The Business Review, Cambridge

Vol. 14 * Number 2 * Summer. 2010

The Library of Congress, Washington, DC   *   ISSN 1553 - 5827

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A Proposal for the Convergence of Global Accounting Standards Relating to R & D Capitalization Based Upon an Empirical Study of Product Development Projects

Prof. Lee Tagliaferri, Pace University, New York, NY

 

ABSTRACT

The Financial Accounting Standards Board Statement No. 2 (SFAS No. 2) and the International Accounting Standards Committee Statement No. 38 (IAS N0. 38) are in accord with respect to expensing research expenditures and criteria which are prerequisite for the selective capitalization of product development costs.  Hence, the two standards are not at odds because of differences in generally acceptable accounting principles.  Rather, the two are separated by a dichotomy of confidence which can be placed on subjective managerial judgments of the feasibility of product development objectives of a project. SFAS No. 2 allows no subjectivity for selective capitalization, whereas IAS No. 38 takes the opposite stance. The purpose of my study is to discern if specific product development objectives can be predicted to be successful with confidence and if others can be identified which do not fulfill conditions required for selective capitalization because of conditions of uncertainty. The outcome of my study perceives that certain categories of product development projects with specific technology and marketing objectives fulfill the criteria of success predictability for selective capitalization.  The United States SFAS No. 2 and international IAS No.38 are in accord with each other regarding accounting principles for expensing research costs.  Both standards, also, are in general agreement concerning criteria which must be fulfilled in order for exceptions to be allowed for the selective capitalization of development costs.  However, the two standards contrast each other regarding if or when these criteria can be fulfilled based upon perceptions of conditions of uncertainty. SFAS No. 2 does not endorse selective capitalization on the premise that accurate evaluations of uncertainties are inconceivable, whereas IAS No. 38 gives management full discretion to judge feasibilities.  The prerequisite conditions for selective capitalization in the two standards are, essentially, the same: certainty with respect to technology, marketing, and economic feasibility and management commitment.  SFAS No. 2 also includes as a criterion usefulness in financial reporting. . The conclusion of my study supports IAS No. 38 but suggests an exception for SFAS No. 2.  Conversely, my study also deduces that there are product development projects with specific technology and marketing objectives which do not fulfill the criteria for selective capitalization, because of conditions of uncertainty.  This conclusion supports SFAS No. 2 but suggests an exception for IAS No. 38 to constrain the subjectivity to evaluate the feasibility of specific product development objectives of a project which satisfy criteria for selective capitalization.  The incorporation of the foregoing exceptions to SFAS No. 2 and IAS No. 38 conveyed by my study would unite the two statements into a global accounting standard for research and the selective capitalization of product development costs.  The model for my research embraces a broad universe of development projects in empirical studies of product development projects which depict technology and marketing uncertainties.  The universe is found in textbooks and academic papers written by scholars of product development management.  The purpose of my research is, first. to investigate the empirical studies of product development projects in order to evaluate if any of their objectives fulfill the feasibility conditions required for selective capitalization. Subsequently, if feasibility conditions are identified, the goal of my study is to categorize circumstances when the technology and marketing criteria for selective capitalization are fulfilled.  My evaluation of the feasibility of product development objectives was guided by the theory of uncertainty of Frank H. Knight, the cofounder of the Chicago school of economics and the author of the acclaimed textbook on the subject, Risk, Uncertainty, and Profit. His theory provided the rationale for classifying a project in an empirical study as either feasible or uncertain for technology and/or marketing. In addition to technology and marketing feasibility, ancillary conditions which must be met for the capitalization of product development costs include economic feasibility, management commitment, and usefulness in financial reporting. Those conditions are investigated after both technology and marketing feasibility criteria are found for product development project objectives.   Dynamic scientific discoveries accelerated the pace of technological development in the past several decades. Significant academic research regarding the management of product development emerged in order to devise strategies to control development costs for the discovery and application of new technology. Textbooks and professional papers document the evolution of numerous technologies in their life cycles and expound the diverse objectives of product development which take place. While formulating principles of product development management in the research literature, authors incorporate empirical studies for various types of projects in the life cycle spectrum of a particular technology. Within the stages of the life cycle, I probed the empirical studies incorporated in the research literature. The empirical studies manifest technology and marketing uncertainties inherent in projects based upon their product development objectives. Those objectives which ascertain the feasibility for success for a project and its probable benefit to the future are identified and categorized in my study.  The phases of my study are organized as follows:  The engineering and design facets of product development projects were explored.  This gave an insight on technology objectives and related uncertainties of projects.  The understanding of the engineering fundamentals of product development steered my evaluation of feasibility conditions of  technology in development projects which must be met for selective capitalization . An investigation of empirical studies of product development projects, subsequently, was carried out. Product development projects analyzed were collected from the universe of projects in the empirical studies found in academic literature on the subject of product development management.

 

Mark-to-Market Rule and Its Impact on the Financial Crisis

Dr. Hailu Regassa, Professor, Colorado State University – Pueblo

Geri Wink, Colorado State University – Pueblo

 

ABSTRACT

The mark-to market rule also known, as “fair-value” accounting has been the subject of much debate and controversy over its impact on and implications for the current economic crisis in general, and financial markets, in particular.  Critics have identified this standard to be responsible for the undue write-downs of asset values at a time when there are no active secondary markets for those assets.  Companies that are subjected to this rule had to raise significant capital to stay afloat in the face of a precipitous drop in their stock prices to unsustainable levels in the midst of a dire economic crisis.  The US Government had to step in to prop up the balance sheets of some of those corporations, particularly major financial institutions, whose assets were significantly impaired.   Our paper explores on whether or not the market-to-market rule is actually responsible for the increased volatility in the stock prices of those companies that have to abide by this rule which, in turn, led to the impairment of their assets. We begin by addressing the primary objectives of accounting reports.  In general, accounting reports should accurately reflect and measure the current economic conditions of the firm, facilitate comparisons of a firm’s performance and its financial condition over time and across firms within an industry, and be as fairly objective and consistent as possible.  It is not clear which of these broad goals will repeal or revisions of the mark-to-market rule serve.  If they have their way, it is possible that some managers, usually motivated by managerial self-interest, may not disclose valuable information in order to engage in deceptive practices by fudging their accounting numbers to the detriment of shareholders and other stakeholders.  At a time when these assets are declared non-performing or toxic assets, even if we get rid of or relax the standards of this rule, as long as the underlying problems that triggered the current economic crisis still persist, it will still be difficult to carry out meaningful comparisons across firms at this critical juncture.  In addition, there is no clear cause and effect relationship between the mark-to-market rule and the viability of those firms that are directly impacted by this rule.  At least, we have not come across any research yet that documents such evidence.  This also begs the question as to whether there are other accounting standards that need to be revisited every time economic circumstances turn sour.   We also doubt whether this rule will bring about order and calm to the US domestic market in the face of a global financial meltdown.   The global economic outlook raises another immediate concern for the accounting profession.  In order to enhance an objective assessment of existing or potential standards, there needs to be recognition to adhere to and move towards globally coordinated accounting standards.  These are dilemmas that the FASB may be faced with in deciding on whether this rule should be modified or temporarily suspended.  The FASB appears to have actually bowed to pressure from the banking community, legislators and powerful lobbyists and relaxed this standard on April 2, 2009 to become operative in the second quarter of 2009.   Even if the mark-to-market rule is somehow modified, as was widely anticipated, we doubt whether such measure, notwithstanding the lingering underlying problems that beset the markets, will turn the tide against the continued down ward spiral in asset valuation.  Our paper will shed some light on alternative courses of action to mitigate the controversy surrounding this issue.  The current financial crisis has created very complex and intractable problems that have unimaginable consequences beyond our shores.  Over 40 percent of global capital has been wiped out since the recession started in late 2007 and the rank of the unemployed and underemployed continues to rise unabated.  While there is enough blame to go around for the slump in economic activity and the market meltdown, this paper will primarily focus on some of the thought provoking and burning issues related to the mark-to-market Rule (FASB 157) and its impact on the domestic and global economy, in general, and financial institutions, in particular.  It has been widely reported in the financial media on how the investment banking community led by Goldman Sachs, Morgan Stanley, the now defunct Lehman Brothers, Merrill Lynch, which merged with Bank of America, Washington Mutual and Bear Stearns which were merged with JP Morgan Chase, Wachovia which was merged with Wells Fargo, Citigroup, American International Group and other major financial institutions were able to create layers and layers of exotic and complex financially engineered risky products backed only by a small fraction of the value of the underlying assets (mostly subprime mortgages).    This was done with the tacit approval of the rating agencies and without the proper scrutiny of a regulatory oversight.  Mizen (2008) estimated how at its peak, $600 billion in subprime mortgages, metastasized into trillions of dollars of potentially toxic asset-backed securities, collateralized debt obligations and credit default swaps.  The credit default swaps alone, by some estimates, have a notional value in excess of 60 trillion dollars. Many economists cite Mortgages as the major culprit for the economic down turn.  Mortgages backed by actual homeowner’s income stream are the backbone for all the layers of derivatives that were created by financial institutions and hedge funds.  These mortgages were sliced and repackaged into various classes of collateralized debt obligations (CDOs) and were sold to domestic as well as global investors.  The investors who purchased these securities were, however, far removed from the underlying assets that generate the cash flow streams and neither did they have adequate information to make informed decision.   As the subprime mortgages went sour due to massive delinquencies, defaults and foreclosures, the rating agencies, the very agencies that first anointed their creation, started downgrading the institutions that hold claims to these assets and this, in turn, took the markets by the storm.  Joseph Stiglitz, Nobel laureate and former chief economist of the World Bank, underscored the importance of economic information by arguing,

 

Expecting Less and Getting More: Trike Survey Over Performs

Dr. Annette Ryerson, Black Hills State University, Spearfish, SD

Dr. Barbara Looney, Black Hills State University, Spearfish, SD

 

ABSTRACT

Current market research that implements survey collection is moving away from the traditional, quantitative method centered on mailed paper questionnaires.  Trends have shifted toward electronic options, from email contact and website surveys to blogs and chat rooms for customer feedback.  A recent student-generated survey for Lehman Trikes, the three-wheeled motorcycle manufacturer, relied upon a paper questionnaire; despite numerous structural flaws and non-standard implementation, the survey outperformed all reasonable measures of expectation.  The reasons for the survey success deserve consideration, as marketers move toward paperless data collection.  Based on the Lehman success, a cautionary pause may be due before researchers presume mailed surveys are passé.   Marketing survey results often generate new questions, even as they provide answers about product use, customer preference, and sales potential.  Surveys demand time in careful preparation; casual or hurried forethought can readily sabotage data collection.  Developing an effective survey is essential when attempting to collect the appropriate information needed to target customers with the correct message, price and promotion.  This paper focuses on a tightly controlled customer survey conducted in early 2009 for Lehman Trikes, Inc., a company that manufactures three-wheel, custom motorcycles.  Lehman agreed to have two marketing students from Black Hills State University provide research services by creating and conducting a customer survey.  The results up-ended the anticipated survey paradigm when, despite notable flaws, the survey actually functioned quite credibly.  The unexpected outcome offers both insight and speculation about what diverted failure, and about what we can learn from results gleaned despite flaws. Before sharing particulars about the Lehman Trike survey, we offer some background on current survey research.  If we consider current trends in survey methodology and compare them to how the Lehman example functioned, then we can better grasp what made the Lehman results rather surprising.  At present, debate continues about the best method for conducting marketing research surveys.  Endless hours of interpreting paper and pencil results and waiting for mailed replies from more respondents could be coming to an end.  The future of marketing research appears to lie in the interpretation of online blogs, chats and various forms of hybrid surveys.  Ray Poynter (2009) has predicted that in the future, “Conventional quantitative studies will be increasingly seen as unable to provide valuable insight, and as being poor value for the money.  Research communities will become the centerpiece of many companies’ insight strategies, answering some questions directly, dictating the needs for some research and tying the various strands together.” As Poynter recognizes, with “value for money” dictating trends, survey methods will move away from paper to faster and less costly strategies.  Respondents want to be reached where they are most comfortable and where it is most convenient for them.  In their recently completed book, Internet, Mail and Mixed-Mode Surveys: The Tailored Design Method, authors Dillman, Smyth and Christian (2009) assert that, with convenience and ease as primary respondent motivators, preferable survey models should incorporate multiple modes.  Dillman explains, “When surveyors decide from the beginning that achieving good results requires using multiple modes, questions must be written that achieve the same measurement across modes, and modes must be implemented in ways that support one another and maximize response rates.  These requirements mean that survey methodologies must be competent in multiple survey modes.”  Thus, to attain higher customer response rates, marketing researchers will need to consider respondent convenience, as well as their own ease in administering and interpreting results.  These considerations about ease and convenience make systems like Survey Monkey, an online survey program, a popular and useful tool.   The on-line format provides marketing researchers the ability to link surveys to emails, websites, Facebook, chat rooms, and other forms of electronic communication.  A databank immediately compiles survey results and allows for retrieval and analysis at any time.   A multi-mode survey becomes more readily attainable with the help of a computer generated data-collection system such as Survey Monkey. Consequently, just as the telephone survey became antiquated, the single mode survey appears to be slipping into disuse.  Electronic options make multi-mode analysis more attractive.  Initially, researchers thought that only a select group of individuals would use the internet and respond to surveys.  However, by 2003 with internet access already reaching 60% in the U.S. (Ray and Tabor, 2003) the presumption of limited use had to be rethought.  As use became a given, the caliber of that use garnered scrutiny.  Hair, Busch and Ortinau (2009) share reservations about the effectiveness of online surveys and about who responds to them.  Hair et al. distinguish between two forms of online surveys: email or internet/web based.  Email surveys are sent to a mass mailing of email account holders who may choose to opt in or opt out of the survey.  Recipient filter systems may hold back survey emails, placing them in a Spam folder.  Thus, the sender risks never reaching the intended recipient with an email survey, and the successful transmission depends upon the sender possessing an updated email address bank. The other option, an internet /web based survey, is placed on websites frequented by prospective respondents.  These respondents need to join a club or become a member of an organization to have access to the website displaying the survey.  The advantage of internet/web based surveys is that the targeted population has an interest in the site.  Many companies give their respondents immediate access to survey results and offer them the option of commenting on the results online.  These comments can give the surveying companies additional information they previously lacked.  Since surveys oftentimes fail to target the right questions, by including the option of comments, surveyors can gather insights about respondents even as questions fall short.  A study by Kaplowitz, Hadlock and Levine (2004) suggests that web surveys “can achieve a response rate comparable .to a surface mail questionnaire, if the web version is preceded by a surface mail notification.” These results indicate web surveys may require greater up-front effort to produce results. 

 

Expectancy Theory and Social Loafing in Marketing Research Group Projects

Dr. Pradeep K. Tyagi, San Diego State University, CA

 

ABSTRACT

Students in a group project environment who shirk their obligations in the hopes of benefiting from the work of others are often referred to as social loafers. The benefits of group projects cannot be realized if groups are dysfunctional. Group performance researchers have repeatedly observed that individuals exert less effort when their efforts are considered individually. In this study, we examine the role of motivation and its components (Expectancy, Instrumentality, and Valence) as modeled by Expectancy-Value theory in controlling the phenomenon of Social Loafing in group project situations. Data were collected from two (high and low motivational) groups of marketing research students were collected to examine hypotheses based on expectancy-value theory. Results suggest that when instructors clearly and forcefully provide guidance that high level of efforts would lead to high project performance and that high performance will lead to desirable outcomes such as grades, the social loafing behavior is likely to decline.  Marketing research projects cannot be carried out individually, requiring instead all group members put forth a sincere effort to carry out several complex tasks over the academic term to accomplish common goals. However, group performance researchers have repeatedly observed that individuals exert less effort when their efforts are pooled than when their efforts are considered individually (Latane, Williams, and Harkins 1979; Shepperd and Taylor 2009). Latane et al. (1979) coined the term “social loafing” to describe lessened effort of people working collectively as opposed to coactively and described as social disease.  In sociological literature, researchers have examined a variety of factors that lead to social loafing and related behavior (e.g., free riding) and have proposed different solutions (Karau and Williams 1993; Shepperd 1993). A body of research suggests low motivation and effort in collective settings is best conceptualized within an expectancy-value theory framework (Karau and Williams 1993; Kerr 1983, 1986; Shepperd 1993; Stroebe and Frey 1982). The main objective of this study is to examine social loafing phenomenon in the context of expectancy value theory. A number of hypotheses will be proposed based on the literature review. These hypotheses will then be tested based on data collected from marketing research students. Implications based on results will then be discussed for controlling social loafing behaviors.  Expectancy-value theory first popularized by Vroom (1964), describes motivation in terms of three major components: expectancy, instrumentality, and value (Mitchell 1974, Porter and Lawler 1968). The expectancy component refers to an individual’s perception that performance is contingent upon effort (i.e., that a greater effort would lead to a better performance). For example, a student may believe that if he or she works hard, he or she can perform better on a class project (high effort expectancy). Alternatively, this student may believe that no matter how hard he or she tries he or she would not be able to write a good term paper (low effort expectancy).  The instrumentality component refers to an individual’s belief that a given level of performance would lead to an outcome (i.e., an outcome is contingent upon certain level of performance). For example, the student may believe that a good paper will receive a good grade and an inferior paper will receive a bad grade (high instrumentality condition). On the other hand, the student may view the teacher as capricious and thus perceive no relationship between the quality of the paper and the grade received (low instrumentality condition).  The value component refers to the importance of performance outcome to an individual. In the class project example, if the student believes that the course grade may largely depend on the class project grade, thus attaching a greater importance to the term (high value). Alternatively, the class project may have a little impact on the course grade and, hence, the student may attach a low importance to the project grade (low value). Of importance, value does not depend solely on how important or rewarding an individual regards the outcome; it also depends on the cost (psychological and material) associated with achieving the outcome (Shepperd 1993). Thus, outcome value represents the difference between the reward for achieving the outcome and the cost of achieving the outcome. For many events, there are multiple values. There may be a value attached to completing a task, such as completing the term paper, independent of any external rewards received for the performance.  Considered together, motivation can be viewed as the product of expectancy, instrumentality, and outcome value. This implies that in a collective setting, student motivation should be high when he or she (a) perceives a contingency between effort and the performance, (b) perceives a contingency between performance and the outcome, and (c) values the outcome. Thus, effort motivation reflects how much effort a person is willing to exert on a task or toward a goal.  In a group setting, Dommeyer (2007) describes social loafing as “behavior of group members who shirk their obligations in the hopes of benefiting from the work of others are often referred to as social loafers or free riders.” Specifically, social loafing occurs when a member of the group does not contribute fairly to the group work by demonstrating behavioral patterns such as not showing up to group meetings, not providing the quality input to group deliberations, and not completing the assigned tasks on time. Researchers in social science have examined various causes of social loafing.  Researchers have recognized that social loafing is more prevalent in group projects. It is more likely to be a problem when a group project requires considerable amount of effort from group members. Such could be a case involving marketing research projects, where students are required to be involved in a variety of complex and challenging tasks such as conducting exploratory research, designing research, collecting data, analyzing and interpreting research data.  In a longitudinal study (Tyagi 2008), it was found that in any given academic term, 15 to 20% of groups in a marketing research class experienced the problem of social loafing. Social science studies have identified various factors that lead to social loafing that ranged from laziness to low self-esteem. However, the real causes of social loafing may be more subtle or complex. One explanation of social loafing is that social loafing of one group member can lead to social loafing of other members. Some potential “non-slackers,” for example, may not want to waste their time working on a project that is doomed to fail with the lack of effort from one or more slackers (Grieb and Pharr 2001). For a group with social loafers to succeed, one or more persons in the group would have to do more than their fair share of the work. No one wants to be the “sucker” that does all the work. A number of studies have indicated that when a student contributes to the group work and his/her work is seen as not up to the quality standards by other group member, the individual may stop contributing based on the expectancy that even if he/she works hard his/her work may not be viewed a acceptable by his group members.

