorvinusKiosk

Researcher’s Insights – László Kállay: Do we fool ourselves? The moral risk of state subsidies


This time I talked with László Kállay, associate professor of the Institute for the Development of Enterprises. In recent years, his main fields of research have included the moral risks of state subsidies. Many would argue that the development of Hungary’s Small and Medium-sized Entreprises (SME) sector is hindered by the fact that SMEs lack capital and for that reason, it is state subsidy (or the recapitalisation of SMEs) that would give an impetus to the sector’s development. A related fact is that a key tool in the government’s current development policy is that of non-refundable aids. A government decree specifies that a priority for the use of EU development funds is the support of direct economic development.

The question is how successfully and efficiently state subsidy can function. László employs a micro-approach model to investigate the solutions opted for by enterprises that receive such external funds. Non-refundable state subsidy is not “free money” or interest-free loan, but a resource that has a “negative price” as it is not to be paid back. A management-focused problem is that in such a situation the profit of investment projects becomes dissociated from the personal profit of the entrepreneurs or company managers, as the entrepreneur gets something but is not supposed to give anything in return. To put it in another way, such subsidies make companies that otherwise would be loss-making profitable on paper; that is, an income is recognized that would not have been generated without subsidies. We fool ourselves.

In terms of economic policy, it is of paramount importance whether any government commits itself to the decision to support efficiently operating and, possibly, profitable companies, that is, to ensure that market principles are taken into consideration when subsidies are awarded. Yet another aspect to be taken into account is the way efficient and profitable companies use such subsidies, in other words, whether they create added value or not. Such a complex economic policy decision that is positive from a normative point of view would require the decision-makers to be properly informed. It would also necessitate a will to ensure that the EU funds are not only spent but also have a tangible effect on economic development. László emphasizes that a basic prerequisite for such a will and for proper information provided to the decision-makers is the compilation of impact assessment studies before the set-up of a subsidy system.

Let’s take a deep breath and see behind “what would be good”. Let’s look at the consequences of the current practice. As shown by László’s research results, non-refundable government subsidies disbursed in an inadequately prepared manner have immediately perceivable short-term consequences as well. Decisions made by the affected entities of the corporate sector reflect the fact that they “have become accustomed to” state subsidy, and adjusted their activities to its accessibility. The competitiveness of such companies fails to improve.

László would be happy to see experts of modelling participate in the work on this interesting research area, so that he could investigate the effects of non-refundable state subsidies in other fields of the corporate sector. The issue may be of relevance to researchers of corporate financing, as currently non-refundable state subsidy is granted at such massive scales that it influences the operating conditions of corporations to a degree that is of macroeconomic significance. László would be pleased to examine the large-scale macroeconomic effects of the phenomenon in cooperation with researchers of macroeconomics. Researchers of corporate strategy may also find that this field of research is linked to their own, as it is perceptible that affected companies no longer develop their products (completely) for the market, but make attempts to utilise funding application opportunities. Moreover, specific problems arise as far as the adequate accounting for such state subsidies is concerned.

This field of research is of interest to many of us. László expects or hopes that his research will ensure that a number of such analyses will be channelled into the government’s decision-making practice, so that subsidies bring about the growth of corporate competitiveness.

Miklós Kozma
Department of Business Studies

The Economic History Research Library

The Economic History Research Library is a nice hidden corner located on the third floor of the Central Library of Corvinus University, housing volumes of historical interest on economic history and the theory of economics, produced in the 16th century or later. The documents preserved in the library may serve as a basis for research in numerous fields. Many related theses have been written. Dedicated researchers work with the material of our valuable volumes, investigating, for example, Pál Teleki’s works on geographical economics, or the beginnings of Hungarian economic thinking. The majority of the volumes are written in German and Latin; some of them are available in translation in the Central Library. Obviously, the Library also houses books and publications written in Hungarian.

