college of business

How American consumers view debt: a case study

CORVALLIS, Ore. – A new study published this month suggests that while younger Americans are more smitten with credit cards and debt than older Americans, the older generation helps enable their children by encouraging use of credit as a “safety mechanism.”

The findings were based on case studies conducted with 27 white, middle-class Americans in 2006. The researchers, Michelle Barnhart of Oregon State University and Lisa Peñaloza of Ecole des Hautes Etudes Commerciales du Nord of France, wanted to explore some of the attitudes, perceptions and cultural meanings behind how Americans view and use debt and credit that could have contributed to the economic recession. While a small study, Barnhart said these participants were representative of overall perceptions Americans have on credit.

The results, which include detailed interviews with participants, are currently available online and will be published in the December issue of the Journal of Consumer Research.

“The economic crash was not just about people being dumb or greedy,” Barnhart said. “There are compelling forces out there that lead people to live lifestyles outside of their means.”

In 2008 alone, Americans spent 9.3 percent of their income servicing debt. And in 2010, more than 24 percent of homes in the United States had an upside-down mortgage owing more than the homes were worth. Based on interviews conducted before the 2008 financial crisis, researchers found that even though consumers espouse that they should limit their debt, they take on significant debt because doing so has become normal. As one participant put it, taking on debt is “the American way.”

Barnhart and Peñaloza’s research yielded a few key findings, including:

  • Americans suffer from a lack of financial literacy. Every participant said they had learned about credit card use and debt primarily through personal experience. Very few had received any training in school or at home, and most participants said they didn’t discuss family finances with their children.
  • Half of the participants had debt they were unable to pay and one-third of them were dealing with collection agencies.
  • Participants often talked about credit as a measure of worth, noting that if they were approved for a certain loan they were “good enough for that car.” Statements often indicated that approval for big-ticket items such as cars and homes were directly related to a value of the person.
  • Those who had credit cards and paid them off each month tended to be older, and had higher incomes.
  • Several of the younger participants in the study noted that they did not want to use credit, but felt they had to in order to finance cars and homes in the future. Most of the younger participants also were encouraged by their parents to have credit cards, and started using credit at a much younger age than those older than 50.

Barnhart, who is an assistant professor of marketing at OSU, said much of the research done on cultural behavior and attitudes leading up to the economic downturn has focused on ethnic minorities and low-income minorities. However, she said it has been some of the most educated and privileged of Americans who have engaged in risky financial behavior.

This case study, while a small sample, was able to ask detailed questions to probe into deeper issues within American society.

“Over time, credit card use and heavy debt has become normalized in our culture,” she said. “Even though we say as a society, ‘don’t get in debt,’ the overwhelming messages being sent out – from the way credit is used to approve or disapprove us for services to political leaders telling us to spend after a big disaster to prove our patriotism – all of this has created a culture of debt.”

One of the few young participants to not carry any debt said she felt punished for her refusal to have a credit card. She was refused a cell phone, and had encountered embarrassing situations during business travel because she did not have a credit card. Barnhart said this system of penalizing consumers for not using credit is one of the problems.

“Your credit score is this big black box mystery,” she said. “There are three companies in the entire country that control this information, and they make the rules and the equation is secret. So people are told to get credit cards, but not use them. For some, this is equivalent to filling your freezer with ice cream and telling you not to eat it.”

Barnhart would like to next do a study about how norms, values, and habits have changed since the economic crisis. However, she said financial literacy is still the missing link in American society. She and Peñaloza believe that financial literacy classes should be required in schools, and that these classes should not only address credit card fees and compound interest, but also critique debt as a cultural value.

“It’s easy to sit back and blame consumers for just spending too much, but the truth is we have an entire infrastructure set up to support, maintain and encourage credit card use and debt,” Barnhart said. “I would love to see economics back in high school classes that addresses how to manage household finances. And firms need to step up. The 2010 credit card reform was a step in the right direction, but more needs to be done.”