 

Product Involvement as a Predictor of Generation Y Consumer Decision Making Styles

Megha Gupta, University of Kentucky

Aquiashala Brantley, University of Kentucky

Dr. Vanessa P. Jackson, University of Kentucky

 

ABSTRACT

The purpose of this cross-sectional research study was to explore the influence of product involvement on Generation Y consumer decision making styles.  A convenience sample of Generation Y consumers at a Midwestern University completed a self administered survey questionnaire.  Two hundred and fifty useable questionnaires revealed that Generation Y consumers have different decision making styles when buying high and low involvement products.  Generation Y consumers were found to be brand store loyal, spontaneous, price value conscious and variety seekers when buying a high involvement product than when buying a low involvement product.  Recommendations for future research are offered.  Decision making is a cognitive process which leads an individual to make a choice from various alternatives.  A consumer decision making-style (CDMS) is defined as a “mental orientation characterizing a consumer’s approach to making a choice” (Sproles & Kendall, 1986).  Knowledge of consumer decision making styles is clearly important to marketers because it is linked to purchase behavior (Mitchell & Bates, 1998).  As demographic groups within the United States population evolve, marketers need timely information that describes typical behaviors and preferences of consumers within these segments.  Profiling consumers could assist marketing managers gain a more profound understanding of consumer shopping behavior, and more efficiently target specific consumer clusters or segments (Jackson & Kwon, 2006).  One group to consider is Generation Y.  Individuals within Generation Y are likely to have developed different decision making styles compared with previous generations (Bakewell & Mitchell, 2003), due to their diversity (Coates, 2007).  This consumer group is known for its large disposable income (Tomkins, 1999), and is growing at a very fast rate.  Generation Y’s disposable income is so large that its direct spending power is estimated to be an astounding $1.3 trillion (NAS, 2006).  Individuals within this generation make for a profitable and loyal customer base because this group is often typified as being highly consumption oriented and sophisticated in relation to their tastes and shopping preferences (Holzhausen & Sardom, 2006; Wolburg & Pokrywczynski, 2001).  Moreover, Generation Y appears to have a positive attitude toward shopping (Zeithmal, 1985).  Lehtonen & Maenpaa (1997) indicate that this generation lives in an era in which shopping is not regarded as a simple act of purchase.  Other research emphasizes that Generation Y is resistant to advertising efforts: individualistic and anti-corporate (Kapner, 1997; Wolburg & Pokrywczynski, 2001). This requires retailers to develop strategies based on understanding the decision making processes of Generation Y consumers.  Unlike previous age groups, Generation Y has been acculturated into an environment that provides more opportunities and reasons to shop than ever before (Bakewell & Mitchell, 2003).   Research evidence about Generation Y decision making styles will contribute a great deal to strategy development to target them as a potential market niche.  The economic potential that this group offers advertisers and the perceived difficulty in successfully marketing to them has created a need for research that will provide new insights (Wolburg & Pokrywczynski, 2001).  The researchers categorized consumer decision making styles (CDMS) research efforts into three main approaches: the consumer typology approach (Darden & Ashton, 1974; Moschis 1976); the psychographics/lifestyle approach (Lastovicka, 1982) and the consumer characteristics approach (Sproles, 1985; Sproles & Kendall, 1986; Sproles & Sproles, 1990).  Among these three approaches, the consumer characteristics approach (CCA) seems to be more explanatory since it focuses on the mental orientation of consumers in decision making (Lysonski, Durvasula & Zotos, 1996).  Sproles and Kendall (1986) developed a consumer style inventory (CSI) combining CCA and other traits.   The CSI inventory has been used by many researchers to characterize consumers domestically and cross-culturally (Durvasula, Andrews, Lysonki, & Netemeyer, 1993; Durvasula, Lysonski & Andrews, 1993; Fan & Xiao, 1998; Walsh, Mitchell & Thurau, 2001; Hiu, Noel, Wang & Change, 2001; Mitchell & Walsh, 2004; Bakewell & Mitchell, 2004, 2006; Bauer, et al., 2006; Hanzaee, 2009).  Cross cultural variations have been related to the number of CDMS, creation of new CDMS through the combination of some of the initial CSI items, factor loadings of the items, as well as the generalization of the CSI.  Most of these studies used adolescents, high school and college students, older adults, factory workers and college student samples for their cross-cultural research.  These samples were drawn from Germany, New Zealand, South Korea, China, India, Greece, United Kingdom, and Americans.  Among these studies were comparisons between developed and underdeveloped countries.  The foundation for this study draws on Bauer, et al., (2006) attempt to apply Sproles and Kendall’s (1986) consumer style inventory (CSI) to investigate the relationship between product involvement and consumer decision making styles.  The sample for their study consisted of German and British students. Findings by Bauer, et al. (2006) suggested that there was a relationship between product involvement and consumer decision making styles and that decision making is governed by the perceived product involvement.  Mitchell (1981) and Costeley (1988) state that involvement influences information search, processing and saving.  Bauer et al., (2006) indicated that since CDMS are closely related to information handling, they believe product involvement to govern CDMS.   Product involvement is a complex mental and enduring, intervening construct that stands between the consumer and their behavior, and therefore influences their purchase decision process (Bauer, et al., 2006).  Product involvement refers to the degree to which an individual is involved with a given product on a regular basis (Zaichkowsky, 1985).  Traylor (1983) defined product involvement as “recognition that certain product classes may be more or less central to an individual’s life, attitudes about self, sense of identity, and relationship to the rest of the world”. For each individual, a set of products can be arrayed on a continuum which is defined by the products’ centrality to the individual (Houston & Rothschild, 1978). 

 

Interpretation of Advertisements in Intercultural Setting

Olli Ristimaki, Metsaliitto Group

Dr. Senja Svahn, Tampere University of Technology

 

ABSTRACT

This research focuses on the interpreting of advertisements in an intercultural setting. The purposes of the research were to study the influence of cultural contextuality when reading advertisements and secondly, to explore how interpretation is affected by the stage of the development and the role of advertising in a particular society. The data was collected in Finland and Uruguay. In the study, sixteen Finnish and fifteen Uruguayan university students took part in a computer-based survey that tested their interpretations of different print advertising pictures. In addition, five respondents from both groups were invited to a focus group interview to get a deeper knowledge of advertising and the characteristics of that particular society. The study provides a contribution to the assumption that culture has significant meaning when interpreting advertisements. The respondents found advertising based on typical characteristic of their culture to be more positive and these advertisements also created a stronger willingness to buy the product. The development stage and advertising role in society also has a significant effect on the general attitude towards advertising. Uruguayans found advertising more positive and were more willing to analyse them open-mindedly. A growing amount of companies is operating internationally and especially Western companies are expanding their sales into new markets across the world in order to be more profitable (Banerjee, 2000, pp.13, 27). In new environments, marketers are challenged by new culture, new values and new ways to interpret signals sent through different media. Cultural factors influence strongly to the communication, especially, in the context of international marketing (Almeida, Grant and Song, 1998; Bhagat et al., 2002; DeLong and Fahey, 2000; Hamel, 1991). Therefore, cultural issues should be analyzed and utilized in advertising (Brouthers, Brouthers, and Wilkinson., 1995; Contractor and Lorange, 1988). Difficulty lays in how to forecast receiver’s interpreting process and then deliver the desired message (de Pelsmacker, Geuens and van den Berg, 2004). Although culture has long been seen as a crucial factor in advertising planning and reading, there is still some disagreement over its importance. Most radical arguments for standardised advertising say that the coherent needs of people overrule cultural issues and consumers buy for their needs once they have been made aware of the products available. These scholars often see textual information as more important than pictures, but they do not see pictures as more culture-bound than verbal impression. According to Lehtonen (2006), the question of whether the meanings of pictures are culture-bound or not is purely academic. Persuasion does not rest within the picture per se but rather depends on the mental processes that the picture evokes in the mind of a person under given contextual, situational and individual variables.80-90 percent of all the space in magazines, billboards, walls and fences is reserved for advertising. Visual signals and imagery in advertising are very important issues for effectiveness, often including the primary message. In pictures the advertiser can also make claims that would be unacceptable, inappropriate or even improper when spelled out verbally (Lehtonen, 2006). It can be very effective and at the same time, visual messages can be a great threat when interpreted wrong. That is a risk, especially in collectivists and high-context cultures. There exists research (Branthwaite, 2002; Gulas & McKeage, 2000; Scott, 1994) about imagery in advertising in the fields of marketing and communication. Still, there is a shortage of research on the cultures’ role in the audience´s ability to decode visual messages. Literature neither addresses the extent to which this high- versus low-context framework influences the type of implications that are made when receivers interpret visual images in print ads (Callow & Schiffman, 2004, pp.1114-1115).  Although research exists (e.g. Branthwaite 2002; Gulas & McKeage 2000; Scott 1994) on imagery in advertising in the fields of marketing and communication, there is still a shortage of research on the role of cultures in the audience’s ability to decode visual messages and in the general interpretation of ads in a cross-cultural setting. While it is obvious that people around the world can “read” the images, the language according to which those meanings are caught may be different. The amount of existing studies on cultural differences in reading visuals is rather scarce and the study of visual persuasion is rather young, even though verbal persuasion has been studied for centuries which have resulted in sophisticated models and theories (Lehtonen 2006).  In this study, we have focused on two research questions. First, what is the influence of collectivistic and individualistic culture when interpreting same pictures and secondly, how the stage of development of society can be seen in interpretation. In countries chosen to carry out the comparative study, Finland and Uruguay, there is supposed to be differences in both factors. When the basic aim of advertising is to create a willingness to buy the products advertised, it is also important to know which factors and elements in the advertisements increase that willingness, and which are attractive and which even act negatively. This issue, in relation to culture, acts as the specifying question in the advertisement. In the next sections of the paper we will introduce theoretical concepts of our study which are derived from the discussions of cultural studies and interpreting advertisements in different cultures. In addition, theories related to imagery and visuality are utilized. Then our assumptions and methodology are introduced. A discussion, theoretical and managerial implications and limitations conclude the paper.  Imagery has in recent years inspired many researchers as well as marketers and the increased data on the power of imagery and at the same time good experiences of imagery in advertisement practices have advanced its success. Imagery has an undoubted power to influence.

 

The Impact of Hyperlink on Online Course Design:  A Case Study of MBA Economics Course

Dr. Chien-Ping Chen, University of Houston-Victoria, Victoria, TX

Xiaoyun Peng, University of Houston-Victoria, Victoria, TX

 

ABSTRACT

This paper explores the impact from one of most commonly used online instructional technologies, simulation and reference hyperlinks, on the students’ grade performance. Two sessions with hyperlinks and two sessions without hyperlinks of the same MBA Economics course serve as the samples of case group and control group respectively. The hypothesis testing on grades over different course assessments shows that hyperlink insertion has a significantly positive impact on student performance through the frequent assignments such as discussion board and homework. In addition, the case also confirms that the total time spent online is positively related to student performance through the discussion board; however, the browsing time over hyperlinks does not play any role in grade determination. Both the hyperlink insertion and total time spent have no significant impact on the performance in exams and term paper in which the desk-studying time is required. The overall impact of hyperlinks on the semester grade depends on the weight distribution over assessments.  The number of U.S. students enrolling in postsecondary online education courses has been increasing significantly. In fall 2007, some 3.94 million students took at least one online course at U.S. degree-granting institutions; an increase of 12.9 percent over the previous year (Allen and Seaman, 2008). Among all fields in higher education, economics is one of the best represented online disciplines, particularly at principles and MBA levels. Numerous empirical studies (Vachris, 1999; Navarro and Shoemaker, 2000; Neuhauser, 2002; and Coates et al., 2004) in economics teaching examined student performances (i.e. test scores) to conclude there is no significant difference between online environment and traditional face-to-face course. Not surprisingly, few cases such as Brown and Liedholm (2002), found that students in the traditional class of introductory microeconomics course did much better than those who in the online course on exam questions involving complex material. Whether online and face-to-face course deliveries can achieve the same teaching efficiency has become an endless debate. Nowadays, given the increasing online student population and the continuously improving course delivery platforms such as WebCT and Blackboard, online instructors are shifting the focus from the face-to-face-equivalent performance to the optimal online pedagogy. As Johnson and Aragon (2002) stated, “Instead of comparing two dissimilar learning environments (i.e. face-to-face and online), future studies should empirically test the effectiveness of different instructional techniques in maximizing opportunities and achievement in online environments.” Equipped with various forms of instructional technology such as multimedia (video and audio), hyperlinks, blogs, and Web 2.0 social network, online instructors are capable to maximize teaching effectiveness for web-based learners by choosing the most efficient instructional technology rather than just posting the material as that in traditional class. The student tracking record in WebCT and Blackboard also allows online instructors to explore the impact of browsing time over each instructional technology on students’ performance. Unfortunately, there is still short of empirical studies to verify the effectiveness of instructional technology.  To explore the impact from one of most commonly used online instructional technologies, simulation and reference hyperlinks, this little research examines the author’s four online sessions of the same MBA economics course to seek the answer for the following two questions:   Do hyperlinks, which take the online students voluntarily from the current course page to another website for simulation tool or reference article, enhance students’ understanding over course contents? If so, what kind of assessments reveals the impact significantly?  Does the total time spent online affect student performance? If so, whether the browsing time over hyperlinks matters?   For the hypothesis testing and the OLS linear regression, two sessions with hyperlinks and two sessions without hyperlinks serve as the samples of case group and control group respectively. The grades over different course assessments show that hyperlinks have a significantly positive impact on students’ performance through homework assignments and discussion board. The regression also confirms that the total time spent online is positively related to student performance through the discussion board; however, the browsing time over hyperlinks does not play any role in grade determination. Both the hyperlink insertion and total time spent have no significant impact on the performance in exams and term paper in which the desk-studying time is required. The overall impact of hyperlinks on the semester grade depends on the weight distribution over assessments.  The paper is organized as follows. The next section reviews the literatures in online course pedagogy to highlight the importance of instructional technique choice. The details of data collection, course design, hypothesis testing, and regression results are in the section of empirical analysis. The final section summaries and provides possible explanation for the findings and future extension.  Numerous studies comparing classroom-based instruction with technology-supported instruction have concluded that the technology used to support instruction has little impact on student performance of educational outcomes (Clarke, 1999;

 

A General Model for Variety Seeking Behavior

Esra Sonmezler Arikan, Bogazici University, Istanbul

 

ABSTRACT

For decades, the stimulants for variety seeking behavior have been an area of primary concern. However, despite the numerous studies that exist both in psychology and in marketing, a unified framework which attempts to organize and integrate previous work has been mostly lacking.  Even if Hoyer and Ridgway (1984) have notified the academicians in this field of research that variety seeking behavior is the result of the interaction between individual-level and product-level characteristics, most of the studies conducted in the following years have continued to focus on either the product characteristics or the individual differences. This inclination has not only weakened the validity of the studies conducted but also hampered the development of integrative models. Reviewing the mainstream marketing journals and books, this study aims to propose a model that provides a more comprehensive framework for variety seeking in the consumer choice context. The model not only integrates most of the factors that are claimed to stimulate variety seeking behavior, but also offers various managerial implications that can be very helpful for both attracting and keeping variety seeking consumers.  Variety seeking as a consumer motive has generated considerable research interest since it is considered to be a determinant factor in consumer choice. While variety seeking behavior is thought to have relevance for several areas of marketing, most work has concentrated in the area of exploratory purchase behavior such as brand switching and hence, variety seeking has mostly been defined in this context (Hoyer and Ridgway, 1984).  Though there are various definitions available, the one that is highly referred in the literature is the one by Givon (1984). He defines variety seeking as a type of switching behavior that is induced by the pleasure that the consumer will derive from the change itself. Similarly, Menon and Kahn (1995) define variety seeking as a type of behavior independent of preferences meaning that consumers switch not because their preferences have changed but just because they want something different or novel. One major reason for variety seeking to generate such considerable interest among academicians is that it is a real challenge for many economic models claiming that people make choices with the ultimate goal of maximizing their satisfaction. Many studies on variety seeking behavior reveal that consumers usually switch away from their favorites and choose a less preferred item that will give them less pleasure just for the sake of variety.   A review of the literature on variety seeking reveals that individual differences, product/ object characteristics and situational variables are all potential stimulants for variety seeking behavior. Yet, it is unfortunate that most studies fail to bring together these isolated pieces of findings. Even if Hoyer and Ridgway (1984) have notified the academicians in this field of research that variety seeking behavior is the result of the interaction between individual-level and product-level characteristics, most of the studies have focused on either the product characteristics (e.g. Simonson, 1999) or the individual differences (e.g. Ratner and Kahn, 2002). This inclination has not only weakened the validity of the studies conducted but also hampered the development of integrative models. Realizing this need, this study proposes a model that discusses all these stimulants for variety seeking from an integrative perspective.  The model also makes a significant contribution to the literature by making a distinction between “attitude toward variety seeking” and “variety seeking behavior” and discusses the possible stimulants for variety seeking in this frame. The relationship between attitudes and behavior has always been a highly debated issue, especially in the consumer behavior literature. As Wilkie (1994) states, attitudes are learned predispositions to respond any object in a consistently favorable or unfavorable manner. In other words, attitudes are evaluative judgments made with respect to some target object or issue. Even if most researchers assume that knowing about a consumer’s attitude will allow them to predict that consumer’s behavior at a later time, this issue is more complex than expected. Empirical research on the attitude-behavior link has been yielding contradictory results. While a number of studies show little or no relationship between attitudes and behavior (e.g. Wicker, 1969), more recent reviews and meta analyses reveal that attitudes significantly and substantially predict behavior or behavioral intention (e.g. Kim and Hunter, 1993; Kraus, 1995). Based on the latter view, this study proposes that:  P1: Individuals who have a favorable attitude towards variety seeking are more likely to engage in variety seeking than individuals who do not.  As Franc (1999) claims, the progress in establishing expected attitude-behavior correspondence has resulted from methodological improvements and the inauguration of the so-called moderator approach in this domain of research. In the moderator approach, researchers have demonstrated that various factors moderate the attitude-behavior relation. This study also points outs some factors that can moderate the relationship between attitudes and behavior. More specifically, the proposed model argues that a variety of individual difference characteristics determine the attitude of consumers toward variety seeking and argues that whether a favorable attitude toward variety seeking will result in variety seeking behavior or not depends on the presence of a range of situational and/or product related factors.  Individual difference characteristics have been an issue that has been quite popular in the field of variety seeking. Based on the framework provided by Hoyer and Ridgway (1984), it is possible to categorize the individual difference characteristics as personality traits and motivational factors. Even if there exist a number of studies suggesting that some personality traits such as extroversion or creativity are related to variety seeking behavior (e.g. Farley and Farley, 1967; Houston and Mednick, 1963), such studies are relatively limited in number. Hence, the literature on variety seeking seems to focus almost exclusively on motivational factors.

 

Ethical Issues Encountered in Healthcare Organizations: Perceptions of Healthcare Administrators in Taiwan

Dr. Mei-Hua Chen, National Changhua Universiy of Education, Taiwan, R.O.C.