In 2008, a volume entitled Liber Oeconomicus… was published to celebrate the 60th anniversary of Corvinus University and its Library. The work, edited by Éva Szőnyi, was intended to inform the wider public about the treasures and values preserved in the Library. To represent the diversity of the collection, colour illustrations of the volumes are included. Currently, the Research Library is preparing for its 70th anniversary. The list below, accompanied by photos taken in the Library, gives an insight into books and publications (either included or not in the volume Liber Oeconomicus…).

[1_kolligatum; 2_kolligatum] Adrian Beier’s collection of publications bound togethe r. It consists of those publications issued separately in the late 1600s that Beier used for teaching.

[4_rajna; 3_rajna] The Rhine area from Mainz to Cologne. The topography and towns (and their sights) are represented on the two sides.

[5_liber; 6_liber] Liber Oeconomicus, the book where the title of the illustrated volume published for the 60th anniversary of the University Library comes from. The manuscript, originally bound in wood, dates back to the 17th century. It contains lists and recipes.

[7_statistika; 8_statistika] A collection of statistical data “for students”, published in 1832. The data pertain to the world’s countries, their population, area, “directors” and religions.

[9_iniciale] Initials rarely appear in printed volumes. The initial of the introduction to Francisco Wagner’s Latin dictionary is a coloured copper engraving.

[10_arany] In the Research Library, several volumes contain pages ornamented with gold.

ProAbility conference


On the 18th of October HR managers, HR directors and CEOs were presented a teaching material that had been developed to enhance the employability of people with disabilities and to highlight the practical skills needed to employ such people. The methodology within the framework of the ProAbility project was worked out by the best experts in the field of the Corvinus Business School and the Salva Vita Foundation. The results were presented during the closing conference of the project, accompanied by best practice cases implemented at the various companies.

Today in Hungary any company which has a staff of more than 25 people can save 1 million HUF (3300 Euro) in taxes if they employ a person with disability. However most companies do not take advantage of this tax-break. Why not? This is the question to which ProAbility wanted and managed to find the answers as a result of involving stakeholders and experts in the field and of analyzing the findings of previous research and initiatives.

The overall aim of the ProAbility project was to connect employers with employees with disabilities. The teaching material created for HR specialists and CEOs is intended not only to inform them of this form of employment, but also to help implement diversity in the workplace principles in practice. The accompanying toolkit contains methodological and pedagogical guidance for teachers and instructors which will assist them in their work and make knowledge-transfer more efficient.

The partners of the ProAbility project are:

  • Corvinus University of Budapest (Observatory Centre for Educational Development, Centre for Teacher Training and Digital Learning, Institute of Management / Department of Organizational Behaviour)
  • Salva Vita Foundation
  • DG for Social and Child Protection
  • NHO Service (Norway)

„For me the ProAbility project was a possibility to deepen my knowledge and experience on the issue of the organizational integration of people with disabilities.”
”Inclusive organizational culture has been an important research topic, from now on we also have a teaching material at our disposal”
Henriett Primecz, associate professor, CUB Institute of Management

 

„For me, the ProAbility project was about professional and personal development, it touched me.”
„As a teacher it enabled me to develop curricula with the aim of providing a practical knowledge base that helps inform participants, raise their awareness and offer them learning through experience.” „The development process also made me face my own mental barriers and gave me the opportunity to transform and overcome them.”
Andrea Toarniczky, senior lecturer, CUB Institute of Management

 

In the Facebook-web of politics – The scholar of the Szabó Kálmán Talent Program presented his research in Cracow


János Bíró, member of the Rajk László College for Advanced Studies has just returned from Cracow where he presented at a conference.

„With ITMO University (University of St. Petersburg) as the main organizer and the support of AGH University of Cracow, young researchers –among them PhD students and a handful of MA students - had the opportunity to present their findings at a conference. These students are the ones whose dissertation had been chosen for publication in the Procedia Computer Science Journal and will also be available online on sciencedirect.com.