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Michelle Barnhart, 541-737-1455

Students and aspiring entrepreneurs invited to ‘pitch’ business ideas for competition

CORVALLIS, Ore. – Oregon college students and entrepreneurs are invited to pitch their venture ideas for the chance to win cash and other prizes.

Oregon State University’s Austin Entrepreneurship Program will hold The American Dream Elevator Pitch Competition on Friday, April 22, at the CH2M Hill Alumni Center, 725 S.W. 26th St. Corvallis. The event runs from 9:30 a.m. to noon and is free and open to the public.

The idea of an elevator pitch is that the entrepreneur has about the length of an elevator ride to explain a business idea. Participants will each have 90 seconds to pitch their venture idea to a panel of judges, which will include successful entrepreneurs, senior executives, venture advisers and investors. The participant must tell the judges what their venture does and convince the panel why it is compelling to both investors and customers.

Participants will compete in one of two categories: a student entrepreneur division and an entrepreneur division.

Each division will compete separately, and the finalists in each will go head to head for the top overall prizes. The award for first place is $500, while second place winners will receive $250, and third place finishers $200.

Entries must be received by April 15 to be eligible to compete in the event. For information on entry requirements, visit http://aep.bus.oregonstate.edu

The Austin Entrepreneurship Program is the largest residential living-learning facility dedicated to entrepreneurship in the nation. Because the majority of its residents are first-year students, the program shapes many students from the start of their OSU experience, providing a deeper immersion in entrepreneurial thinking.

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Mary McKillop, 541-713-8044

Alumni and Business Partner Awards set for May 3 in Portland

PORTLAND, Ore. – Prominent business leaders from around the country will be honored during the Oregon State University College of Business’ Alumni and Business Partner Awards on Tuesday, May 3, at the Governor Hotel in Portland.

The event begins at 5:30 p.m. with a reception, followed by dinner and the awards presentation.

This annual event recognizes outstanding professional achievements and service by the OSU College of Business alumni and business partners.

The 2011 award winners include:

• Hall of Fame: Patricia Bedient (’75), executive vice president and chief financial officer, Weyerhaeuser

• Distinguished Business Professional: Steve Gomo (’74), executive vice president and chief financial officer, NetApp Inc.

• Distinguished Early Career Business Professional: Ryan Smith (’95), chief financial officer, Nike Golf

• Distinguished Young Business Professional: Rachel Todd (MBA ’08), vice president, Clinical Services & Specialty Practices, Samaritan Health Services

• Distinguished Business Partner: Ferguson Wellman Capital Management, award being accepted by Mark Kralj (’78), principal

• Distinguished Service Award: Brigadier General Al Guidotti (’56), Boeing (retired)

For more information and to register on or before April 22, visit http://business.oregonstate.edu/awards

The event is sponsored by the Portland Tribune and Community Newspapers.

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Gwen Wolfram, 541-737-4330

Nominations sought for Outstanding High School Educator Awards

CORVALLIS, Ore. – Nominations are being sought for the 2011 Outstanding High School Educator Awards.

Sponsored by Portland Tribune and Community Newspapers and the Oregon State University College of Business, the awards will recognize five educators who use innovative and exemplary instructional strategies to enhance student learning.

The nominee must be a high school educator (teacher, adviser, or administrator) in Oregon or Clark County, Wash., with at least two years of experience as an educator. The winning five nominees will each receive a $500 cash prize and recognition at the OSU College of Business’ 2011 Alumni and Business Partner Awards dinner on May 3 at the Governor Hotel in Portland.

Nominations can be submitted online on or before April 8 at http://portlandtribune.com/forms/educator_award.php

The High School Educator Awards were established in 2008 to acknowledge the importance of business education at the high school level. The awards ceremony takes place in conjunction with the Alumni and Business Partner Awards, an annual event that honors prominent OSU College of Business alumni and friends.

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Sue Curran, (503) 546-0716

OSU launches research to help colleges connect with alumni and donors

CORVALLIS, Ore. – Oregon State University’s Close to the Customer Project has launched a new research tool, the Building Community Initiative (BCI), to assist other colleges and universities in fundraising efforts. 