 

ABSTRACT

For the past few decades, healthcare administrators played major roles in healthcare organizations.  Their practice involves ethical decision-making that significantly affected different stakeholders in the organization.  These ethical decisions are based on their professional ethical values.  Investigations on these ethical values in western countries have already been limited and that of eastern countries are far less scarce. This paper reports the results of an empirical study that aimed to examine healthcare administrators’ perceptions on professional ethical values they possess.  Five hundred forty nine healthcare administrators from nine medical centers and twenty-two metropolitan hospitals in Taiwan were surveyed.  The five most important professional values were: medical records confidentiality, equitable treatment of patients, respect for different backgrounds, compliance to professional standards, and professional development.  In the spring of 2003, the outbreak of Severe Acute Respiratory Syndrome (SARS) in Hong Kong, Singapore, China, Canada and Taiwan caused tremendous panic around the world; the quick and deadly spread of the disease was terrifying.  As of July 11, 2003, there were 8,437 cases of SARS worldwide, leading to 813 deaths.  In Taiwan, as reported by the Center for Disease Control (CDC), there were 664 probable cases, leading to 73 deaths.  This unexpected extent of the outbreak was in part related to hospital administration, and involved many ethical dilemmas.   First, the reporting of the SARS disease was required by the Department of Health (DOH), and yet some hospitals chose to conceal the SARS cases from the DOH, thereby aiding in the spread of the disease in these hospitals.  According to Taiwan’s CDC, of all 664 probable cases, about 30% were healthcare workers and 41% were hospitalized patients.  This unethical behavior by the healthcare administrators of concealing of SARS cases brought a tremendous amount of criticism and questions about the management and the ethical issues related to hospital administration.  Emanuel (2003) indicated that SARS tested not only the emergency response plan of each country, city and hospital, but also their integrity in reporting data.  Second, the withholding of necessary protective equipments, such as medical masks, to the frontline physicians and nurses by healthcare administrators raised questions about the professions’ morality and integrity. The experience of SARS in 2003 reaffirmed the healthcare workers’ ethical duty to care for the sick, as well as imposed a correlative responsibility on healthcare administrators and senior physicians to maximize the safety of frontline physicians and nurses. (Ezekiel, 2003)  Healthcare administrative practice involves many ethical issues and decisions, which not only affect healthcare organizations themselves, but also patients, patients’ families, employees and the communities in which these organizations are located. The processes that healthcare administrators use for ethical decisions have been poorly documented by research; when Frederick, Wasieleski and Weber (2000) did an extensive computer survey of 22 databases (including ABI/Inform Global, ERIC, Medline, Ovid and UMI ProQuest), they found virtually a total lack of empirical data on ethical issues and the values held by healthcare administrators and managers.  In Taiwan, the government and the healthcare network had been proud of the advances in healthcare conditions in this country.  With the outbreak of SARS, many people realized that there were many questions that needed to be explored in the field, relating to healthcare administration.  There is almost no research on the ethical issues relating to healthcare administration.  Therefore, the purpose of this study is to investigate the ethical environment of hospitals and the key ethical issues encountered in healthcare organizations as perceived by healthcare administrators.  More specifically, this study targets the general healthcare administrators in an attempt to describe their perceptions regarding their organizations’ ethical environment, the ethical issues they encountered in their work and the resources they seek for assistance in resolving these ethical dilemmas. Ethics, generally known as “doing the right things”, is a difficult issue in healthcare arena.  Four main ethical areas relating to healthcare administration are: clinical (medical), professional, business and organizational ethics.  Clinical ethics, professional ethics and business ethics are mature and well-developed fields of applied ethics. In a contemporary healthcare organization, financial, clinical, professional and organizational issues are so interrelated that one cannot neatly distinguish between them.  In fact, distinguishing or isolating business issues from issues raised by clinical ethics, or from research issues, or from the responsibilities of healthcare professionals, may be detrimental to a healthcare organization, to patients, and to the long-term professional commitment of healthcare specialists.  Some of the ethical issues now drawing attention in hospitals are most appropriately addressed according to business ethics (Rorty, 2000), with the emphasis on the moral problems in economic transactions and in the relationships among employers, employees and consumers.  Healthcare has become viewed more and more like a “business”; yet, it is also a social responsibility, and very centrally, a matter of social welfare.  Therefore, in this new context of healthcare, business ethics could provide many useful insights and approaches, where clinical and professional ethics need to be coordinated and integrated as well.   Healthcare is no longer just practiced by individual professionals.  More and more, it is now practiced by organizations.  Deserving of administrative and organizational considerations are new ethical issues related to activities in healthcare organizations, regarding the use of outcome information, new technologies, population-oriented care and biopsychosocial healthcare that coordinates different professionals and paraprofessionals,.  Thus, these issues should be included within the scope of organizational ethics (Khushf, 1998); according to the Joint Commission for Accreditation of Healthcare Organizations (JCAHO) (2003), the term refers to “those aspects of the operation of the HCO that have to do with the “ethical responsibility” of the organization itself “to conduct its business and patient care practices in an honest, decent and proper manner”. The Virginia Bioethics Network (VBN)’s definition was more process-oriented, “Organization ethics consists of a process(es) to address ethical issues associated with the business, financial and management areas of healthcare organizations, as well as with professional, educational and contractual relationships affecting the operation of the HCO.” (Spencer, 1997)  Gallagher and Goodstein (2002) defined the term as “fundamentally concerned with questions of integrity, responsibility and choice.  In short, organizational ethics ask how the role, purpose and norms of various institutions should be specified.

 

Exploring Customer Satisfaction, Perceived Quality and Image: An Empirical Study in the Mobile Services Industry

Dr. Feng-Cheng Tung, Kun Shan University, Tainan, Taiwan

 

ABSTRACT

With the rapid development of technology, the world has quickly become an information society built upon a foundation of telecommunication networks. Through the innovation of information technologies such as mobile communication, internet, and multimedia, time and space has become compressed as well. Telecommunication services are the integration of computer and communication, which deeply influence the increase of quality of life and information dissemination. According to statistics collated by the Industrial Economics & Knowledge Center (IEK), in 2005 there were 22.17 million mobile phones in circulation in Taiwan, with a saturation rate of 97%, ranked 22nd in the world.  This research integrates the American Customer Satisfaction Model, image and perceived ease of use to propose a modified American Customer Satisfaction Model to study consumer satisfaction with the mobile services industry in Taiwan. The American Customer Satisfaction Model is a general, cross-industry model that provides market-based performance measures for firms, industries, sectors and nations. It is based on a structural model that consists of six latent variables. A sampling of 235 questionnaires was collected from 300 current mobile phone service users in Taiwan. This research sent questionnaires by email in March of 2009. After four months, we had 238 returned as of July 2009. The rate of response for the questionnaire was 79.33%. The statistical analysis software used for the research was LISREL 8.3 and SPSS. This research adopted structural equation modeling for its data analysis to study the causalities among all parameters constructed in each model. Based on 235 questionnaires collected from 300 current mobile phone service users in Taiwan, the research finds that perceived expectations, perceived quality, perceived value, image and perceived ease of use have a major positive effect on customer satisfaction with mobile services. The research also finds that customer satisfaction has a significantly positive direct impact on customer loyalty. Customer complaints have significantly negative direct impact on customer loyalty. Customer satisfaction has a significantly negative direct impact on customer complaints. This research found that perceived expectations, perceived quality, perceived value, image, and perceived ease of use were critical factors for customer satisfaction with mobile services. The research offers important recommendations to service providers and subscribers and helps the mobile services industry better understand the factors affecting customer satisfaction for mobile services in Taiwan. The findings should have implications for mobile phone service firms that seek to improve their overall levels of customer satisfaction.  With the rapid development of technology, the world has quickly become an information society built upon a foundation of telecommunication networks. Through the innovation of information technologies such as mobile communication, internet, and multimedia, time and space has become compressed as well. Telecommunication services are the integration of computer and communication, which deeply influence the increase of quality of life and information dissemination.  According to statistics collated by the Industrial Economics & Knowledge Center (IEK), in 2005 there were 22.17 million mobile phones in circulation in Taiwan, with a saturation rate of 97%, ranked 22nd in the world. The number of the third generation mobile communication (3G) mobile phone users has grown from 1.33 million in 2005 to 2.19 million in 2006 with a growth rate of 65%. Furthermore, the total number of mobile phone users in the world is estimated to reach 2600 million in 2006, and will exceed 3 billion in 2008. 3G services are expected to have 390 million users in 2006 with a growth rate of 100 million users per year. In 2007, the total number of 3G users should reach 520 million, 18% of mobile phone users. This shows that data transmitting applications in mobile phones is a trend that is increasing.  In the last decade, a number of national indicators have reflected that consumer satisfaction across a wide range of organizations has risen (e.g. USA-ACSI Fornell et al., 1996; Europe-ECSI Technical Committee, 1998; Denmark-Martensen et al., 2000). A standardized measure of satisfaction provides the means for accurate regulatory objectives that capture both consumer interest and overcome vagueness. Regulators can adapt this standard measure for national benchmarking, competitive country assessment, and longitudinal studies of regulation implications. Specifically, several mobile service studies conducted regionally have attempted to explore the antecedents of customer satisfaction, customer loyalty and customer retention (Gerpott, Rams, & Schindler, 2001; Kim, Park, & Jeong, 2004).The American Customer Satisfaction Model (ACSM) is a general cross-industry model that provides market-based performance measures for firms, industries, sectors and nations. It measures the quality of goods and services as experienced by consumers (Fornell et al., 1996) and gauges their actual and anticipated consumption experiences (Anderson & Fornell, 2000). This research integrates the ACSM, image and perceived ease of use to propose a modified American Customer Satisfaction Model to study consumer satisfaction with the mobile services industry in Taiwan. The research involved 235 current mobile phone service users residing in Taiwan and found that perceived expectations, perceived quality, perceived value, image, and perceived ease of use were critical factors for customer satisfaction with mobile services.   The American Customer Satisfaction Model (ACSM) measures the quality of goods and services as experienced by consumers (Fornell et al., 1996) and gauges their actual and anticipated consumption experiences (Anderson & Fornell, 2000). The American Customer Satisfaction Index (ACSI) is a market-based performance measure for firms, industries, economic sectors, and national economies. The American Customer Satisfaction Index (ACSI) of an individual firm represents its served markets, its customers’ overall evaluation of total purchases, and consumption experience, both actual and anticipated (Fornell et al., 1996). The objectives of the ACSI are to generate exact and comprehensive information about customer satisfaction that can serve as an indicator for the economic success of companies, industries, and the national economy.

 

Emotional Motives and Attitudinal Reflections of Workplace Deviant Behavior

Deniz Kantur, Bogazici University, İstanbul, Turkey

 

ABTRACT

This paper concentrates on workplace deviant behavior with a special focus on the effects of emotional motives and attitudinal outcomes of such behavior. The conceptual model developed in the current paper integrates injustice perceptions, negative emotions, and job satisfaction in relation to workplace deviant behavior. Among the several determinants of the workplace deviance interpersonal injustice and discrete negative emotions are studied as determinants. Job satisfaction, on the other hand, is proposed as an outcome based on justification processes. After the literature review on workplace deviance in relation to injustice perceptions, emotions, and job satisfaction; the paper develops the relevant propositions and conceptual model of the study. The conceptual model developed here attempts to develop the literature on workplace deviance through integrating emotional determinants of such behavior and job satisfaction as attitudinal outcomes.   Workplace deviance has been a neglected topic until recently and there has been disproportionate emphasis in literature on the extra role behaviors as organizational commitment (Meyer and Allen, 1991) or organizational citizenship behavior (Dyne, et.al., 1994). However, researchers now increasingly give importance to the study of the behaviors at the other end of the spectrum because of their negative effects on organizations (Henle, 2005). Workplace deviance or counterproductive behaviors have become the focus of several studies in the past decade (Robinson, et.al., 1995, 2001; Skarlicki and Folger 1997; Judge, et.al., 2006). Research shows that organizations bear significant economic losses from deviant behaviors (Aquino, et.al, 1999). Employee deviance and delinquency has produced organizational losses estimated to range from $6 to $200 billion annually in the last decade (Murphy, 1993). Thus, studying workplace deviance is important in enabling researchers to understand how diverse components of organizational performance and correlates of workplace deviance relate to each other (Colbert, et.al., 2004).  Researchers studying destructive behaviors within organizations focused on different aspects of the issue such as aggression (Baron, et.al, 1999), counterproductive behavior (Spector and Fox, 2002) retaliation (Starlicki and Folger 1997), theft (Greenberg, 1990) or sabotage (Ambrose, et.al., 2002). This paper will use the term ‘workplace deviance’ which is defined as ‘the voluntary behavior that violates significant organizational norms and in so doing threatens the well-being of an organization, its members or both’ (Robinson and Bennett, 1995, p.556). Employee deviance is voluntary in that, employees either lack the motivation to conform to the norms of the organization or desire to violate those norms (Kaplan, 1975). Workplace deviant behaviors include withholding effort, stealing, sabotage and any other type of rude and destructive behaviors through which the employee gives damage directly or indirectly to the organization or its members.   The research on the possible causes of workplace deviant behavior has emphasized social, cognitive, situational, environmental or personal factors (Baron, et. al., 1999), yet studies mainly concentrated on situational (i.e. injustice) or personal factors (i.e. negative affectivity). In a review of the literature on the antecedents of workplace deviance, Bennett and Robinson (2003) identified three distinct research trends. First trend focused on experiences at work, second concentrated on the personality characteristics and lastly, the third trend has studied workplace deviance as adaptations to the social environment in the workplace.   Deviance as adaptation to the social environment included perceptions of injustice (Bennett and Robinson 2003). Perceptions of injustice by employees have been emphasized as one of the cognitive antecedents of workplace deviance by many researchers (Judge, et.al. 2006; Colbert, et.al. 2004; Aquino et.al. 1999). The term justice is used to imply ‘oughtness’ or ‘rightousness’ (Colquitt, et.al. 2001), yet, it should be noted that a particular behavior can be both deviant and unethical (Robinson and Bennett, 1995). For instance, dumping toxic waste in a river is not deviant if it conforms to the policies and norms of an organization. Reporting this dumping can be an ethical act but would be considered as deviant because it violates the organizational norms (Robinson and Bennette, 1995).  Among the four types of organizational justice – distributive, procedural, interpersonal and informational – interpersonal justice was most strongly related to deviant behavior by employees in the workplace (Colquitt, et. al. 2001). Besides perceived injustice, personality characteristics are also important in determining whether to engage in deviant behavior or not (Colbert, et.al, 2004). Individuals with certain characteristics tend to be more inclined to act destructively as suggested by several empirical research findings (Salgado, 2002; Douglas and Martinko 2001).   While both situational and personal characteristics are important determinants of workplace deviant behavior, emotions also play a central role in the perceptions of injustice and in the emergence of deviant behavior within organizations (Barclay, et.al., 2005; Weiss, et.al, 1999). In the literature there are conceptual models that incorporate the situational and personal factors (Henle, 2005; Judge, et.al., 2006; Skarlicki et.al. 1999) however, a comprehensive model is lacking that incorporates the affective reasoning behind workplace deviant behavior. Moreover, there is gap in the literature regarding the outcomes of deviant behavior. This lack of emphasis can be attributed mainly to measurement problems. Considering these, this study addresses two questions: (a) ‘What is the role of emotions in relation to cognitions and personality characteristics in motivating workplace deviant behavior? and (b) What are attitudinal outcomes of deviant behaviors?. Thus, the aim of this paper is to develop a conceptual model that incorporates the role of emotions as possible causes of deviant behavior and attitudes as outcomes of such behavior.   The literature on deviant workplace behavior studies retaliation, aggression, deviance and counterproductive behavior.

 

Investigating Efficiency of GCC Banks: A Non-Parametric Approach

Dr. Hela Miniaoui, University of Wollongong in Dubai, UAE

Dr. Abdellatif Tchantchane, University of Wollongong in Dubai, UAE

 

ABSTRACT

The aim of this paper is to measure Gulf Cooperation Council (GCC) banks efficiency. Data envelopment analysis (DEA) is performed to assess the technical efficiency of the top 50 GCC banks as a homogenous set over the period 2005-2008. Cross-sectional data for each year is used in the analysis to determine those banks operating on the efficiency frontiers which are used as benchmarks for their peer banks. The sensitivity of the results is investigated by applying constant return to scale (CRS), variable return to scale (VRS) DEA models. Data on banks based on two-year period windows each and covering the overall time period 2005-2008 are incorporated into DEA analysis providing us with targets for improvement over time.   The results show that only 14 banks of the sample are rated as efficient under CRS and/or VRS assumptions, and indicate that Islamic banks perform slightly better than the other types of banks.  We have investigated whether or not there are efficiency differentials between Islamic banks and conventional banks. Such investigation is motivated by the assumption that Islamic banks should be more efficient. DEA was introduced by Charnes et al. (1978) and it is recognized as a benchmarking technique for efficiency measurement and evaluating the performance of organizations involved in a wide range of contexts: banking (Avkiran 2009), hospitals (Banker, 1984), airports (Lam 2009), tourist hotels (Yu, 2009), educational institutions (Carrico et al. 1997; Celik et al. 2009), electricity sector (Hrovatin, 2009), transportation and construction contractors (El-Mashaleh, 2009). The firms range from public to private and non profit organizations. It is widely used by researchers to help managers, economists, chief executives, principals, unit leaders and firms’ policy makers to make critical decisions. Wu et al. (2009) used DEA to assess the performance of Olympic games. DEA may be applied to a single organization with multiple units as it may be applied across organizations operating under similar technologies. Edirisinghe et al. (2008) reported the use of DEA in a case study of 313 US unalike industry firms but grouped into 6 alike technological activities. DEA may be used from small-scale of less than 20 units to large-scale implementation involving more than 1000 organizational units (Medina-Borja, 2007). DEA was successfully used to assess new information tools introduced in firms such as Enterprise Resource Planning, (Bendolly, 2009). Wang (2007) proposed models using DEA for preferential voting system.  Inventive in-depth description of DEA can be found in the well known papers of Charnes et al. (1978) and Banker et al. (1984). Three useful papers by Adler (2008), Wade (2009) and by Bougnol (2010) may be reviewed for experimenting with DEA.   DEA determines a single score characterizing each firm as a consequence of transforming input to output. A firm input may be employee salaries, cost of borrowing money, operating cost (eg. call centers, number of ATM machines) and level of computerization, providing the various financial instruments. DEA analyses the performance based on the output generated from the consumed input while carrying various operations. Firms output may be employees’ job satisfaction, customer services, number of transaction, net profits... Though DEA is used extensively in financial related applications, however, only a limited work is published on The Gulf Cooperation Council (GCC) banking.   Our paper exploits the provided GCC panel data over a four year period (2005-2008) to investigate the performance of the GCC banking institutions. Such research output would help banks to acquire knowledge about the competitiveness from similar banks working under the same political, economical and geographical environment.   The remainder of the paper is organized as follows. Section 1 reviews the relevant literature. Section 2 describes the data sources and model specification. Empirical results are presented in section 3. Finally, section 4 concludes the study.  In our study, DEA is used to obtain a measurement of performance of the GCC's top 44 banks. Some of these are Islamic banks which are essentially riba-free ("riba" is usually translated simply as "usury"). Islamic banks adopt various financial instruments in operating their businesses (e.g. Trustee Finance Contract (Mudāraba), Safekeeping (Wadiah), Equity Participation Contract (Mushāraka), Cost plus (Murabahah), Islamic Bonds (Musaka) and leasing (Ijarah)).  The other banks are known as conventional with an Islamic windowing; that is providing services to Muslims engaging in Islamic law (Sharia). In fact, the past two decades have witnessed a substantial increase in the number of Islamic banks, financial institutions and Islamic funds in different parts of the world. It was to meet this demand and capture this emerging market that the conventional banks started opening Islamic windows and Islamic units for those clients who do not want to indulge in interest-based transactions. This conviction created an increased demand for Islamic products in the field of financing, and gave birth to a market where only Islamic products are acceptable. Thus, banks working under Islamic windows are established to provide an additional service to Muslim clients or to offer a variety of products for general clientele. The remaining banks are referred in our article as Conventional banks.   The choice of the GCC countries is influenced by the fact that these countries operate under similar economic and political conditions. Only a limited work has been done on GCC banks; most related work has been reviewed as presented in Table 1 (see the Appendix) which provides a listing of inputs and outputs chosen for studies on GCC banks performance analysis.   DEA is a tool for efficiency measurements by assigning a single measure of efficiency falling in the range (0-1) for each decision-making unit (DMU) in relation to others relative to its peers. It enables units to be compared to other units in terms of efficiency. A DMU is considered efficient if it has an efficient score of 1.0. Efficient DMUs form together a surface frontier where all the inefficient units lie. Such measures uncover efficient firms from inefficient ones.  DEA in its standard form does not provide sufficient discrimination between the efficiency of DMUs especially for small samples. In particular, for efficient units, there is no mechanism to differentiate between them. Further, standard DEA fell short from identifying sources of inefficiencies.   Such limitations leaded to new DEA approaches such as incorporating cross-evaluation techniques (Bao et al. 2008) and by the use of weight restrictions (Thanassoulis, 2001) and by incorporating simultaneous changes to the inputs and outputs that are technologically similar (Podinovsky, 2007).   Sowlati (2004) proposed a new mathematical model yielding a new frontier so that the efficient units may be compared among themselves. A general model framework for DEA including the standard DEA is described in Klein (2004). Recent publications by Avkiran (2009) proposed an extension to standard DEA known as network DEA for identifying sources of inefficiencies. Such an extension requires access to underlying diagnostic information which is inaccessible to outside researchers.