I presented a study that is based on network analysis. I analyzed the Facebook networks of 7 Hungarian political parties through the methods of basic network statistics, community detection and the exponential random graph model (ERGM). I was curious about the structure of the network and was interested to see how the different attributes influenced the likes between pages with ERGM.

Currently I am not sure if I want to enter the scientific world, since I am only about to finish my BA studies, but I am certainly enjoying the environment owing to the Szabó Kálmán Talent Program.”

János Bíró heard of this program 4 years ago when he was still student of the St. László Catholic School in the town of Kisvárda.
„The network of Rajk students was at work, they came and introduced the program to their old school. This is how I heard about the program through two students and the possibilities offered by it.

I believe that besides the financial support the best thing about the program is the active professional and community background it offers. This is a distinctive feature owing to which I became familiar with the philosophy of the Rajk College, their attitude to the world. It was so attractive that I wanted to become part of the community. As for the Szabó Kálmán Talent Program, it gave me a push-start, a great opportunity to reach something more, bigger, something that I had always dreamt of. In fact, later on I had the chance to act as coordinator of the program, an activity that I have not given up to this day.”


What would you ask from the famous network researcher Albert-László Barabási?
János Bíró’s question:What would be an exciting topic in the empirical analysis of Facebook that awaits further research?

Kioszk found out! Albert-László Barabási’s answer: Whether people can truly influence each other, or tend to agree only because their friends think alike.

Researcher’s Insights: Miklós Rosta on the development of the university’s social environment and research capacity


From this spring onwards, Corvinus University of Budapest will launch a program called „Institutional Developments for Smart Specialisation”. Within the EFOP 3.6.1 project grant the university can carry out basic and applied research that underpins the economic and social development of the Central Transdanubian region. What is the project about? How can it contribute to both regional and academic growth? We interviewed Miklós Rosta head of the project on the details.

The three-year project that was launched in February 2017 has a double objective. On the one hand, it is a unique initiative built on an exceptional cooperation and knowledge-base that fosters the development of the economic and social environment of the Campus in Székesfehérvár . On the other hand, it helps to recruit an upcoming generation of researchers. The 326 million HUF (1 million EUR) grant will be used for ambitious, forward-looking plans.

The umbrella concept of the many-fold project is network: it will help to improve the competitiveness and the standard of living of the Central Transdanubian region through the research of market, public-service and social innovation networks. Researchers from all the three faculties of Corvinus are involved in this project, a fact that truly shows its network orientation. The questions and issues to be tackled during the project period are based upon the needs and necessities of local communities, of the local governments and businesses that will be identified through interviews, surveys and workshops.

Another positive aspect of the project is that it creates opportunities for young researchers and PhD students to choose scientifically challenging topics that are at the same time socially relevant. Owing to the project, they can also get access to empirical data and research grants, something that might motivate them to continue their career as researchers.

Corvinus University of Budapest will play a role of knowledge-creator and mediator within this project in order to support the Székesfehérvár region’s development by bringing together the actors of business, public administration, civil society and science. For this to happen, a multifunctional lab will be established at the Székesfehérvár Campus which will function as a creative research space for cooperation. The smart systems facilitating smart specialisation, among them the “Talk Lab”, the “Social Lab” and the “Behavioral Economic Lab”, all serve the purposes of conducting cutting-edge research in the social sciences.

The three sub-projects are led by Andrea Gelei (networks generating market products and services), Márton Péti (networks establishing public services and policies) and Balázs Hámori (social innovation networks). The researchers have three years of inspiring work ahead of them. The various stages of the project and interesting findings will be regularly presented by the editors of Corvinus Kiosk.