The BCI assesses the affinity and connection that exists among an institution’s alumni and donors. This level of affinity is measured in four areas. The BCI affinity research looks broadly at the diverse relationship a person can have with an institution of higher education. It produces a score that is associated with each area of affinity and each person is assigned an overall BCI score denoting their overall level of affinity toward the institution. 

“What sets this research apart from other products on the market is its ability to pinpoint how alumni and donors feel right now,” said James McAlexander, director of the Close to the Customer Project and a professor of marketing at OSU. “We are not looking at public domain information. We are going to the source and using very specific questions and detailed analysis to determine an alumni or donor’s allegiance to an institution.”

Many research tools used by universities to identify a donor’s giving potential typically screen for capacity to give or often assigns a person a “wealth score,” McAlexander said. The BCI provides university advancement and foundation professionals a fresh and innovative way of connecting with alumni and donors.

The information gained through the BCI survey can be used independently or combined with existing wealth and biographical information to create a deeper understanding of a person’s affinity and propensity to give. This research has the capacity to bring new donors to the surface, focus development priorities and even discover underlying areas of dissatisfaction for current or potential donors.

Mark Koenig, senior director of advancement services for the OSU Foundation, said BCI has been invaluable for him to put together lists of potential donors for the Campaign for OSU. The OSU Foundation used the BCI to learn more about their discovery pool. 

“The BCI score tells me whether someone has high affinity towards the university rather than lukewarm affinity, so we can really prioritize those individuals that we want to reach out to first,” he said.  

Koenig emphasized that he used the information not only to prioritize contacts but appropriately segment potential donors.

“We were able to not only find out how well alumni liked their experience at OSU, but what their priorities are,” he said. “So maybe a certain person loved their professor and degree, but hates athletics. We’re not going to target that person to contribute to a new athletics facility.”

For information on this research, go to www.oregonstate.edu\bci

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James McAlexander, 541-737-3182

Weatherford Awards honors entrepreneurs, innovators on Feb. 17

CORVALLIS, Ore. – Business leaders from across the state will gather Thursday, Feb. 17, at the Hilton in downtown Portland for the third annual Weatherford Awards, Oregon State University’s celebration of lifelong and pioneering entrepreneurship and innovation.

The event, hosted by OSU’s Austin Entrepreneurship Program, starts at 5:30 p.m. with a reception, followed by a dinner and the award presentations. Tickets are $75, available until sold out and can be obtained by contacting Mary McKillop, 541-713-8044, e-mail mary.mckillop@bus.oregonstate.edu or on the web at: http://business.oregonstate.edu/programs/aep.

“The Weatherford Awards recognize pioneering and lifelong entrepreneurs and innovators who have shaped our world and, in many cases, are simply overlooked,” said Christopher Klemm, director of the Austin Entrepreneurship Program. “Our goal is to honor those pioneering spirits and help publicize the role, importance, and variety of entrepreneurs and innovators who have Oregon roots.”

Past individuals honored through the Weatherford Awards include a broad cross-section of individuals and their activities. For example, among the entrepreneurs honored at past awards include the inventor of the inkjet printer, cattle ranchers, a wheat breeder, a restaurateur, and a natural foods maker.

The awards are named for OSU's Weatherford Hall where entrepreneurship and business students can explore their innovations and new venture ideas in a unique, living learning residence hall.

For complete bios of the winners, go to: http://business.oregonstate.edu/programs/aep

The recipients of the 2011 Weatherford Awards will be:

  • Frank Dulcich, entrepreneur, co-founder and CEO of Pacific Seafood. Headquartered in Clackamas, Pacific Seafood opened its first retail location in Portland in 1941. Dulcich has successfully driven his company to become the largest vertically integrated seafood company in the United States.
  • Paul Gulick, entrepreneur and founder of Clarity Visual Systems, co-founder of InFocus Corporation, father of the digital projector. Until late 2007, Paul served as chief technology officer of Planar Systems, Inc., a leader in specialty display systems. Gulick serves on six boards and holds 17 U.S. patents in the field of electronic displays and related technologies.
  • Jack Smith, inventor and co-founder of Hotmail, serial entrepreneur. Jack Smith started Hotmail, the first Web-based email service. After Hotmail was sold to Microsoft in 1997, Smith focused on advanced infrastructure design. He is CEO of the information security company Proximex.
  • Rex Smith, former chairman and COO of the Hotmail venture and father of Jack Smith. Rex Smith served as vice president for MSN Operations prior to his retirement in 2002. In 2006, Smith received the OSU College of Engineering Hall of Fame award.
  • Junki Yoshida is chairman and CEO of Yoshida Group, visionary behind the famous Yoshida sauce. Born in Kyoto, Japan, Yoshida arrived in Seattle at the age of 19 with only $500 in his pocket. Today his line of sauces sells in stores throughout the country.
  • Fred Ziari is founder of ezWireless and IRZ Consulting, a leader in water and energy conservation technologies. He is chief executive of IRZ Consulting, ezWireless and Onsmart LLC. Ziari founded OnSmart Technologies in collaboration with Intel to provide the next generation of hardware and software platform that will allow homeowners to manage the energy use in their homes.
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Christopher Klemm, 541-737-8046

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Frank Dulcich
Frank Dulcich Paul Gulick
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Rex Smith
Junki Yoshida Fred Ziari
Fred Ziari

New Portland workshop series for family businesses starts Feb. 9

CORVALLIS, Ore. – Oregon State University’s Austin Family Business Program will launch a series of monthly workshops for family businesses in Portland. The first session, “Family Policies Today Help Family Business Tomorrow,” will be held Wednesday, Feb. 9, at the Governor Hotel (614 S.W. 11th Ave.).

This new “Business for Breakfast” series will address fundamental aspects of running a family business.

“The family business community is ready to come together and examine some key management and governance issues in running a family business,” said Sherri Noxel, interim director of the Austin Family Business Program. “This series will be the beginning of extensive programming addressing more advanced family business issues in the future.”

The series will feature networking and in-depth discussions with experienced advisers and each session will be facilitated by an Austin Family Business Program board member. Participants will learn about new resources available to help businesses and gain perspectives on issues such as governance, leadership and finances.

All sessions are from 7:30 to 9:30 a.m. and include breakfast. The cost is $30 per session or $100 for the entire series of four topics. For tickets or information, call 800-859-7609 or http://familybusinessonline.org.

The Feb. 9 session will be facilitated by Clint Bentz, a member with Boldt, Carlisle & Smith, a full-service CPA firm with offices located in Albany, Salem and Stayton.

The speakers are June Wiyrick Flores of Ater Wynne LLP and Terri Bennink of Columbia Leadership Institute. Flores is an attorney who works with families and businesses to develop and implement succession strategies. She is also experienced in estate and trust administration. Bennink is an organizational development consultant who specializes in assisting and advising family businesses.

Noxel said many family business owners have expressed that a common barrier to improving their business was the lack of written policies and agreements. The development of agreements help families connect and strengthen their shared understanding of core issues in the family and the business. This session will facilitate an extensive discussion to help family business leaders discover how policies such as family employment and compensation and family charters are being used to strengthen today’s family businesses.

The rest of the Business for Breakfast series includes:

March 10:

Topic: “Family Business Boards and Advisors: Outside Directors Bring Insight.” Facilitator: Mark Kralj, Ferguson Wellman; Speakers: Mike Henningsen, Henningsen Cold Storage, and Richard Simmonds, Simmonds Associates. Location: Tonkon Torp., 888 SW 5th Ave., Portland;

April 13:

Topic: “Family Business Banking for Long-Term Success.” Facilitator: Kay Abramowitz, Ater Wynne LLP. Speakers: Justus Poling, Umpqua Bank, and Leif Hansen, Leif’s Auto Collision Centers. Location: Governor Hotel;

May 10:

Topic: “Family Business Tax Matters in 2011.” Facilitator: Ken Madden, Madden Industrial Craftsmen. Speaker: Gwen Griffith, Tonkon Torp, LLP. Location: Tonkon Torp.