 

The Influence of Affect-Based Trust, Cognition-Based Trust, Institution-Based Trust, and Communication on Patients’ Satisfaction

Dr. Chung-Hung Tsai, Tzu Chi College of Technology, Taiwan

Bi-Kun Chuang, Chu Shang Show Chwan Hospital, Taiwan

 

ABSTRACT

The aim of the study is to explore the influence of affect-based trust, cognition-based trust, institution-based trust and communication impact on patients’ satisfaction. The sample collected from four regional hospitals in Taiwan. The visit questionnaires were completed by 576 patients known to be eligible and data were analyzed by descriptive statistics, explore factor, correlation, and regression analyses. The conclusions are as follows: (1) Correlation analysis revealed that affect-based trust, cognition-based trust, institution-based trust, and communication were highly correlated with patients’ satisfaction. (2) According to the statistical results, the proposed model was more than satisfactory in explaining the variance of patients’ satisfaction for the samples of four hospitals; (3) Affect-based trust, cognition-based trust, institution-based trust and communication are the significantly and directly antecedents of patients’ satisfaction; (4) The rank of influential effect on patients’ satisfaction is affect-based trust, cognition-based trust, institution-based trust and communication. The result of the study can provide the executives and managers of the hospitals with the insight. That is, physicians are not only the most important suppliers of medical treatment, but also the best listeners of the patients.  Trust is the most important factor in the relationship between patients and physicians. In recent years, not only clinicians, medical staffs, medical instructors, policy makers, but also the mass population have been gradually aware of the impact of trust between patients and physicians on the development of health promotion, disease prevention, therapeutic effect, and medical service quality. Many studies has reported that trust between patients and physicians can predict many indicators of clinical outcomes, such as the behavior of using preventive medical services and health promotion, adherence to treatment, the continuity in treatment, patients’ satisfaction and demands, quality between patients and physicians, patients perception of recovery, and so on (Hall et al., 2001; Thom et al., 2002; Thom et al., 2004).   Recently, it was found that the control of financial cost in a managed care system would probably reduce trust between physicians and patients and increase their confrontation. As a result, the exploration of factors to predict trusting among physicians and patients and the discussion over patient-centered care are taken seriously. Patients with low trust will make people criticize on managed care system and physicians face the dilemma of financial pressure and caring responsibility. How to maintain a mutual trust relationship under the consideration of professional insistence and management merit has been a new medical ethical issue.  By the reform of the National Health Insurance (NHI), hospitals in Taiwan were challenged roughly. Global budget enforced hospital managers to make the best use of limited resources and decrease the cost in a more enterprise way. Under such context, NHI would have direct impact on the behavior of hospital managers and physicians, and consequently influence the relationship between patients and physicians. However, there are still few studies exploring the influence of patients-physicians trust in Taiwan. Therefore, the purpose of present study is to explore the influence of affect-based trust, cognition-based trust, institution-based trust, and communication on patients’ satisfaction.  The concept of trust has been emphasized by business management, primarily because of the emergence of the concepts of the relationship marketing, while trust is one of the most essential elements in relationship marketing. Trust is defined as believing their long-term benefits will be satisfied by the services (Crosby et al., 1990), and is presented by decreasing uncertainty of behaviors. Mayer, Davis, and Schoorman (1995) defined trust as a group of people who is willing to take risk behavior in order to meet others’ expectations to them. McKnight, Cummings, and Chervany (1998) believed that trust is the willingness to depend on others.   By the reform of the NHI in Taiwan, the development of medical standard, and the increasing competition between hospitals, patient-physician relationship is viewed as an important part of medical care process, and patient-physician trust is the most important component of the relationship. Anderson and Dedrick (1990) referred patient trust to a group of belief or expect that physicians will act in some certain ways. Caterinicchio (1979) viewed patient trust as reliance on physicians. Dugan et al. (2005) suggested that with trust in medical officials, patients will have confidence in any treatment.   Mechanic and Meyer (2000) divided patients’ trust in physicians into five parts: (1). Competence: including technological ability and interpersonal relationship. (2). Fiduciary Responsible and Agency: refers to physicians’ commitment to the best health care of patients. (3). Control: physicians’ control over any necessary medical care. (4). Disclosure: the degree that physicians disclose their personal information. (5). Confidentiality: the degree that physicians keep patients’ personal information secret. Hall et al. (2001) suggested patients’ trust includes fidelity, competence, honesty, confidentiality, and global trust. Pearson and Raeke (2000) referred trust to competence, compassion, privacy and confidentiality, reliability and dependability, and communication.  Mayer, Davis, and Schoorman (1995) suggested trust comes from ability, integrity, and benevolence of the one being trusted. McAllister (1995) argued the components of trust are affect-based and cognition-based. As far as affect-based is concerned, emotional tie to individuals is the basement of trust. Cognition-based trust is constructed by rational cognitive evaluation.

 

Tax Avoidance and Evasion with Transfer Pricing

Dr. Atilla Uyanik, Marmara University & CPA, Istanbul

 

ABSTRACT

This paper examines some common techniques that are used by enterprises and individuals to evade and avoid taxes with transfer pricing.  The emphasis will be on tax avoidance and evasion in international transactions and other cross-border situations. In addition to general overviews of cross-border tax avoidance and tax evasion, this research  specifically covers avoidance and evasion using “tax haven” jurisdictions, preferential tax regimes, transfer pricing techniques, thin capitalization, cross-border leasing arrangements, hybrid structures, and other financial market innovations. Because, financial services industry is being transformed by the interaction of several phenomena, including the wider process of globalization, the harmonization of the regulatory framework and the implementation of financial reforms in the World.   There are three spheres of transfer pricing analysis – income tax, customs and VAT – and the rules among these spheres are not harmonized. Because these rules intersect far more in practice than in theory businesses frequently face inconsistent treatment among these taxes, a three-way, potentially no-win situation whenever they structure cross-border related party transactions.  The world’s largest multinational enterprises transfer goods, services and intangible properties in cross-border related party transactions on a daily basis.  Horizontal harmonies are largely attributable to the influence of supra-national standard setting organizations: the Organization for Economic Cooperation and Development (OECD) in income tax, the World Trade Organization (WTO) in customs, and various regional economic unions, like the European Union (EU) in VAT.   There is broad agreement in theoretical work that taxes on capital income are bound to cease when markets become fully integrated. In particular, high-tax countries should be concerned about tax competition, and empirical evidence on the working of tax competition should be found most easily by looking at countries with traditionally high tax rates on capital income.  In the world   industry is being transformed by the interaction of several phenomena, including the wider process of globalization, the harmonization of the regulatory framework.  From this point of view, the tax system and policy has been an important instrument. In recent years, important changes have occurred in tax laws especially in income tax code. Tax harmonization, tax co-ordination, tax competition are expressions, which are used to describe the processes of approachments of the taxation systems in different countries, or which lead to such outcomes.  As it known, one of the repercussions of the transfer pricing manipulation is tax avoidance, which is the most important issue in international taxation today. We will try to understand all that issues and how could be solve that. Tax competition and tax harmonization have become a hot issue recently. However it has been debated vigorously at the various international and national forums at least since the OECD report“ Harmful Tax Competition: An Emerging Global Issue” published in 1998.  OECD  went through a few stages of tax harmonization and the major achievements were accomplished.  But the problem of tax distortions and of harmful versus fair competition in taxation systems is coming back. There are many dimensions of this debate: economic, legal, constitutional, administrative, and political. One may say that only comprehensive approach to this debate is appropriate.   The present international trade is marked with a few unprecedented momentous developments.  Technological innovations especially in transportations, communications and information technology (like internet), removal of tariff and non-tariff barriers, emergence of rule-based trade regulated by the World Trade Organization (WTO) and easy cross-border movements of goods and capital, the volume and geographical extent of international trade has increased tremendously. In 1960, the foreign trade in goods and services constituted 10% of Gross National Product (GNP) and in 1982, it increased to 22%.  Between 1970s and 1980, approximately 80% of new jobs were export-related (Evans, Taylor and  Holzmann, 1985).  The intra-group transactions have been estimated to be more than 60% by Rohatgi and the OECD ( Rohatgi,  2002),  and constitute more than 30% of export of the leading countries like US, UK and Japan, especially in high-technology sector like chemicals, machinery and transport equipments  (UN,  1984).  The increase in intra-group cross-border transactions by MNEs facilitates them to manipulate prices, inter alia, to avoid tax.  This paper aims to focus on the effects of relevant regulations as well as the tax avoidance and evasion on the international trade of development. Although funding for new aid commitments is important, it is argued that  sustainable development requires developing states to approach fiscal independence, and  that the annual revenue cost of tax leakages is well in excess of aid flows.  Defines the burden of tax and who actually makes the tax payment to the government. The incidence of taxation is seen to fall on the person legally responsible for meeting the tax bill (Cullis, Philip, 199, p. 181-182). The welfare costs or excess burden of taxation can be identified by reference to indifference curve analysis. The individual is assumed to be faced with a fixed budget which permits the choice of any combination of two goods.  The slope of the budget, will reflect the relative prices of two goods that depends on taxation or not. Before taxation the individual will chose that combination of the two goods and thereby attain the highest level of welfare possible.  Tax capitalization and incidence is a topic that is not only of importance in itself, but also provides a convenient link between concept of incidence and concept of allocation.  In addition the concept once more warns against simply the face value analysis of taxation (Musgrave, 1989, p.381).  The price at which goods, services or intellectual property  are transferred between related parties. Transfer pricing includes cross border transactions therefore every single transaction will generally therefore every single transaction will generally involve at least two countries involve at least two countries If countries tackled transfer pricing in isolation, there If countries tackled transfer pricing in isolation, there maybe considerable risk of double taxation  maybe considerable risk of double taxation International recognition through forum of OECD International recognition through forum of OECD (Organisation for Economic Co (Organisation for Economic Co-operation and operation and Development) Development) OECD first recognized transfer pricing in Model Tax OECD first recognized transfer pricing in Model Tax Convention.   If companies enter into transactions involving the sale.  If companies enter into transactions involving the sale or the purchase of the goods or services with related or the purchase of the goods or services with related parties by setting prices or amounts that are not in line parties by setting prices or amounts that are not in line with the arm's with the arm's-length principle, associated profits will length principle, associated profits will be treated as distributed entirely or partially in a be treated as distributed entirely or partially in a disguised way via transfer pricing.   The second major way that firms can shift profits from high-tax to low-tax jurisdictions is through the pricing of goods and services sold between affiliates. To properly reflect income, prices of goods and services sold by related companies should be the same as the prices that would be paid by unrelated parties. By lowering the price of goods and services sold by parents and affiliates in high-tax jurisdictions and raising the price of purchases, income can be shifted.  An important and growing issue of transfer pricing is with the transfers to rights to intellectual property, or intangibles.

 

An Empirical Investigation of the Factors that Influence the Customer Churn in the Portuguese Fixed Telecommunications Industry: A Survival Analysis Application

Sofia Portela, ISCTE Business School, Lisbon, Portugal

Dr. Rui Menezes, ISCTE Business School, Lisbon, Portugal

 

Abstract

Considering that profits from customer relationships are the lifeblood of firms (Grant and Schlesinger, 1995), an improvement on the customer management is essential to ensure the competitivity and success of firms, mainly in a period of economic recession. For the last decade, Portuguese customers of fixed telecommunications have easily switched the service provider, which has been very damaging for the business performance and, therefore, for the economy. This study aims to develop a comprehensive model of the residential customer churn in the fixed telecommunications industry in Portugal, which can support managers on the customer portfolio management. A survival analysis model is developed based on a random sample of 830 customers. Our results show that the majority of variables that influence customer churn are related to the customer spending with the service provider, and that usage, product or even subscription conditions do not seem to influence the duration of the relationship. We also found that the probability of a given active customer cancels his/ her relationship with the firm is neither constant over time nor across customers. Lastly, it seems that satisfaction does not influence customer churn. We can conclude that pricing is a sensitive area in this industry.  The Portuguese market of fixed telecommunications (FT) soared in the last decade and, as a consequence, firms focused on customer acquisition and they neglected customer retention. Strong competition and low switching costs have given rise to a phenomenon of customer switching behaviour, and, thus, high customer churn rates, which has serious consequences for business performance and, therefore, for the economy. According to several researchers, customer churn (i.e., the customer’s decision to terminate the relationship with a provider) is the main reason of profitability losses in the telecommunications industry (TI), due to losses on current and potential revenues, marketing costs, and brand image (e.g., Ahn et al., 2006; Qian et al., 2006; Zhang et al., 2006).  Nevertheless, firms must change their strategy from customer acquisition to the retention of potentially valuable customers (Hadden et al., 2005; Hung et al., 2006), because the market is becoming saturated and firms cannot lose valuable customers to their competitors, mainly in a period of economic recession. Bolton and Tarasi (2006) suggest that customer retention is often easier and cheaper than customer acquisition in stable markets.  The customer retention became a buzzword in the 1990s, mainly due to the work of Reichheld and Sasser (1990), who firstly provided evidence about the advantages of customer retention. Although their results definitively caused a change in the marketing theory, they are not consensual (see, for example, Carroll, 1991/92; Dowling and Uncles, 1997; Reinartz and Kumar, 2000; East et al., 2006; Gupta et al., 2006; Ranaweera, 2007). Following this new paradigm, many firms have focused on retaining all customers. Nevertheless, many researchers argue that the retention strategy must be strongly linked with the customer lifetime value (i.e., the expected net present value of the future cash flows of the customer - CLV), and, consequently, enterprises should not try to retain all of their current customers, because they are probably investing in unprofitable customers (Gupta and Lehmann, 2003; Jain and Singh, 2002; Malthouse and Blattberg, 2004; Ryals, 2003; Thomas et al., 2004), and, in this way, they are destroying value (Gupta and Lehmann, 2005; Jain and Singh, 2002; Ryals, 2003) because (i) the retention of unprofitable customer is damaging to the firm, and (ii) the money wasted on the retention of unprofitable is not used on the retention of profitable ones, who are harder to get (Thomas et al., 2004).   The customer churn issue is present both in studies about CLV as a component of CLV and on specific studies of churn, but in different perspectives. In studies about CLV, customer churn is mainly analysed in a theoretical way, whereas on the later case, the statistical models with empirical data are predominant. Furthermore, most studies which focus on CLV make strong assumptions about customer retention (i.e., the opposite of customer churn), such as customer retention is constant over time (e.g., Berger and Nasr, 1998; Blattberg and Deighton, 1996; Gupta and Lehmann, 2003; Gupta et al., 2004;) and across customers (Hogan et al., 2002). Nevertheless, the limitations of these assumptions are not recognised by all researchers.  Customer churn has been studied using different techniques, in different industries (e.g., banking, insurance, telecommunications), and in different contexts (contractual vs. noncontractual settings, continuous vs. discrete time). Buckinx and Van den Poel (2005), Hadden et al. (2005), Reinartz and Kumar (2003), Song et al. (2004), and Van den Poel and Larivière (2004) present literature reviews of customer churn studies. The Appendix 1 presents a review of the literature about customer churn prediction in the TI in contractual settings and continuous time, which is the scope of this study. Ahn et al. (2006) point out that the reasons of customer churn and the customer behaviour towards churn need to be more studied.  Despite the large amount of research done on customer churn, there are few studies applied to the FT industry. Furthermore, to the best of our knowledge, none is applied to firms with bundled offers. The majority of published research about customer churn in the TI analyse the mobile telecommunications (MT). This issue has never been studied in Portugal. Many studies focus on comparison of techniques rather than on testing the effect of churn covariates. Lastly, most of them model whether (or not) a customer is likely to churn in a pre-specified time period, rather than the longitudinal churn pattern over the duration of the relationship.  It seems relevant to do a more detailed study of the customer churn in the FT industry, because it may be misleading to make decisions based only on the results of the MT industry, which presents very different characteristics. Moreover, considering that the customer churn behaviour may be influenced by the customer culture, it is pertinent to examine different markets, like the Portuguese one. In this context, the aim of this study is to develop a model of the residential customer churn in the FT industry in Portugal. It also intends to analyse the assumptions of constant retention rate over time and across customers. 