Máté Baksa

Analyzing supply networks –a behavioral approach. Interview with Andrea Gelei on the world of business relationships and networks


Interviewee: Dr. Andrea Gelei, professor, Corvinus Business School, Institute of Business Economics, Department of Logistics and Supply Chain Management
Interview by: Miklós Kozma, PhD, senior lecturer, Department of Business Studies
27/10/2016

Who among researchers would find this piece of research relevant?
The title of our study financed by the Hungarian Scientific Research Fund (OTKA) is ’Analyzing supply networks – a behavioral approach’. As it examines the impact of business relationships and networks on the economic performance of companies, it can be of interest to many researchers in the field of management. First of all, instead of looking at companies as business nodes, we chose to look at the relationship between the different companies and their complex systems, the units of analysis upon which competition is based today. Also, by widening the level of the unit of analysis, we encountered methodological problems the solution of which is a challenge for researchers in every field. We ourselves have applied a number of methodological innovations. One of them is the dyadic data analysis, which had never been used in economics before, but we also use tools from experimental economics, for example an improved version of the so called trust game.

How can the results be implemented in practice?
The analysis of business relationships sheds light on the trust between partners, which in practice is also a sensitive question. While CEOs mention the issue only cautiously, they are very eager to get the results of the research, since they can gain new knowledge that is vital for their competitiveness. The findings are also interesting for them because as a result of the dyadic nature of the analysis, it will change the CEOs’ self-perception as well as their view on the business world.

What other researchers would you involve?
Given the multidisciplinary nature of the work, the research group has come together from across different departments, even faculties. We have also contacted several other researchers from the areas of finance, management science and sociology. Owing to the innovative approach in both definition (business networks as the research unit) and methodology (dyadic data analysis and experimental game), we envisage further research cooperation from the broad field of business economics.

Photo: György Kenéz

The Corvinus Team won the Heavener International Case Competition


The team of Corvinus University students came first in the 2017 Heavener International Case Competition staged by the Warrington College of Business of the University of Florida. The event was held from 5 to 11 of February. Members of the winning team were Luca Csanády, Domonkos Erőss, Natália Madarász and Bence Nemes, accompanied by myself as mentor. Out of the 76 mainly native English students , Natália Madarász won the Award for Best Presenter.

19 teams from leading universities across the globe, accompanied by faculty members with significant case solving experience took part. By winning the competition, the Corvinus team has become eligible to participate in the global Champions’ Cup and received further invitations to other competitions.

The preparations were led by professor Erzsébet Czakó along with lecturers of the Institute of Business Economics: Zsolt Ábrahám, Miklós Kozma, Zsolt Matyusz and Miklós Stocker and alumni of the Cases on International Business Strategy (CIBS) course. The Case Solvers team provided valuable professional assistance too. The CIBS course has passed its 9th year. This course is fine-tuned each year, taking into account the experience, information and insights gained during the international competitions. Nevertheless it is always an exciting task to adapt the tactics of the team to the given competition and to given opponents. The mentality and preparedness of the team are crucial to how successfully the tactics can be implemented. In Florida all went very well and we were acknowledged by several foreign colleagues who had not known Corvinus before. The competition consisted of two rounds. Whereas during the first round the teams had 6 hours to solve a case, in the second round they had 30 hours at their disposal to develop their solution. Both cases were evaluated by a jury of 4-5 members from the world of corporations. According to the jury, the strength of the Corvinus team lay in the feasibility of their solution which placed them above all the other competing teams.

The results of the competition:

  1. Budapest Corvinus Egyetem
  2. Singapore Management University (SIN)
  3. Nanyang University (SIN)
  4. University of New South Wales (AUS)

 
Other participating universities:
Concordia University (John Molson School of Management) (CAN)
Florida State University (USA)
Hong Kong University of Science and Technology (HKG)
Ivey Business School (CAN)
Maastricht University (NED)
Penn State University (USA)
Queensland University of Technology (AUS)
Rotterdam University (NED)
Simon Fraser University (CAN)
University of Alberta (CAN)
University of Belgrade (SRB)
University of California, Berkeley (USA)
University of Florida (USA)
University of Melbourne (AUS)
University of Waikato (NZE)

Miklós Kozma, Department of Business Studies

Pages