Story By: 

Sherri Noxel, 541-737-6019

Profiling based on mobile, online behavior: a privacy issue

CORVALLIS, Ore. – It’s illegal for businesses and law enforcement to profile a person based on their race, gender, or ethnicity, yet millions of Americans are being profiled every day based on their online consumer behavior and demographics.

Known as consumer profiling for behavioral advertising purposes, this type of profiling is largely unregulated.

The result, according to two recent articles in the journal of Computer Law & Security Review, is that consumers have less privacy and are being targeted by advertisers using increasingly sophisticated measures, which may include efforts to alter behavior based on online tracking and profiling.

The articles examine existing privacy laws to determine how well they protect consumers’ privacy and look at possible ways to protect consumer privacy including adopting new laws, using technology to protect privacy and voluntary efforts by the advertising industry.

Nancy King, associate professor of business law at Oregon State University, is lead author on the articles in a two-part series on profiling of mobile customers. King is an expert on privacy issues and e-commerce and has been studying issues related to consumer privacy and data protection for more than a decade.

“Most people do not know they are being tracked, and they aren’t given a choice whether to be tracked or to have their online behavior and personal information shared with large networks of advertisers,” King said. “Online advertisers may know or make inferences about what neighborhood you live in, your gender and how much money you make and even very intimate details – such as if you are trying to lose weight or where your next vacation is planned – and they use that information to target advertising at you.”

In addition to the concerns regarding online behavioral advertising, mobile users have added concerns, King said, because typically only one person uses a particular cell phone and the geographic location of cell phones may also be tracked. So advertising generated through cell phone tracking and profiling may be both personal and location-specific.

King gives a hypothetical example of fast food ads based on profiling teenage customer behavior and demographics that could produce highly-targeted ads sent to teens on their cell phones. These ads can be time- and location-targeted, arriving when teens are likely to be out of school or when they happen to be near fast food restaurants.

Given the concern about obesity in our culture, King said teens and their parents may have legitimate privacy concerns about the impact of these types of ads on teenagers’ food choices; yet existing laws do not protect these privacy interests.

“Profiling can manipulate consumers’ behavior without them knowing that they have been categorized by advertisers,” King said.

King seeks potential solutions to protect consumers’ privacy, but she said it is important to avoid privacy solutions that go too far and might unduly restrict the behavioral advertising industry. Often the right balance involves ensuring consumers have enough information and mechanisms in place to protect their privacy.

As it stands now, King said, consumers have little choice whether or not they are tracked or profiled. Online users can disable tracking cookies – software code that is downloaded to your computer by websites that track consumers’ behavior – but many websites will not allow users to access their sites if cookies are disabled. And wiping cookies from your computer regularly may not help either.

Web beacons are another tool used to track behavior, but instead of downloading the tracking device to a personal computer, a beacon tracks behavior directly from the website. Web beacons can record almost every individual move of a web user and users have no control over beacons since they reside on the websites that users are visiting.

King said that online behavioral advertising is a new and effective tool to reach potential customers, which is one reason why the privacy issues are as yet unresolved. However, as lawsuits – such as one pending against Facebook for potentially disclosing users’ personal data to advertisers – continue to increase, King said it is inevitable that the issue of online and mobile privacy will be addressed, if not by Congress, then by the courts.

“The bottom line is that we as consumers are being tracked and profiled, and it is an invasion of privacy and in some cases gets into issues of social justice,” King said. “You are being targeted because you ‘look’ like someone who may – or may not – be interested in a certain product, but you may never know what the advertiser knows about you that lead to this conclusion.”

The implications of consumer profiling go far beyond receipt of targeted advertising. Imagine this scenario: you are on a travel website browsing airline ticket fees, and you decide to do shopping on other websites. You find a good deal on a hotel at your proposed destination, so you make a reservation. A few hours later you re-check the travel site only to notice that the price has increased by $100. Most likely, you have been profiled as a return visitor and a customer who is highly likely to buy an airline ticket, based on online tracking enabled by the cookie that was downloaded to your computer on your first visit to the travel site. So, now the price of those tickets is higher – just for you.