 

Understanding the Influence and Approaches to Effective Chinese Negotiations

Jose Anibal Torres, Argosy University – Sarasota

 

ABSTRACT

This study focuses on the influences and approaches to Chinese negotiators.  Since most of the literature on Chinese negotiations has a Western bias, this study focuses on the variables and elements that influence Chinese negotiators and the approach they take when negotiating in an international environment, from a Chinese perspective.  The study begins by defining what is culture followed with the definition of Chinese culture and philosophy, that includes Universism, Taoism, Confucianism, and Buddhism.  This basic Chinese cultural understanding will provide a basic foundation to build upon in understanding what influences Chinese negotiators.  This is followed with a brief overview of the significance and influence of cultural dimensions, by Kluckholn and Strodbeck, Schwartz and Geert Hosftede, to show the complexity of understanding cultures and how they influence Chinese negotiators.  Since culture is not static and is constantly evolving international negotiators must have an understanding of those variables that influence Chinese culture, such as cultural dynamics, global flows and their consequences.  This cultural foundation will provide an understanding of Chinese negotiators’ behaviors during the negotiating process.  The study is followed with an understanding of the approach to Chinese negotiations as taught to the Chinese and the effects of their culture and philosophies and logic paradigms in negotiations.  Effective and successful negotiations are largely dependent on understanding the other negotiating party’s characteristics and approach.  And in international negotiations understanding the other party’s culture is an even more challenging task, (Huang & Van De Vliert, 2004).  Therefore, this study focuses on understanding the influence and approaches to effective Chinese negotiations.  Research suggests that research on negotiations and on international negotiations has been biased towards the ideologies and schema of Western countries.  Therefore, in order to have a clear understanding of how to negotiate effectively with the Chinese it is important to understand what influences Chinese negotiators and the approaches they learn in negotiating internationally.  To this end, the purpose of this study is to review, evaluate and interpret the literature on Chinese culture, Chinese cultural dimensions, effects of cultural dynamics on culture, Chinese philosophy, and their influence on Chinese negotiations from the Chinese perspective.  This study expands on existing, although not exhaustive, literature on Chinese negotiations, from a Chinese perspective and not a Western perspective.  To help the focus of the study and to provide a framework, the study will address the following research questions: What are the influences of effective Chinese negotiations?  Are Chinese negotiations influenced by their culture, beliefs, and socio-political systems?  And how do these influences affect the approach of Chinese negotiators?  It has been argued that reciprocity in negotiations is an important factor in not only domestic negotiations but in international negotiations.  And Gouldner (as cited in Adair, 1999) defines the norm of reciprocity as “a universal code that guides patterns of interaction in social systems” (p. 1).  Furthermore, it is suggested that the norm of reciprocity is what keeps us from inviting friends over and over to a gathering if they haven’t invited us in return.  Research suggests that normative behaviors in negotiation differ across cultures.  “In negotiations, the norm of reciprocity explains why we feel obligated to make a concession in response to a concession and why we seek revenge when a party has taken advantage of us” (Adair, 1999, p. 1).  This concept of reciprocity in Chinese negotiations is very important and is explained through the Chinese concept of guanxi, connections where both parties mutually benefit, an essential element in Chinese negotiations and Yin and Yang principles.  There are many reasons for the Western world to take interest in China.  China has been able to accomplish in approximately twenty-five years what it has taken developing countries nearly a half of a century to accomplish (Guthrie, 2006).  In fact, some of the world indexes since 2005 ranks China in the top three of the largest economies of the world (Guthrie, 2006).  And in 2006 China was ranked at the fourth largest economy and third largest trading nation with an annual growth of about 10 percent per year for three decades (Bergsten, Gill, Lardy, & Mitchell, 2006).  Moreover, research suggests that China will be the number one economic power in the next couple of decades, if not sooner.  Ma (2007) suggests that the increase of China’s economy has created much interest by Western countries and negotiating with the Chinese people is a very challenging and daunting task.  As a result many foreign countries, from developed to undeveloped countries, are studying China’s successful, and central government supported, economic model.   To this end, China’s rapid economic growth has been occurring so fast that Westerners have had difficulty in understanding how to effectively negotiate with the Chinese.  Zhao (2000) suggests that Westerner’s frustration on how to negotiate with Chinese negotiators is in part due to Chinese negotiations specialists who provide seminars and workshops that only address what annoys the Chinese negotiators and not how to get ahead of the Chinese during negotiations.  And research supports that international negotiators negotiating with China must understand the Chinese culture, philosophy, the use of such concepts such as guanxi, mutual beneficial relationships and connections, and mianzi, face.  For example, the Chinese are very sensitive to losing face, mianzi, during meetings.  And in China things get done more effectively with guanxi (Seligman, 1999).  This study will identify the influences of Chinese negotiations and the approaches to effective Chinese negotiations by first defining what culture is and providing highlights of the Chinese cultural philosophy regarding Taoism, Confucianism, and Buddhism.  The study will then discuss overviews of leading research on cultural dimensions and how they relate to the Chinese culture.  However, cultural dimensions alone will not provide an international negotiator with the understanding of how the Chinese negotiate because research suggests that culture is constantly evolving and changing.  However, having an understanding of cultural dimensions will provide the reader with a basic foundation for understanding differences in traditional cultures.  The study continues by discussing research that supports the changes in culture and consequences of these cultural dynamics.  This will provide the reader will a clear framework for understanding the basics of Chinese culture and philosophy that influence negotiations.  With this cultural framework, as a foundation, the study then focuses on the effects of cultural dimensions, negotiating styles and influence of logic paradigms that influence Chinese negotiations.  The researcher then discusses the elements required of a successful initial meeting with the Chinese during negotiations.  The study then concludes with a brief discussion on the methodology and a final summary.  It has been argued that the complexities of culture extend to the many different definitions of culture.  Consequently, one method of defining culture is in relation to the sources, determinants and elements of culture.  Craig & Douglas (2006) posit that “culture is a pervasive influence which underlies all facets of social behavior and interaction and it is evident in the values and norms that govern society” (p. 323).  Krober and Kluckholn (as cited in Craig & Douglas, 2006) identified over 160 different definitions for culture.  Chang (2003) defines culture as “the unique characteristic of a social group; the values and norms shared by its members set it apart from other social groups.  And culture is concerned with economic, political, social structure, religion, education, and language” (p. 567).   Finally, Tylor (as cited in Craig & Douglas, 2006) defines “culture as that complex whole which includes knowledge, belief, art, morals, law, custom, and any other capabilities and habits acquired by man as a member of society” (Craig & Douglas, 2006, p. 323).   In order to understand the influence of the Chinese culture in negotiations it is important to have a basic understanding of their beliefs.  Research suggests that there are three basic philosophical belief systems of the Chinese people: Taoism (harmony with nature), Confucianism (human relationships), and Buddhism (human immortal world).  The Chinese people view these three as philosophies and not religions and that is because they are not as concerned with religion as the rest of the world, (Fang, 2006). 

 

Consumer Decision-Making Styles and Multi-Channel Shopping: The Missing Links

E. Eser Telci, Bogazici University, Istanbul, Turkey

 

ABSTRACT

Globalization of world markets and advancements in technology change the balance of power within the retailing industry, in favor of consumers. Traditional retailers with store-based operations are under the pressure of new channels that enable customers to shop at their convenience without a need for a physical environment. As a result, sellers that have realized the necessity of offering customers alternative shopping methods developed multi-channel retailing models. The aim of this paper is to identify the gaps in the multi-channel retailing literature about the role of consumers’ decision-making processes on their channel choice and/or patronage behavior. The study’s main contribution is that it proposes a model that highlights consumer decision-making styles as predictors of their multi-channel shopping intentions. Specifically, it expects multi-channels users to be less hedonistic and more price and fashion conscious consumers than users of a single channel. It also predicts consumers’ level of overall shopping involvement and gender to moderate the hypothesized relationships.  Retailing industry is passing through a restructuring period, characterized by a strong focus on customer orientation and the emergence of new channels. The rapid changes in technology and the rising power of buyers play significant roles on this change. Consumers’ interest towards different non-store selling forms force retailers to renew their strategic approaches to channel management so that they can establish long-lasting, profitable relationships with their customers (Payne and Frow, 2004). The most visible outcome of this reorganization is the increase in the number of retailers that use multiple channels.   Despite the growth of the industry in terms of the number of channels used to reach shoppers, research on how consumers make their channel choice in an environment where there is a wide array of alternatives is very limited. This paper is an attempt to close this gap by reviewing the literature on consumer behavior in multi-channel shopping contexts (e.g. Balasubramanian et al., 2005; Gensler et al., 2007; Goldsmith and Flynn, 2005; Gupta et al., 2004; Hughes, 2005; Neslin et al., 2006; Reardon and McCorkle, 2002; Stone et al., 2002; Van Baal and Dach, 2005) and discussing the importance of using consumer decision-making styles (e.g. Bao et al., 2003; Mitchell and Bates, 1998; Sproles, 1985; Sproles and Kendall, 1986; Sproles and Sproles, 1990; Walsh et al., 2001) to understand customers’ multi-channel patronage patterns.   Retailing industry all around the globe has been experiencing a revolution throughout the recent years, which is likely to continue in the following decade as well (Grewal and Levy, 2007; Wood, 2002). This era of change has mostly been brought about by technological developments, consolidation of ownership in retail markets, and changes in consumer profiles (Burnett and McCollough, 1994; Mulhern, 1997; Wood, 2002).  Retailers have traditionally been product-oriented, putting merchandising, buying, or distribution issues at the core of their focus, despite their chances of establishing long-term relationships with customers through their personal contact with them (Mulhern, 1997). However, the new retail environment requires cost controls, innovativeness, and greater value creation to gain a sustainable competitive advantage (Grewal et al., 2006). When these changing dynamics of the industry are complemented with the technological advancements that enable collecting detailed data about customers’ buying behavior, they lead to an integrated approach to retail marketing placing highest priority on consumers (Mulhern, 1997).  As a result, changes in the demographic characteristics and convenience orientations of customers, shift in the marketing orientation of the retailing industry, and innovations in information and communication technologies stimulate the growth of non-store retailing as an alternative to store-based selling. While Mulhern (1997) refers to non-store retailing as marketing of products without the use of a physical store, Burnett and McCollough (1994, p. 452) define non-store shopping as “a phenomenon where the primary shopping and purchase task takes place at a site other than a traditional retail setting, and is, therefore, primarily the responsibility of the shopper”. Although the proportion of non-store sales to store sales is still considerably small, the growth rate of the former is far more than the latter (Kotler and Keller, 2009). For an increasing number of consumers, non-store retail channels have become not only viable means of shopping but also the preferred alternatives (Burnett and McCollough, 1994).  While non-store retailing methods go back to catalogue selling, electronic marketing is the most recent form (Burnett and McCollough, 1994; Dholakia and Uusitalo, 2002). According to Kotler and Keller (2009, p. 484), the whole range of non-store formats can be grouped under four categories: direct selling (door-to-door selling), direct marketing (direct-mail marketing, catalogue marketing, telemarketing, television direct-response marketing, electronic shopping), automatic vending (vending machines that offer a variety of merchandise), and buying services (non-store retailers that offer discounts to a specific group of customers in return for their membership).  Retailers, recognizing the growing importance of a variety of non-store formats, have started to adopt multi-channel retailing strategies. Although reaching customers through two or more different channels has a long history, multi-channel operations gained greater popularity after the initiation and expansion of electronic sales methods (Schröder and Zaharia, 2008). According to Ogden and Ogden (2005), future of retailing will rely on the successful convergence of traditional and electronic forms of selling.  Delivering products and/or services through a number of channels increases a retailer’s competitiveness (Lee and Kim, 2008); since it helps to maximize customer satisfaction through providing alternatives that fit diverse sets of needs best (Alba et al., 1997; Dholakia et al., 2005; Schröder and Zaharia, 2008). Using a multi-channel strategy also helps retailers to serve broader markets and to generate greater revenues (Dholakia et al., 2005; Lee and Kim, 2008; Payne, 2004); as well as to develop interactive relationships with customers to deliver information, products, and after-sales supports (Rangaswamy and Van Bruggen, 2005).  

 

Spectator Visual Perception Scale for Lighting at In-line Hockey Rinks

Dr. Chin-Hsien Hsu, National Chin-Yi University of Technology, Taichung, Taiwan R.O.C.

 

ABSTRACT

This article develops a scale for measuring spectators’ visual perception regarding lighting at in-line hockey rinks, based on environmental psychology and sportscape theory, as well as to examine the reliability and validity of the scale. The subjects of this study are 339 in-line hockey spectators (aged 15-60) of the World Games in Kaohsiung, Taiwan, R. O. C. The CFA (confirmatory factor analysis) shows a good model fit assessment of the spectators’ visual perception model in renovated in-line hockey rinks, and the construct validity is also provided: (χ2(62, n=214)=106.27, p < .01, GFI=0.93, RMSEA=0.058, SRMR=0.043, CFI=0.98, NNFI=0.97, CN=184.30, χ2/df=1.71). This study’s great reliability and validity is able to measure visual-spatial perception of spectators while they are watching in-line hockey events. Meanwhile, this study also provides a direction for conducting future researches into sports marketing and consumer behaviors.   Servicescape, a tangible element in the service process, plays a significant role in the consumer satisfaction index (Ezeh & Harris, 2007). Servicescape refers to the physical environment in which a service process takes place. It might comprise lights, music, colors, facility designs, symbols, etc. Related researches have also been conducted on the impact of servicescape on consumer behavior. (Areni & Kim, 1994; Baker & Cameron, 1996; Correia & Esteves, 2007; Ezeh & Harris, 2007; Greenwell, Fink & Pastore, 2002; Harris & Ezeh, 2008; Hightower, Brady & Baker, 2002; Lin, 2004; Nguyen, 2006; Ogle, Hyllegard & Dunbar, 2004; Parish, Berry & Lam, 2008; Wakefield & Blodgett, 1996)  Based on this concept, Wakefreld, Blodgett and Sloan (1996) also introduced “sportscape” for sports & leisure environment and analyzed whether or not spectators will be influenced. Afterwards, some scholars also published related empirical studies on sportscape (Greenwell, et al., 2002; Hightower, et al., 2002; Ko & Pastore, 2004; Theodorakis & Alexandris, 2008; Yusof, See & Yusof, 2008). In brief, the physical environment is extremely influential in regard to service organizations achieving internal strategies and extenal goals. However, physical environment plays different roles under different servicescapes, so the planning and designing strategies should therefore also be modified (Hightower, Brady & Baker, 2002; Wakefreld, et al., 1996). Thus, this article will explain how the physical environment influences human behavior and cognition based on environmental psychology; as well, it will introduce research defects in sportscape-related research. Finally, we will discuss the impact of lighting on spectator visual perception and the necessity for formulating this scale.  Belk (1975) pioneered the systematic study on how situational factors influence consumer behaviors. He adopted S-O-R (Stimulus-Organism-Response) model to explain the relationships among environmental atmosphere, emotions and human behaviors. Afterwards the environmental psychologists Mehrabian and Russell (1974) developed the “M-R model” based on the S-O-R model. The M-R model describes how customers’ emotions will be affected by the atmosphere of retailing environment, and the ways that the cognition and behaviors of customers will be changed. The M-R model also comprises environmental atmosphere, emotions and behaviors. Environment can be divided into high-load environment and low-load environment. Under environmental stimuli, behavioral responses are mediated by three emotional states: pleasure, arousal and dominance (PAD). Behavioral response is the response to environment, which comprises approach/avoidance response.  Thus, the impact of the physical environment on human emotions can be explained by environmental psychology theory, upon which this study is developed, and probes into the impact of sporting lighting in a sportscape on spectator visual perception.  Space perception is a physiological and cognitive process whereby an individual perceives the surrounding space, objects and situation based on his/her senses and memories. In three-dimensional space, an individual must make judgments on distance, height, and direction, any time and any place. Otherwise, one might encounter difficulties and even dangers (Areni & Kim, 1994). Space perception comprises visual space perception and audio space perception. Visual space perception refers to depth perception, namely, three-dimensional perception or distance perception. Obviously, depth perception is based on vision. With visual stimuli and previous experiences, individuals are able to understand and judge the situations.  In the interactive mode between people and environment, perception and evaluation overlap, so it’s not easy to define where the margins are; environmental perception process covers both the senses and perception. Sense is more like a physiological process, whereas perception is mainly based on psychological process and also well-organized. The evaluation to physical environmental spaces depends on previous experiences and current psychological state (Mehrabian & Russell, 1974).  Under a competitive sportscape, spectators’ visual perceptions are, naturally, the critical aspect. The key factor which might have impact on spectators’ visual perception is lighting (Tai, 2008; Chan, 1991).. Adequate lighting can strengthen the ability of the retina to identify tiny objects. Both distant and near vision can be improved. Meanwhile, with appropriate miosis, the image on retina will be much clearer. Thus, a well-designed lighting environment can make the object outlines chiseled, and during the activity, eye fatigue owing to difficult identification can thereby be avoided (Chan, 1991). Hence, in this study, in regard to the facilities of sporting venues, the impact of lighting on spectators’ visual perception is a fundamental issue. Zeithaml and Bitner (1996) classified three dimensions of the physical environment (servicescape) for service organizations to strengthen customers/staffs behaviors: Ambient Conditions: the background of the servicescape (temperature, light, noise, music, smell, and color) will influence customers’ feelings, senses and responses. Spatial Layout and Functionality: Spatial layout refers to the layout of machines, facilities and furniture, as well as size, forms, and spatial relationships. Functionality refers to the capabilities of machines, facilities and furniture, which can help customers and staff to carry out tasks and achieve goals. Signs, Symbols and Artifacts: customer recognition of service organizations is derived from visible/invisible symbols and features in the physical environment. The signs inside/outside of the architectures are visible communicators. They can be used to indicate the name of organizations or departments, provide direction guidance, and convey regulations (ex. smoking prohibited). The aim of this research was to apply environmental psychology and sportscape theories to in-line hockey, as well as to adopt psychometric methodology to make up the spectator visual perception scale of lighting at in-line hockey rinks. Not only can this study determine the impact on spectator visual perception, but also serve as an examining tool to measure the visual perception of spectators.  

 

Minimizing Service Failure in Sports Centers with the Six Sigma Methodology

Dr. Kuei-Mei Cheng, National Taiwan College of Physical Education, Taiwan R.O.C.

Chun-Ming Shih, National Kaohsiung Normal University, Taiwan R.O.C.

 

ABSTRACT

Nowadays, people have started to attach importance to leisure and recreation. More and more people exercise in order to relax as well as remain healthy. Therefore the need for recreational activities and facilities has increased. Hence, the Taipei City Government has approved a budget for establishing sports centers. However, owing to the rise in consumer awareness and the competitive market of private health clubs, enhancing customer satisfaction and minimizing service failures has become a vital issue for sports center operators. This study examines service failures in sports centers by using the Six Sigma Methodology as well as the cause and effect diagram. A few suggestions for the management of the sports centers are provided as well.  In modern society, most people live with increasing pressure and have a bustling lifestyle. However, as trends have changed, people have started to attach more importance to leisure and recreation. In addition, since the Taiwanese have started to take two days off per week, more and more people exercise in order to relax and to maintain their health. Therefore the need for recreational activities and facilities has increased. Taiwanese professional athletes such as Chien-Ming Wang, Mu-Yen Chu, Cheng-Min Peng, and Chin-Feng Chen enjoy great popularity around the world and have inspired people in Taiwan to exercise.  As the capital of Taiwan, Taipei has followed the trend and endeavored to create a healthy city, aiming to encourage citizens to exercise and improve their health. The city government unprecedentedly established a sports center, which has been privatized. The main goal is to uphold the citizens’ right to participate in sports and achieve their “Public Fitness” goal (Taipei City Bei-Tou Sports Center, 2004). Thanks to its successful marketing strategy, the sports center attracted as many as seven thousand users within a month. Thereafter, the Taipei City Government has continued to establish sports centers around Taipei. Each sports center has its own swimming pool, court, gym, and classroom for aerobic dance. The convenient and fully-equipped sports center therefore has become a perfect choice for people to exercise. Still, enhancing customer satisfaction and minimizing service failure remains a vital issue for sports center operators.  In recent years, an increasing number of companies have adopted the Six Sigma methodology. These companies combine Six Sigma with cost control, statistical analysis and a problem management process to solve management problems. Peter and Patrick (2000) pointed out that Six Sigma is actually a reformed quality management system. Six Sigma seeks improvement by using statistical methods. Chuang (2009) observed that providing service is the main goal for sports centers, and the sports center operators face a challenge: how to provide service with the following four characteristics — intangibility, inseparability, heterogeneity, and perishability — while finding solutions to the causes of problems. Thus, this article aims to correct service failure by sports centers with the Six Sigma methodology and provide a reference for related organizations.  Many international enterprises (such as General Electric and Motorola) have adopted Six Sigma, the quality-improving strategy, to enhance customer satisfaction and remain market leaders. GE has saved enormous cost since it began to use the Six Sigma strategy. Pan (2003) indicated that GE started to promote Six Sigma methods in 1995. Since then, Six Sigma has been applied to the entire operations of the company including: R&D, purchasing, human resources, and asset management. Under this policy, GE increased its profit by 300 million USD in 1997, and by 2 billion USD in 1999, or 15% of its total profit.   6σ, which symbolizes Six Sigma, produces merely 3 or 4 defects per million opportunities. For enterprises, Six Sigma is the ultimate tool (Peter & Patrick, 2000). There are different explanations for Six Sigma in different fields. From the perspective of management science, Six Sigma is a new management approach, which emphasizes customer-oriented concepts and low numbers of defects, so that both production errors and costs can be reduced; as for statistics, Six Sigma focuses on minimizing the variance of process, that is, if a product follows a normal distribution, it allows only 0.0198 defects per million opportunities to go beyond control. Therefore, Six Sigma can be considered as a breakthrough management strategy. Through proper application and control, enterprises can diminish operation defects as well as improve the quality of products and services (Tsai, 2001).   There are many advantages to using Six Sigma including: understanding customers’ needs, having a high regard for input variable x and output variable y and a more thorough improvement process, as well as increasing potential benefits (Li, 2003). Six Sigma is composed of five steps (DMAIC), which are specifically stated as follows (Li & Wu, 2003):  1. Define: Define what customers need and the main problems in the service process. Those problems can be found during interaction with customers. When found, they are defined and quantified in order to narrow the range of problems that need to be improved. In the Define process, the main tools used include the Quality Function Deployment, questionnaire survey, Kano model, and Pareto analysis.  2. Measure: Collect data and measure the defects in the process. Then set an improvement standard or process based on the questionnaire survey, and conduct factor analysis to verify current quality and the quality goal in order to meet the standard. In this process, the most commonly used process capability index is Cp and Cpk.   3. Analyze: Use statistical analysis to examine latent variables that might influence results and then analyze the root causes of the defect. The goal is to improve the factors that cause a service failure with data analysis. In order to determine the sequence of improvement, one must verify and develop the sources of CTQs and then conduct an analysis on the causes and impacts. The main tools in this process are the cause and effect diagram, scatter diagram, as well as hypothesis testing.  4. Improve: Find the best solution and take actions. Minimize the impact of critical variables and fix the problems to within a tolerable range of maximum variation, so as to satisfy the customer. In order to prevent service failures or defects in the production process, sometimes adjusting or redesigning the operation process is required. Most of the time, experimental designs as well as the failure modes and effects analysis (FMEA) are used in this step.  5. Control: Maintain improvements and avoid repeating failures. The fifth step is quite important for preserving the benefits of the previous process. This step is mainly used to minimize or terminate service failures within maximum tolerance of critical items. Finally, improvement is verified with statistical tools and constantly monitored. The main tool used in this process is the control chart.  

 

A Semi-Quantitative Approach for Evaluation of Cost-Effectiveness of Safety Measures

Dr. Eirik Bjorheim Abrahamsen, University of Stavanger, Norway

Dr. Willy Røed, Proactima AS, Norway

 

ABSTRACT

A cost-effectiveness analysis is a well established discipline, and is often used as basis for comparisons between competing safety measures. There is, however, a gap between the theoretical cost-effectiveness analysis and the practical implementation of the tool as decision-making support. Ideally, the decision-maker should have a number of methods at hand. Some of these should be detailed and sophisticated and being used when a few safety measures are compared and the consequences of unfavourable decisions are severe. On the other hand there is a need for simplified methods to sort out some cost-effective measures from many alternatives in less complicated comparison studies or in pre-studies to more sophisticated comparisons.  This paper suggests a method for semi-quantitative cost-effectiveness analysis used as a part of a screening process to identify safety measures to be assessed in a more detailed analysis. In the proposed method, evaluation of cost-effectiveness is not only based on a cost-effectiveness ratio such as the expected cost per expected number of lives saved, which is usually done in a traditional cost-effectiveness analysis. A cost-effectiveness ratio is based on expected values, which means that the uncertainty to large extent is ignored. A broader reflection of uncertainties is incorporated in the suggested method in order to make sound and robust judgements about the safety measures’ effects on risk. An example from risk analyses of Norwegian road tunnels is presented to illustrate the use of the semi-quantitative approach.  Large resources are spent on safety measures and the need for tools for supporting the decision-making is large. Cost-effectiveness analysis is such a tool, and it has shown to give useful support for comparisons between competing safety measures.   Different cost-effectiveness measures are used reflecting that there are many ways of expressing cost-effectiveness. We may think of a safety measure as cost-effective if it is (Pettiti 2000):  Less costly and at least as effective.  More effective and more costly, with the added benefit worth the added cost.  Less effective and less costly, with the added benefit of the alternative not worth the added cost.  Cost saving with an equal or better outcome. A cost-effectiveness analysis is a well established discipline, and is often used as basis for comparisons between competing safety measures. In many cases, the cost-effectiveness is expressed as a cost-effectiveness ratio; the ratio of change in expected cost to the change in expected effects. In other cases, more simple approaches are used, where cost-effectiveness is categorized without presenting quantitative cost-effectiveness ratios. In both cases, the cost-effectiveness analysis and categorisation process is however based upon evaluations of expectation values; the expected cost and the expected risk reducing effect. The cost-effectiveness indices such as expected cost per expected number of lives saved provide useful insight, but indices based on expected values are not sufficient for evaluating cost-effectiveness. Uncertainty must be considered beyond the cost-effectiveness indices. The main problems are that the expected values are conditional on specific background knowledge, and the expected values could produce poor predictions. Surprises may occur, and by just addressing expected values such surprises may be overlooked (Aven 2008). Taleb makes a similar conclusion using the black swan logic (Taleb 2007). The inability to predict outliers (black swans) implies the inability to predict the course of history. An outlier lies outside the realm of regular expectations, because nothing in the past can convincingly point at its occurrence. We find also similar ideas in approaches such as the risk governance framework (Renn 2008) and the risk framework used by the UK Cabinet Office (Cabinet Office 2002).  In this paper we present a framework, taking the expected cost and the expected risk reducing effect into consideration, along with uncertainties. We suggest a method for semi-quantitative cost-effectiveness analysis to categorise safety measures, providing an example of how this framework could be carried out in practice. The method provides a practical approach to systemise and prioritise between a large number of alternative safety measures, and may be used in cases where the real outcomes may differ greatly from the expected outcomes. The paper is an extended version of a paper presented at the ESREL conference in 2009 (Røed et. al 2009).  The paper is organized as follows. In Section 2 we review and discuss the use of cost-effectiveness analysis in evaluation of safety measures. In Section 3 the basic feature of the suggested semi-quantitative approach for evaluation of cost-effectiveness of safety measures is presented. Then, in Section 4, an example is presented to illustrate the applicability of the method. Finally, in Section 4 we draw some conclusions.   In the evaluation of safety measures a cost-effectiveness analysis may be adopted. A cost-effectiveness analysis compares the costs and the effects of a decision alternative, where the cost is measured in monetary terms and the effects are measured in natural units, such as lives saved, see e.g. Boardman et. al 2006, Baron 2000 and Petitti 2000.  The results of a cost-effectiveness analysis may be expressed in two ways; either as a cost-effectiveness ratio or as an effectiveness-cost ratio. The review and discussion of the cost-effectiveness analysis that follows, focuses on the cost-effectiveness ratio which is by far the more commonly used ratio.   In order to compare the cost-effectiveness of the two measures, the cost-effectiveness ratio for both measures is calculated. The cost-effectiveness ratio for safety measures 1 and 2 is equal to and , respectively.  Safety measure 1 is more cost-effective than safety measure 2 if . To see whether safety measure 1 is preferred to status quo or not, the cost-effectiveness ratio has to be compared with a reference value, R. The reference value clarifies how much money the decision-maker is willing to pay to obtain one unit of effectiveness. Implementation of the safety measure is preferred to status quo if the decision-maker is willing to pay more to obtain one unit of effectiveness than the cost-effectiveness index expresses, which means that safety measure 1 is preferred to status quo if.  We cannot determine the cost and in particular the effects with certainty. There is often uncertainty about C and in particular about Z. As a result predictions are required, and the natural choice is to use expected values.  

 

Selecting the Most Feasible Strategy for Green Supply-Chain Management

Dr. Chen-Kuo Lee, Ling Tung University, Taiwan

Shu-Ho Chen, Ling Tung University, Taiwan

 

ABSTRACT

Along with the rapid economic growth and the swift expansion of enterprises across the world, human beings are utilizing natural resources faster than ever. Meanwhile, the excessive development and pollutions are causing the most severe damages to the environment and has thus destroyed the ecology. Faced with the deteriorating environmental issues, enterprises have to adopt new management models in all aspects throughout their business activities. Apparently, the green supply-chain management is the most effective tool that helps enterprise accomplish their management goals and solve the environmental issues at the same time. In Taiwan, however, the green supply-chain management still has a long way to go before the enterprises adopt it consciously. Therefore, this study attempts to analyze the external conditions related to the green supply-chain management by SWOT method thereby identify the potential opportunities and threats and, meanwhile, assess the internal conditions required by the green supply-chain management thereby identify the advantages and disadvantages possessed by the enterprises, and thus create a solid framework for the enterprises with respect to the implementation of green supply-chain management. Most importantly, this study concentrates on the most feasible strategy for green supply-chain management in relation to the present situations of Taiwan’s enterprises.   Nowadays, the environment has become the critical factor with relation to the influence on and restriction for social development. Along with the economic development, human societies are faced with the deteriorating environmental issues. The environmental issues have been overlooked over the past decades. Consequently, human beings are faced with the deteriorating environmental issues, such as global warming, ozone depletion, acid rain, air pollution, and water pollution, to name just a few. As a result, resources, environment, and population have become the three major concerns in the 21st century. In an effort to solve the three major concerns permanently, human begins have proposed a sustainable development strategy in which the ecology and economics are considered an entity and affect each other. In other words, economic development entails the ecological environment’s long-term tolerance. The environment and resources are needed by economic development and, as the most critical factor for human beings’ survival, ensure human beings’ existence. Thus, the sustainable development – an overall development strategy – was born.  As the backbone of the industrial society, the manufacturing industry produces wealth for human societies and, on the other hand, pollutes the environment and ecology severely with irreversible impacts in consideration of the enormous amount of un-recyclable resources consumed by the manufacturing industry. According to statistics, 70% of pollutants on the Earth are discharged by the manufacturing industry. It is, therefore, extremely important for the manufacturing industry to implement the sustainable development strategy permanently, which entails both production process and production methods compliant with sustainable development requirements with emphasis on resource depletion and environmental impacts. People started calling for green manufacturing in the 1990s. Green manufacturing (GM), also known as environmental conscious manufacturing (ECM), entails the highly competent and hygienic product design methods to develop and upgrade resource utilization efficiency and, meanwhile, reduce the types and quantities of pollutants produced by the manufacturing process and minimize the wastes produced by end-users. Apparently, green manufacturing manifests sustainable development for the manufacturing industry.  More and more enterprises are shifting their management models towards supply chain management (SCM) since 1990s. As a result, the competition was upgraded – from the rivalry between enterprises to the competition between supply chains. In an effort to maintain their competitive edge, enterprises have united themselves with raw material suppliers and distributors into a supply chain that comprises raw material suppliers, manufacturers, and distributors. Apparently, “supply chain” is the most powerful tool for enterprises to enhance their competitive edge for their long-term development. There is no doubt that the supply chain helps enterprises upgrade their competitive edge. But, the conventional supply chain has a number of drawbacks:  Overlooking the impacts imposed by the enterprises on ecology and environment. Enterprises strive to maximize their monetary benefits and are hardly concern themselves with the negative impacts imposed by supply chain on human societies and have thus caused the ecology and environment to deteriorate.   Obstructing the rational utilization and allocation of social resources. The conventional supply chain adheres to “enterprises’ internal benefits” instead of “social benefits” and have thus rejected the ecology-oriented enterprises. Thus, the ecology-oriented enterprises are eliminated and, meanwhile, other enterprises grow rapidly by giving up the society’s benefits.  Vulnerable to government policies and green trade barriers. More and more governments and peoples are aware of the deteriorating environments and natural resource depletion. Consequently, more and more policies and laws are enacted to restrict enterprises from causing damages to the environment and, meanwhile, to support green enterprises and eco-friendly products. Green manufacturers entail a higher level of requirements for manpower, materials, financial strength, and technologies throughout the entire process, including green design, green process planning, green materials, green marketing, etc. In this connection, supply chain – the most important factor for competitive edge – has to adhere to the fundamental belief of the green manufacturing. If the supply chain lacks due attention to the environment throughout its management process, the business activities will be unable to create any benefit to the environment thereby reduces the enterprises’ economic benefits and, to a worse extent, weakens the enterprises’ competitive edge and their strategic administration capabilities in the long-run. It is, therefore, extremely important to reorganize the supply chain and to optimize the resource utilization with due attention paid to the environment thereby establish a green supply chain (GSC) and implement green supply-chain management (GSCM).

 

Determinants of Capital Structure Policies of Turkish Manufacturing Firms

Dr. Deniz Parlak, Dogus University, Istanbul, Turkey

 

ABSTRACT

In contemporary literature the knowledge about capital structure policies of individual firms is mostly derived from data from developed economies in which the degree of market capitalization is high and information asymmetry is low. The purpose of this study is to identify the factors that affect capital structure decisions of manufacturing firms in an emerging economy, Turkey and to find out which theory best explains the situation.  Capital Structure decisions of individual firms have been an important concern for researchers throughout the last 60 years. The theoretical framework has evolved around three theories. First, the trade-off theory maintains that firms have an optimal capital structure policy, so they set a target debt-to-value ratio according to their risk class and gradually move towards it. Second, the pecking order theory sustains that firms prefer internal finance and sticky dividend policies determined according to their investment opportunities; if external finance is required first they issue safe debt, then hybrid securities and equity the last resort. Last, the market timing hypothesis states that the first order determinant of corporations’ capital structure decisions is the relative mispricing of the debt and equity instruments at the time the firm needs financing.  Given this theoretical framework, the purpose of this study is to analyze the determinants of the capital structure policies of Turkish manufacturing firms and to find out which theory best explains the situation.  The rest of the paper is organized as follows: part two, the theoretical background; part three, variables and measurement; part four, the data and sampling; part five, the analysis and findings; and part six concludes the discussion.  The stream of thought on capital structure policies is quite old and rich.  It was first studied by the trade-off theory and later the pecking order and market timing theories.  The trade-off theory maintains that firms have an optimal capital structure policy and consequently they set a target debt-to-value ratio according to their risk class and gradually move towards it.  The issue was first studied by Modigliani and Miller in 1958. In their study they stated that under the assumptions of frictionless markets where individuals can borrow and lend at a risk free rate, and where the firms can be divided according to risk classes such that the return on the shares issued by any firm in any given class is proportional to the return of the shares issued by any other firm in the same risk class, the market value of any firm is independent of its capital structure and is given by capitalizing its expected return appropriate to its risk class. If this does not hold, then arbitrage will take place and equality will be restored. As a result, the market price of any share is given by capitalizing its expected return at the continuously variable rate. The independence between market value and capital structure decision holds both under the presence of taxes as the rate of capitalization is measured in a tax adjusted way and under the presence of plural interest rates as an increase in the cost of borrowed funds will be offset by a corresponding reduction in the yield of common stocks (Modigliani & Miller, 1958).  Modigliani and Miller’s (1958) irrelevance argument was criticized severely by Durand in 1959. He argued that markets are not perfect and are not free from the risk of bond default, margin calls, or major disasters of any sort as Modigliani and Miller assume. In an imperfect market, equilibrating mechanism is unrealistic and inconsistent. Durand (1959) also criticized Modigliani and Miller for having underestimated the difficulty of estimating an equivalent risk class which is the cornerstone of their theory. The concept of equivalent return class is derived from notions of static equilibrium and is not adaptable to a highly dynamic economy where stocks do not sell at their book value. So MM approach of measuring the cost of capital as a ratio of current earnings to market price is static and it should be measured as current earnings plus long term growth potential required to meet the needs of an expanding economy (Durand 1959).  In 1961, Modigliani and Miller changed their statement and argued that the tax advantages of debt financing and consequently the quantitative differences between firm values are larger than what they have suggested in 1958. Even if one firm has the expected return after taxes twice that of another firm in the same risk class, the actual return after taxes will not be twice due to the leverage effect. The arbitrage will make values within any class a function of not only of expected after tax returns but of the tax rate and the degree of leverage depending on their size and source of the tax advantages of debt financing (Modigliani & Miller, 1961).  Jensen and Meckling (1976) argued that optimal capital structure is determined not by tax effects but by agency costs of debt and equity. The probability distribution of cash flows is not independent of ownership structure and this fact may explain the presence of optimal capital structure. The first problem is the agency cost of debt, which may cause a wealth transfer from bondholders to shareholders. To avoid this, bondholders may insist on various protective covenants, which are not free of costs (monitoring), or may require a higher return to cover their risk. The second problem is the agency cost of equity that is owner managers maximizing their wealth at the expense of shareholders causing monitoring costs to be incurred. Given the agency cost of debt and equity optimal capital structure is at the point where agency costs are minimized (Jensen & Meckling, 1976).  In 1977, Myers and Ross added bankruptcy cost dimension to optimal capital structure discussions. According to Ross (1977), what is valued in the market is not actual but perceived stream of returns. Changes in financial structure can alter the market’s perception about risk class even though actual risk class remains the same. Given the incentive schedule of managers, the possible distinct modes of financing are limited, what matters is the return they yield. Altering the financial structure affects both return and probability of bankruptcy. There is a single equilibrium pair of incentive-capital structure that maximizes incentive. This equilibrium package correctly signals about the class of the firm so the cost of capital is independent of the financing decision even if the debt is uniquely determined. Bankruptcy risk is an increasing function of debt level and firm class but equal for firms in the same risk class. Similarly the value of the firm does not depend on financial structure within the same risk class (Ross, 1977). Myers (1977) shows that the existence of corporate debt can reduce the present value of the firm hence may increase the probability of bankruptcy by weakening the corporation’s incentive to undertake good future investments.