This type of profiling is not currently illegal in the U.S., nor is it known how frequently it may occur.

“You should have the right to surf the Internet and use your mobile phone without being tracked and profiled, and you should be given a choice about whether you want to receive behavioral advertising,” King said.

The first part of this study was published in the September issue of the Computer Law & Security Review and the second part appeared in the November issue. Pernille Wegener Jessen from Aarhus University in Denmark is co-author of the paper, which was named “Best Academic Paper” recently at a conference in Barcelona for the International Association of IT Lawyers.

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Nancy King, 541-737-3323

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Nancy King

OSU business prof to discuss entrepreneurial wealth and risk at conference

CORVALLIS, Ore. – A new study suggests that for entrepreneurs, both wealth and attitude toward risk matter, but in different ways, depending on the source of funding sought by the entrepreneur.

 Julie Elston, a business faculty member of OSU Cascades campus, has been invited to present on her findings from this study regarding the role of risk and individual wealth at a major conference in Washington D.C. on Nov. 2.

Elston will present at a joint conference between the National Academy of Sciences and the German DIW, DC held on Nov. 1 and 2. DIW DC is a private, nonprofit, nonpartisan economics institution focused on bridging the gap between academic research and public policy. Its partner institution is DIW Berlin, or Deutsches Institut für Wirtschaftsforschung (German Institute for Economic Research).

Elston, an associate professor at OSU Cascades, is an expert on international business, finance and entrepreneurship. In 2008 she was selected as a Fulbright Scholar to study the impact of science on policy formation in the European Union.

Elston’s presentation in Washington D.C. comes from her recent paper in the current issue of the

Journal of Economic Behavior and Organization. In a paper titled, “Risk attitudes, wealth and sources of entrepreneurial start-up capital,” Elston suggests that lower levels of wealth increase the probability of using a Small Business Innovation Research (SBIR) grant, but lower levels of wealth also reduce the probability of using loan financing.

“This indicates that collateral is still important in the lenders decision to finance small firms,” Elston said.

For those entrepreneurs financing firm start-ups with earnings from a second job, the study found it is not wealth but risk aversion which causes individuals to seek this source of financing. According to Elston, this underscores the importance of risk attitudes in the financing choice of the entrepreneur. The study noted that 58 percent of U.S. firms in the study used earnings from a second job as the primary source of funds for start-up capital -the most common funding source, in contrast to findings for the United Kingdom, where the most common external funding source (73 percent) was bank loans.

“More generally, this suggests that country-specific institutional differences may also impact funding choices,” Elston said.

 Overall, findings suggest that both wealth and risk attitudes may play an important role in the financing choice of entrepreneurs.

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Julie Elston, 541-788-1422

CEO to discuss computer fraud and how to stop it

CORVALLIS, Ore. – Greg Pierson, founder & CEO of iovation Inc., is the next speaker in Oregon State University’s Entrepreneur in Residence lecture series.

His free, public lecture begins at noon on Thursday, Nov. 4, in the Construction & Engineering Auditorium at OSU’s LaSells Stewart Center. Pierson’s talk is titled, “How do you Stop 100,000 Computer Frauds a Day?”

Pierson says he is committed to helping make the Internet a safer place for individuals to conduct business and interact with each other. In 2004, he started the company iovation and invented “device reputation” – a way for businesses to identify hackers and thieves on their websites and keep them out for good. Today iovation stops 100,000 online fraudulent activities every day.

In his talk, Pierson will share what kind of fraud and abuse iovation stops, how they do it and why it is important to businesses and consumers.

In addition to the public lecture, Pierson will be at a faculty luncheon at 1:30 p.m. and talk with students as part of a fireside chat at 3 p.m. To RSVP for either of those faculty or student events, e-mail mary.mckillop@bus.oregonstate.edu or call 541-713-8044.

The talk is sponsored by the Austin Entrepreneurship Program and the School of Electrical Engineering and Computer Science at OSU.

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Mary McKillop, 541-713-8044

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Greg Pierson