 

Top Level Manager’s Leadership Styles in Large Croatian Companies

Dr. Ivona Vrdoljak Raguz, University of Dubrovnik, Croatia

 

ABSTRACT

The purpose of this paper is to explore top level manager’s leadership styles in large Croatian companies. The research framework examines leadership styles in large Croatian companies based on the Likert analysis of organization and leadership styles. Survey research has been conducted in the paper based on the answers of 81 top managers of large Croatian companies. The result of the research reveals that the dominant leadership style in large Croatian companies regarding the company size and fundamental industry is consultative leadership style. Details of the results, implications of the findings, and conclusions are presented and discussed. The present study provides a starting – point for further research of leadership styles in Republic of Croatia. This research is among the first and most exhaustive exploratory carried out in the Croatian context of large Croatian companies.  Leadership is a subject that has long interest among people. The numerous leadership theories have been developed at the end of the last century and the beginning of 21st Century. Some theories as a base have leadership style (Tannenbaum & Schmidt, 1958), others as a main variable have the way of making decisions (Vroom & Yetton, 1973, Vroom & Jago, 1988), third are focused on question of perspectives on Effective Leadership Behaviour (Ohio State Leadership Studies, Michigan Leadership Studies, Harvard Leadership studies, Hersey & Blanchard, 1982), while the fourth Theories represent Dyadic Role Making (Leader - Member Exchange), Graen et al. (1974) and Hollander (1978). All of these theories have tried to give “universal” response on question: What makes good leadership? from its angle so every new theory has been the reaction on actual ones and has the main goal to avoid its disadvantage.   In search of the answer, important leadership theories arose – beginning from the personality theory, through behaviourist and contingency theories, to the theory of transformational and transactional leadership. Scientific research, up to now, of which most significant are the works of McGregor, Argyris, Likert, Blake and Mounton, Fiedler, House, towards the more current research of Taffinder, Crosby and Daft have shown that leadership styles influence the efficiency of the company on one hand, and performance and satisfaction of the subordinates on the other.  The whole paradigm of the leadership phenomenon has changed radically at the end of the 20th Century. Olsens’s research (2006) has shown that the leadership is characterised with a vertical structure of power in successful world corporations but is slowly changing with leadingship (horizontal structure of power). The leadingship is based on the fact that the most important variable in the companies are followers, where the most important resource are employees of the company and their human values.  In this research the style approach has been chosen to investigate dominant leadership style. The style approach emphasizes the behaviour of a leader and focuses exclusively on what leaders do and how they act. The style approach expanded the study of leadership to include the action of leaders towards subordinates in various contexts.   Likert’s model for analysis of organizations and leadership styles is used in the paper (Likert, 1961.) Likert believed that the key to good leadership is to establish a climate and system of management that creates an effective organisation. He examined different types of organizations and leadership styles, and he asserted that to achieve maximum profitability, good labour relations and high productivity, every organization must make optimum use of their human assets. Rensis Likert identified four main styles of leadership, in particular around decision-making and the degree to which people are involved in the decision:   Exploitive authoritative – system 1 (in this style, the leader has a low concern for people and uses such methods as threats and other fear-based methods to achieve conformance. Communication is almost entirely downwards and the psychologically distant concerns of people are ignored);  Benevolent authoritative – system 2 (when the leader adds concern for people to an authoritative position, a 'benevolent dictatorship' is formed. The leader now uses rewards to encourage appropriate performance and listens more to concerns lower down the organization, although what they hear is often rose-tinted, being limited to what their subordinates think that the boss wants to hear. Although there may be some delegation of decisions, almost all major decisions are still made centrally);  Consultative – system 3 (the upward flow of information here is still cautious and rose-tinted to some degree, although the leader is making genuine efforts to listen carefully to ideas. Nevertheless, major decisions are still largely centrally made);  Participative – system 4 (at this level, the leader makes maximum use of participative methods, engaging people lower down the organization in decision-making. People across the organization are psychologically closer together and work well together at all levels).  Manager’s are one of the main factors that affect the success of organizations because they participate and work through the decision-making process.  In this research paper based on a survey research of large Croatian company’s two main responses on two queries will be carried out:  What are the main specific’s of top level manager’s leadership style in large Croatian companies?  What leadership style is dominant by the size of the company in large Croatian companies? What leadership style is dominant by the fundamental industry in large Croatian companies?  Leadership is a phenomenon that has long excited interest among people.

 

Workplace Spirituality of Oriental Culture View

Lin Han Pin, National Changhua University of Education, Taiwan

Dr. Jeng Yoau-Chau, National Changhua University of Education, Taiwan

Lin Hong Min, National Changhua University of Education, Taiwan

Dr. Chen Ming-Chia, Ming-Dao University, Taiwan

 

ABSTRACT

In recent years, spirituality in the workplace is gradually valued, as many leaders regard spirituality as a meaningful solution. Thus, scholars endeavor to construct a holistic framework to help leaders recognize complicated spiritual developments in the workplace. After years of study, researchers have come to realize the existence of an in-depth spiritual consciousness and internal existence of spirituality. This study takes the view of the Oriental culture and designs measurement tools for workplace spirituality through a cause-and-effect relation model, which concerns factors of workplace spirituality, as criterion for future research.  At the end of the 20th century, while knowledge economy and technology satisfied material needs, people were lost, ethics and social values were distorted, and there was corruption and crime. Thus, “material life” and “spiritual life” were out of balance. Elliott and Lemert (2006) indicated that a new self-based individualism was developed to allow active and individual free will, as well as an ability to interact with others in an environment of globalization. Human-based economies and managerial concepts emphasize free will, experience, and feelings, and stress human existence and ethics. This individualism was regarded as a philosophical change, born of philosophical thoughts, and applied to areas such as ethics, within economic and managerial fields. Donde and Dennis (2000) also indicated that a more effective approach is required to stimulate employees’ inner powers upon corporate operations. Thus, contemporary organizations and management teams have widely discussed the concept of the “essence of human beings’ existence” (Jurkiewicz & Giacalone, 2004; Moor & Casper, 2006), and thus, studies on “spirituality” were developed. However, “spirituality” is an abstract concept, and not easily defined, thus, various definitions exist. Spirituality does not necessarily refer to religious doctrines. It could be personal philosophies, values, or meanings of life (Kellehear, 2000). Albanese (1990) indicated that spirituality is human awareness of details within existence and reveals in-depth connections. Gawain (2000) suggested that, on the contrary, most contemporary people are lost and insecure from shortages of inner spirituality. Therefore, spirituality could stabilize the will of the people and purify the soul. Kellehear (2000) defined spirituality as the pursuit of the meaning of life and the essence of existence. Spirituality is an awareness of existence; it transcends material life and involves profound consciousness, individual beliefs, and values. Harrington, Preziosi, and Gooden(2001). In other words, typical changes in the new century of information find employees experiencing essential changes in work values.   The change is gradually clarified from studies on spiritual issues, which are valuable and significant for future development. There are growing numbers of companies encouraging employees to develop their workplace spirituality (Claude & Zamor, 2003). Lewis (2001) cited one survey, which indicated that most workers in the U.S. believe that the workplace influences their spiritual lives; thus, workplace spirituality is a valuable research topic. However, in the database of Chinese research, there are few Oriental studies on the management of workplace spirituality. Most studies did not elaborate the context through complete contents or cause-and-effect influences. In addition, Nadesan (1999), Zohar (1997), and Wilber (2000) suggested that constructing knowledge through a combination of Oriental and occidental epistemology would break through boundaries and challenge the original hypothesis. Thus, this study includes the view of the Oriental culture, and more completely probes and validates the cause-and-effect relations of workplace spirituality, the influences of workplace spirituality, and in particular, those of the employees’ work performance.  Workplace spirituality is a relatively new field related to individuals, organizations, and social environments (Sheep, 2006; Moor & Casper, 2006). Neal (1997), Donde and Dennis (2000), and Robbins (2002) analyzed the causes for the value placed on workplace spirituality, and their findings are as shown below: (1). The trend to study life’s meaning and values: as derived from the idealism in the baby boom of the 60s, a time when most people felt they had reached the peak of their career, were middle to older aged, and began to encounter significant anxieties, thus, death, when faced with one’s own mortality, and their questions about the meaning of life were stimulated, resulting with a desire to integrate life’s values with professional values of work (Neal, 1997; Donde & Dennis, 2000). (2). Changes to work and life styles: the public of contemporary societies were busy with work and changeable, and they spent less time interacting with neighbors, families, and friends (Donde & Dennis, 2000). In addition, due to changes to work patterns (small-scale business and workforce dispatching), it became difficult to retain stable employment, and people were anxious and began to reflect on their personal works and inner selves (Neal, 1997). In addition, high-tech living increased distances between people, and other factors, such as a moving population, resulted in great gaps in society, which affected the need for close communities, personal involvements, and meaningful connections (Robbins, 2002).  (3). Rise of self-exploration: Donde and Dennis (2000), and Robbins (2002) suggested that traditional doctrines of religion were no longer as influential as they previously were, and society began to seek spiritual shelter. Thus, a rise in new religions, with aims of spiritual or inspirational content, offered courses that emphasized the people’s need to discover their inner centers.  Based on the above, the rise of spirituality was usually significantly related to the public’s reflection of their current lives and society. In addition, spirituality influences individuals, and significantly affects organizational and managerial fields giving rise to large numbers of studies on workplace spirituality. Brown (2003), and Jurkiewicz and Giacalone (2004), suggested that workplace spirituality refers to a new direction, with regard to modern management, and thus, related studies have increased.  With regard to the definitions of workplace spirituality, many researches applied spirituality to the workplace, providing it further definitions. For instance, Jurkiewicz and Giacalone (2004) defined workplace spirituality as a reinforcement of the employees’ transcendental experiences through their works. Claude and Zamor (2003) suggested that workplace spirituality refers to an individuals deeper discovery of life and work values, achieved through self-reflection and relationships in the workplace, including relationships with others, realizations of personal morality, and a general consideration for the globe. In other words, workplace spirituality means, spirituality as perceived by organizational members within the workplace, or spirituality as perceived by employees, due to meaningful work content, experienced in the workplace (Ashmos & Duchon, 2000).

 

Role of Quality Cost Information and Reporting in Decision Making in Jordanian Industrial Shareholder Companies

Dr. Muhammed Yassein Rahahleh., Al Albayt University, Jordan

 

ABSTRACT

This study aims at investigation usage quality cost information and reports in Jordanian industrial corporations on measuring and reporting of quality costs.  The study showed that there are significant effect of company size and sector of the company, companies belongs to medical, chemical, electronic, food sub sectors report and utilized these reports in different decision making process. There is significant relationship between the use of comprehensive quality management and the measurement of quality costs, reporting about it and used cost report in decision-making. The study recommended the managements of Jordanian Industrial Corporation to implement the concept of quality costs, measure, and report about it, use the reports of quality costs in decision making and train the employees on the measurement of quality costs.  Many organizations have adopted a reliable method for measuring and reporting cost of quality (COQ) and used it to improve operations; the magnitude of benefits in financial terms cannot easily be quantified. Quality cost is as important for all firms, but the importance of quality cost was just realized recently. Studies and research showed that quality cost has a great share of the total cost and sales of any organization. Burner, 1976 estimated the quality cost of a company producing machines and instruments as 5% of sales rotation. In another study, Moyrzed Glemo,(1979) stated that quality cost was about 38% the sales of a company for Iron melting, and Wellat and Haiss estimated quality cost for IBM at the beginning of the 1980s to be 30% of the industrial cost (Giakatis at el 2001). These results seem at first look as not real, since people wonder how their enterprises achieve profit under these high percentages for quality cost. Proving the reality of these results is similar to observing quality cost of all industrial and service activities.  One of the most important objective COQ approaches is to translate quality problems to the top management into the language of money, who are generally more concerned with financial performance. Quality cost information helps management evaluate the relative importance of quality problems and thus identify major opportunities for cost reduction (Evans and Lindsay 1999). Harrington (1987); Juran, Gryna, and Bingham (1988); Chen and Tang (1992); Atkinson, Hamburg, and Ittner (1994); and Bland, Maynard, and Herbert (1998) used the term “cost of poor quality” in place of quality costs or the cost of quality that speaks directly to the real issue and challenge at hand: reducing and eliminating the nonvalue-added costs and waste associated with poor quality.  In the last decade, quality cost was become conscious and in focus of the managerial accounting, this causes a shift from presenting the cost data and information for evaluating the product stock at the financial reports, to presenting information for all levels of management to make sound decisions and assist managers to manage and assess operations in a better way. In practice, eliminate or minimizing cost of poor quality leads both public and private to become the leaders of the future. In most organizations, 40 percent of the total human and mechanical efforts are waste, which can be eliminated or significantly reduced. This leads to reduction the per-unit price for goods and services and consequently, yielding a good returns on investment and often ends up being a price that is globally competitive (Cupello 1999).  Results vary from one industry to another, and the ability of the company to save in this cost depends on its economic status and the degree of competition facing it, in addition to the degree of implementing the quality cost input and befitting from the information that depends on the accurate measurement of this cost through reports prepared by the managerial and cost accounting department, and the degree of the make use of of these information by the top management decisions making process that achieve the proper utilization of resources at the least possible cost.   Recently, several Jordanian companies began to adopt total quality management and set up quality cost systems. In light of the increased focus on quality and customer satisfaction, the question raised: Are Jordanian industrial shareholder companies utilize quality cost in decision making process, and what is the impact of the firm characteristics, namely; firm size, sector on using quality cost report in decision making process.  HA: there are significant differences in reporting quality costs and utilizing these reports in planning, control, investment, and performance evaluation in the Jordanian Industrial Shareholder Companies due to the difference of the sector they belong to.  HA: there are significant differences in reporting quality costs and utilizing these reports in planning, control, investment, and performance evaluation in the Jordanian Industrial Shareholder Companies due to implementing or interesting in total quality management (TQM) concept.  A survey questionnaire was developed to measure the implementation of quality costing in the Jordanian companies. Since surveys provide the ability to address a wider scope than case studies and are frequently used in studies of quality costs (Kumar et al., 1998).  A questionnaire was developed composed of three sections was designed depending on literature. The first section consisted of a set of  questions about the company included location, date of establishment, number of personnel, and value of assets, capital, the sector the company. The second section consists of set questions about utilizing quality cost information and reports in decisions making process in the Jordanian Shareholder Industrial Companies. Responses are requested to evaluate the situations using a five-point Likert scale for each company.  A total of (180) Questionnaires were distributed to all Jordanian Shareholder Industrial Companies listed in Amman stock market for the year 2009; two questionnaires for each company, one for the financial manager the other for director or vice director. The number of returned questionnaires suitable for analysis was amounted to (1146) questionnaires, which represent (%85) of the distributed questionnaires.

 

A Study on Strategic R&D Investment Behavior in Transnational Corporations

Dr. Yeong-Bin Lee, Ling Tung University, Taiwan

Dr. Chen-Kuo Lee, Ling Tung University, Taiwan

 

ABSTRACT

Employing the game theory established by Reihildle Veugelars (1995), this paper aims to analyze the causes that formulate the strategic R&D investment behavior of transnational corporations. The motives behind the R&D investment behavior of transnational corporations may be divided into three categories: (i) progressive transnational R&D investments under dominant strategies; (ii) follow-the-crowd transnational R&D investments under the bandwagon effect; (iii) diversified transnational R&D investments under mixed strategies. Findings of this study indicate that two important strategic variables are reflected in the R&D investment behavior when a transnational corporation engages in global competition, namely, the internal configuration of global business activity and the external coordination. The R&D investment behavior is the consequential result of the interaction of these variables. It is by the globalization of R&D that a transnational corporation may enhance, to a great extent, its strategic advantage and simultaneously upgrades its competitive edge in the international arena.  Since 1980s, as a result of rapid economic globalization and intense international competition, the life cycle of product and technology is getting shorter and shorter day after day. To circumvent the risk of technology development, reduce the cost of technology development, and satisfy the host country’s request for localization of product and the technology development, transnational corporations have gradually desalinated the traditional concept that takes the Home Country as the center of research and development(R&D) . They set up research and development institutes overseas or form a technical alliance with firms in the host country, fully utilize the local comparative advantage in skill and human, and dispose globally the research and development resources to embark in the research and development of new products, new processes and new technology, leading to a new pattern of globalized research and development(Zedtwitz, Gassmann, & Boutellier, 2004).  R&D investment is one of the direct overseas investments of a transnational corporation. Its basic fundamental motive is to pursue the ultimate aim of providing maximum profit and value for the enterprise. However, R&D is characterized by its difference from a regular production investment. When a transnational corporation is making a global R&D investment decision, special motives are considered. In their views regarding the motives for overseas R&D investments by a transnational corporation, European and American economists usually observe from two directions. First, they regard overseas R&D investments as one kind of the international direct investment, and explain this phenomenon with the traditional international direct investment theory to probe into the applicability of the traditional international direct investment theories to overseas R&D investments by a transnational corporation(Pearce, 1989Cantwell, 1995Niosi, 1997). Among them, the Monopolistic Advantage Theory(Hymer, 1960), Product life Cycle Theory(Vernon (1966), Internalization Theory(Buckley and Casson 1976), and the Eclectic Theory of International Production (Dunning 1977, 1981, 1988) are all capable of providing an explanation of motives of overseas R&D investments by a transnational corporation, though there are some limitations(Kuemmerle, 1997, 1999; Cantwell, 1995). Secondly, they proceed from the perspective of technological innovation to explain the globalization of overseas R&D investments by transnational corporations with Strategy-based Theory(Knickerbocker, 1973Veugelers, 1995), the Theory of Market Structure(Granstrand, Hakanson, & Sjolander, 1993Serapio & Dalton, 1999)and propose some new theories. Among them, the Theory of Strategic R&D Investment has explained the situation in a better way why transnational corporations are still striving to make overseas R&D investments in important strategic markets under the greatly increasing world competition.   Whether it refers to the way of investment or in terms of the impact, the globalization of overseas R&D investments by a transnational corporation is different from other forms of globalization. For decades, most transnational investment theories have been mainly put forward for investments in the manufacturing and service industries. Although these theories have some inspiration to the exploration of R&D globalization, yet it cannot be used directly to explain the brand new phenomenon of R&D globalization led by globalized world economy and progress in information technology that we are experiencing today. The research of the R&D globalization by a transnational corporation is still a brand new theme. There is an urgent need to carry out a profound examination into the theories. The R&D investment by a transnational corporation is often accompanied by the international transfer of advanced technology and the worldwide diffusion of innovative experience. It has a significant impact on the technological innovation of both the home country and the host country, and thus causing great concern around the world. How to understand and explain the R&D Globalization theoretically, make full use of the historical opportunity of R&D globalization, and promote the development of technological innovation of the country have become the focus of recent international economic research, and it is the main motives of the paper as well.  The study examines the motives of R&D investment behavior of transnational corporations on the basis of the motives underlying traditional investments in R&D, and use the game model proposed by Reihildle Veugelars (1995) to analyze how the strategic R&D investment behavior of transnational corporations is developed.   Reihilde Veugelars set up a game-theoretic model in 1995 to analyze strategic motives for foreign direct investments.

 

A Study on Leisure Attitude and Educational Cognition;   To Survey College Students in Central Taiwan

Ju-Mei Hung, ChienKuo Technology University, Taiwan

Dr. Pei-Ling Wu, ChienKuo Technology University, Taiwan

Ming-Chieh Wu, ChienKuo Technology University, Taiwan

Dr. Ching-San Chiang, ChienKuo Technology University, Taiwan

Hurdy Su, JSCORP, Taiwan

 

ABSTRACT

To research leisure concepts and leisure tendencies among young people, a questionnaire was administered to survey samples of college students in central Taiwan. Part one of the questionnaire comprised 36 questions on leisure attitudes while part two comprised 36 questions on leisure educational cognition. Part three asked about four background items for data collection purposes. A total of 1221 valid questionnaires from 1442 administered (resulting in a response rate of 84.67%) were used for data storage and analysis. Five processes were followed: planning, preparation, piloting, survey, and analysis. The conclusions drawn indicate not only a medium relation between leisure attitude and leisure educational cognition, but also a high agreement level between both parts. To reject the null hypothesis, part one included the sex, college, school year, and job situation; part two included the same items except for school years. The Nomogram concept was introduced to find the most important items in each part using a combination of means, factor analysis, and stepwise linear regression analysis for confirmation. The results indicated that, in some colleges, the direction of courses in relation to leisure could be important items for curriculum development.  Thanks to rapid developments in medical techniques and information techniques (Daniels and Kart and Lane, 2005), today’s human life spans are now longer than ever (Kao, 2004). Dying of old age may be suspended for a long time, even after retirement (Berges and Dallo and DiNuzzo and Weller, 2006). Maintaining the balance among physical, physiological, and psychological states is the basis of health (Coleman, 1993), while focusing more on daily regimens has become the modern concept of health (Havitz and Mannell, 2005). Traditionally, people have retired or left their jobs to devote time to personal activities according to interests or inclinations (Brossart and Lawson and Keiffer, 2006). Indeed, having the time to do something through self-planning has become part of modem life thanks to economic development and improved living conditions (Chen and Tsai and Thiau, 2004). As a result, leisure is the most significant issue in a healthy regimen (Katz and Marshall, 2004). All people—young or old, retired or non-retired—should give more attention to leisure activities in modern life.  Leisure may have some limitations (Wang and Kao, 2006), but most situations feature activities related to western and eastern sports (Kao, 2004b). Consequently, younger people tend to participate in leisure activities more than older people (Nichols, 2005). Courses in athletics or physical education are available in school as students grow up (Chiang and Liang, 2005). The younger, the students are greater emphasis on courses in athletics (Wei, 2006). Traditionally, physical education was limited to gymnastics (Jang and Chang, 2005); it subsequently was extended to track and field sports (Liu and Jain, 2005) and ball playing (Evan, 2007), until modern multi-sports were incorporated, such as boxing, aquatic sports, horsemanship and winter sports (Lin and Lee and Via, 2004) and even Chinese Kungfu (CTU and CCU, 2005) for interested students.   Educational goals are defined by the school system (Walker and Deng, and Dieser, 2005), while education focuses on engaging students to become physically and mentally healthy (Liao and Chin, 2006). According to Sadzeck (2001), physical education promotes happiness, skills, and competition. Most students chose a sport to learn for pleasure. While practicing and exercising, students develop the fundamental skills to participate in a competitive game. Experience is accumulated over playing time. Because students can choose from a variety of sports as a result of course enrichment and program enlargement (Robbins, 1997), many excellent sportsmen have been found in schools.  Researching the concept of leisure among young people—especially college students—can determine not only the kind of leisure activities the students like, but also the kinds of leisure courses students choose. In the current study, a questionnaire was administered to a sample of college students in Central Taiwan.  The research process involved four areas, each of which included subsections, some of which were unexpected. For example, the aim in the planning section was defined by top management so it was not defined again. Because this research used a field survey, questionnaire design fell under the prepared section, but it needed to go through the pilot stage and be fixed based on feedback. The statistical methods are used for data analysis of the survey section. SPSS 12.0 was introduced to find the results of the data analysis. The research goal was proven in the conclusion section. The research processes are shown in Figure 1. This research relied on a field survey. A total of 1442 questionnaires were administered, through postal mail and email as well as in the classroom, to students attending a four-year college in Central Taiwan, who were chosen based on random sampling. A total of 1221 (84.67%) validated questionnaires were used to store the data file and perform analysis after a total of 1345 questionnaire were received.  The questionnaire included three parts: 36 items on leisure attitude, 36 items on leisure cognition, and four items on background. A five-point Likert scale—ranging from strongly disagree (1) to strongly agree (5) (Cooper and Emory, 1995)—was introduced to measure each item in the first two parts. The scale may have a positive or negative direction based on the question for each item. The four backgrounds were sex, college, years, and job. The contents are illustrated in Figure 2.  The pilot survey resulted in 134 valid questionnaires (156 questionnaires were administered and 141 were returned).

 

Globalization and Granger Causality in the Stock Market for the G7

Dr. Rui Menezes, ISCTE Business School, Av das Forcas Armadas, Lisboa, Portugal

Dr. Andreia Dionisio, University of Evora, CEFAGE-UE, Evora, Portugal

Dr. Diana Mendes, ISCTE Business School, Av das Forcas Armadas, Lisboa, Portugal

 

ABSTRACT

This paper analyzes the process of stock market globalization on the basis of cointegration and Granger causality tests. Granger causality is based on regression modeling and typically captures current and past causal relationships in the data. The dataset used in our empirical analysis was drawn from DataStream and comprises the natural logarithm of relative stock market indexes since 1973 for the G7 countries. The main results point to the conclusion that significant causal effects occur in this context with well defined causal directions. There is also evidence that stock markets are closely related in the long-run over the 36 years analyzed and, in this sense, one may say that they are globalized. As expected, there is evidence that the US stock market dominates in general over the remaining markets.  Recent debates on economic globalization have triggered a substantial amount of research papers that try to determine its causes and explain the consequences of this phenomenon in terms of market performance and their ability to adjust globally to economic boosts and crisis. This has been particularly relevant in the case of financial markets and even more so in the case of stock markets. Indeed, the process of globalization of international stock markets has been deeply studied both by economists and other researchers interested in this subject such as, for instance, physicists and, invariably, they conclude that stock markets are highly “globalized” [Kasa (1992), Arshanapalli and Doukas (1993), Chung and Liu (1994), Masih and Masih (1997, 2002), Zhou and Sornette (2003), Tavares (2009)]. However, many of these studies lack a theoretical background that supports their view of what is globalization and how it can be measured, or they do not simply address the issue of the causality direction, which makes all the difference for policy purposes [Hamao et al. (1990), Drożdż et al. (2001)].  Globalization, in its literal sense, is the process of transformation of local or regional phenomena into global ones and can be described as a process by which the world population is gradually more integrated into one sole society. That is, globalization implies uniformity in terms of tastes, behaviors, prices, goods accessibility, and much more. It is a process of interaction among the economic and social agents (people, firms, etc) driven by international trade and investment and aided by information technology that reduced significantly the geographical distance barriers and communication difficulties between people living in different parts of the world.  One important aspect of economic globalization is market integration. In the sense of Stigler (1969) and Sutton (1991), a market is “the area within which the price of an asset tends to uniformity after allowing for different transportation costs, differences in quality, marketing, etc”. On the other hand, market integration refers to proportionality of price movements over time for an asset or group of assets. The economic variable price is, therefore, a key element in the process of market globalization and provides a suitable framework for testing market integration by looking at the price relationship of assets over time. Strictly speaking we should look at proportionality of price movements over time for a given asset sold in geographically separated markets in order to show whether these markets are integrated or not. This is what we may call strong market integration but, in many cases, market integration only occurs in a weak or imperfect way. If this is so, one can expect nonlinearities and other types of price distortions to be present in the process of price transmission and a test of weak market integration can be performed on the basis of causality between prices, independently of whether they are proportional or not over time. If changes are proportional over time then the markets are said to be strongly integrated.  This definition of market integration can be mathematically expressed as a dynamic model where the long-run and the short-run effects can be clearly separated, known as the error correction mechanism. This model is quite flexible and allows for different impacts of price and returns (or log price changes) movements across markets. For example, a change in the US market, usually considered as the dominant market, may be transmitted in quite different manners to the remaining markets, in which case it is difficult to conclude that markets tend to uniformity. This is not compatible with strong market integration but fits very well in the notion of weak market integration. Indeed, the process of market globalization is complex and the nonlinear transmission of price movements must be properly accommodated within the context of stock market globalization [Menezes et al. (2004, 2006)].  One advantage of the error correction model is that it allows for historical prices and returns to affect simultaneously the behavior of current stock market prices over time. Using historical prices and returns in this context is preferable to using just stock returns since the former retain both the long-run and the short-run information contained in the data, while the latter only capture the short-run information. This statement is valid under the assumption that prices are cointegrated, an issue that was extensively analyzed elsewhere [Engel and Granger (1987), Eun and Shim (1989)]. On this basis, one can construct statistical tests to verify whether the past (and present) information contained in prices and returns of, say, market A, help to explain the behavior of prices and returns of market B. This is what we mean by Granger causality and, under this hypothesis, one can say that knowing the behavior of prices in market A allows one to explain or even predict the behavior of prices in market B. A concise description of this method is presented in the next Section.

 

Dynamic Fuzzy Set in Design and Its Application: Auxiliary Costs of Hair Beauty

Dr. Pei-Ling Wu, Chienko Technology University, Taiwan

Ming-Chieh Wu, Chienko Technology University, Taiwan

Heng-Sheng Chen, Chienko Technology University, Taiwan

Hurdy Su, JSCORP, Taiwan

 

ABSTRACT

A triangular fuzzy set, “” set, is the type most often used for the practical applications. A fixed membership function is a general fuzzy set. A cumulative sum chart (cusum chart) could be used with a “>” mask cusum chart, “>” chart. In this research, we introduced “>” chart through general fuzzy set to construct dynamic fuzzy set for practical purposes. The model consists of three routines, the fuzzy set of “>” chart and α level of fuzzy set and fuzzy subtraction. It is not merely that we extended the “” set to the dynamic fuzzy set; we also designed the upper and lower limits of the dynamic fuzzy set. To prove that the model for the dynamic fuzzy set could be used in a practical application, we chose the auxiliary costs data received from the Moon-Fine Hair Beauty Salon Company in Taipei as our case example. The data from 11 days included items, days from three categories, along with the sum of each items of three categories. The results were that the outcome was had no difference between the “>” chart and three routines of dynamic fuzzy set, and that the latter was simpler than the former. The contributions of this research include three parts. First, we developed dynamic fuzzy set. Second, the dynamic fuzzy set with real numbers was transferred directly from cumulative series data of the “>” chart. Last, the model consists of three routines, for the dynamic fuzzy set could be used instead of general fuzzy set to make decision.  Generally, a Shewhart’s chart is used for quality control in practical applications (Shewhart, 1931). Because samples data is not a cumulative type, a cumulative chart is used instead of it (Hogg, 1987). The “>” mask cusum chart (cumulative sum chart), “>” chart, is a cumulative type used for quality control (Duncan, 1974). Both theories are derived from statistics (Hutchins, 1991).  Fuzzy logic is constructed on the mathematical theory for modeling fuzzy concepts (Lowen, 1996). The triangular fuzzy (or vague) set is a popular model and is applied in various practical applications (Chen, 1995).  The design model could combine the fuzzy theory with statistical methods (Li and Wang, 1996), for examples Fang & Wang (1997) have described the fuzzy statistical model and Wang (1992) have developed the fuzzy decision making model. Or with a neuron network (Ping-Yu, 2000), for example Altrock (1997) had designed the combination neural nets with fuzzy logic (NeuroFuzzy) and applied to business cases, or with something else, depending on the requirements of the application.  The most important problem is the membership function definition, which could be a popular distribution function (Kuan, 1991) or be given by user (Yang and Kao, 1996) and a limited set, discrete type, or an unlimited set, continuous type (Tang, 1994). In generally, the number of items and degree of membership of each item of membership function could be given before the next step to do. Because the contents of fuzzy set not only the number of items but also never consider the methods or processes to get the degree of membership of each item (Feng, 2007) are fixed, so we call general fuzzy set.  How to develop the new and more efficient type of fuzzy set by combining the fuzzy theory with a quality control chart and how to apply it to the practical field is given more attention in the design of the modern model. In this paper, we described the fixed contents of fuzzy set, general fuzzy set, firstly, then we introduced it to develop dynamic fuzzy set, and described the process of transformation of a general fuzzy set to dynamic fuzzy set.  To prove that the model for the dynamic fuzzy set could be used in a practical application, we chose the auxiliary costs data received from the Moon-Fine Hair Beauty Salon Company in Taipei as our case example. The data from Aug.1 to Aug. 11, 2008 included items, days from three categories, the cost of conditioning shampoo (Brand AA), hair cream (Brand BB) and pomade (Brand CC), along with the sum of each items of three categories. The result is that the outcome was had no difference between the “V” chart and three routines of dynamic fuzzy set. The contributions of this research include three parts. First, we developed dynamic fuzzy set. Second, the dynamic fuzzy set with real numbers was transferred directly from cumulative series data of the “>” chart. Last, the model consists of three routines, for the dynamic fuzzy set could be used instead of general fuzzy set to make decision.   From sequential probability ratio test of the Neyman-Pearson test to general fuzzy set. To construct a ”>” chart, which consists of some ”>”masks (Su, 1983) and of the cumulative data in series with time by time, we introduced the sequential probability ratio test of the Neyman-Pearson test (Su, 1994b).   In the sequential probability ratio test of the Neyman-Pearson test, if the normal distribution (N (u, σ)), the type I error (α), and the type II error (β) are given, the testing rules for the upper side would be gotten. For a “>” chart, the testing rules are obtained from the sequential probability ratio test to construct for the one variable situation (Su, 2004). If we give the β=0 and the standard normal value () and the level of significance (α) are given, then the distance “d” and angle “θ” of a “>” chart would be found, as follows:

 

Students’ Perceptions and Intentions Towards Entrepreneurship: The Empirical Findings From Croatia

Dr. Danica Bakotic, University of Split, Croatia

Dr. Dejan Kruzic, University of Split, Croatia

 

ABSTRACT

Entrepreneurship is increasingly recognized as an important generator of growth, innovation and especially new job creation. As a result of that, there is progressively academic, political and corporate interest in entrepreneurship enhancing. In this context the formal education represents one of the possible ways of entrepreneurship endorsement. Many researches show that the entrepreneurship education has substantial effect on entrepreneurial success and they also illustrate the positive relationship between entrepreneurship education and economic development.  Since today’s students are generators of future development their insights and attitudes on entrepreneurship could considerably determinate the future business activities. This paper deals with entrepreneurial intentions of students because of their potential effect on future context of entrepreneurship.  The purpose of this paper is to investigate the entrepreneurship perception and entrepreneurship intention of Croatian university students and to find out whether they are ready for the market game and risk taking which arises from entrepreneurship activities.  The empirical research is conducted on 176 graduate students of businesses who attended the course Entrepreneurship, and who are expected to enter in the process of the entrepreneurship.  In order to investigate the perceptions of youth and their entrepreneurship intention, the research instrument which was used is the questionnaire with 16 questions which covered four dominant areas. The first group of questions is related to the type of potential business, the second group is about financial aspect of business, then follow the questions which deal with the ways of implementing a business idea, and the final set of questions considers the source of information needed to generate business idea and its successful implementation on the market.  Based on the adequate descriptive statistical analysis we discovered the satisfying level of students’ intentions on entrepreneurship and their willingness to put their effort in entrepreneurship activities.  Being an entrepreneur, one who is self-employed and who initiates, organizes, manages, and takes responsibility for a business, provides a personal challenge that many individuals prefer over being an employee working for someone else. Entrepreneurs accept the personal and financial risks that go with owning a business but they also benefit directly from the potential success of the business (Segal et al., 2005). Being an entrepreneur is correlated with the risk situation, uncertainty, hard work and persistence, some new creations and improvements which often lead to pressure, stress and frustration. In order to cope with these problems the entrepreneur has to be prepared. Their knowledge of entrepreneurship is likely to shape their perceptions and intentions to start their own business in the future, as well as to help them in solving different business problems which can arise.  In recent years, entrepreneurship promotion has become one of the main concerns in public policy of the most of industrial countries. In this context, well educated entrepreneurs are top priority. Fostering entrepreneurship through education and training has also received increasing attention from universities in many countries. Consequently, it has been found that the entrepreneurs more often have a formal university education which qualifies them to be ready for the tough market game (Robinson and Sexton, 1994). In this respect, this study tries to discover the entrepreneurship perceptions and intentions of Croatian university students which are the result of the entrepreneurship educational program.  In the psychological literature, intentions have proven the best predictor of planned behavior, particularly when that behavior is rare, hard to observe, or involves unpredictable time lags. Entrepreneurship is exactly the type of planned behavior for which intention models are ideally suited (Krueger et al, 2000).   Arguably one of the most widely and successfully applied theory for predicting behavioral intention is the theory of planned behavior. This theory helps to understand how we can predict and change people behavior. So, it represents a solid model for explaining or predicting entrepreneurial intentions (starting a business). Theory of planned behavior implies that a person’s intention is the immediate antecedent of behavior. Intent to perform a behavior, in turn is a function of three variables:  Attitudes toward the behavior, which refers to the degree to which individuals perceive the attractiveness of the behavior in question. In general, a person who believes that the performance of a given behavior will, with high probability, lead to mostly positive outcomes will possess a favorable attitude toward that behavior.  Subjective norm, which refers to the perceived social pressure to perform the behavior in question. Perceived social norm is a measure of social support of the behavior by significant others, such as family, friends, and other role models and mentors.  Perceived behavioral control reflects the perceived ability to become self-employed (for example, a self-evaluation of one’s own competence with regard to the task or behavior) (Segal et al., 2005; Souitaris et al., 2007).  In short, the theory of planned behavior provides an account of the way in which attitudes, subjective norms, perceived behavioral control, and behavioral intentions combine to predict behavioral performance. This theory has wide acceptance in many behavioral science disciplines and has been used empirically in a variety of settings to predict and understand behavioral intentions (Segal et al., 2005). It offers a significant opportunity to increase our ability to understand and predict entrepreneurial activity. Understanding intentions also helps researchers and theoreticians to understand entrepreneurship related phenomena. These include what triggers opportunity scanning, the sources of ideas for a business venture, and how the venture ultimately becomes a reality (Krueger et al, 2000). The entrepreneurship educators can use this theory to better understand the motivations and intentions of students and trainees and to help students and trainees to understand their own motivations and intentions.  If we observe this theory in some wider extent we can note that intentions are determined by attitudes, and attitudes are affected by exogenous influences such as traits, demographics, skills, education, social, cultural and financial support (Shapero and Sokol 1982; Ajzen, 1991, Krueger et al., 2000). This implies that intention serves as important mediating variable between the act of starting a business venture and potential exogenous influences (Krueger et al, 2000).  Entrepreneurship education is one of the exogenous influences’ on attitudes and intention. Understanding how this factor influences and shapes individuals’ intentions towards starting a business is critical for developing the programs and policies to encourage entrepreneurial behavior. The education influences on entrepreneurship activities could be observed from many researches results.  According to the research conducted in 1990s, one third of Harvard Business School graduates ended up working for themselves, and 90% of them have a dream of self employment (Timmons, 1994). Furthermore, a national sample survey of US high school students reported that 66.9% of them desired to start a business of their own (Kourilsky and Walstad, 1998). Cases in other countries provide similar findings. For example, 40.7% of students in the UK and 34.3% of Irish students were interested in starting their own business in the early 1980s. In a 1987 survey, 40% of 2,802 UK university graduates reported than they wish to start their own business. Other study reported that 37.6% of Norwegian business graduates preferred self-employment. In Singapore 61.8% of the 359 students had the intention of starting their own business (Wang and Wong, 2002).

 

Students’ Entrepreneurial Characteristics: Empirical Evidence from Croatia

Dr. Dejan Kruzic, University of Split, Croatia

Ivana Pavic, University of Split, Croatia

 

ABSTRACT

For decades, entrepreneurial activity has been acknowledged as a significant contributing factor to the economic vitality of any country. Within the field of entrepreneurial research, among different approaches, the most followed one is psychological characteristics school of entrepreneurship which focuses on personality/psychological characteristics that an individual as an entrepreneur possesses, what gives him higher potential to perform entrepreneurial acts than someone who does not possess such characteristics.  The basic objectives of this research are: (1) to inventory entrepreneurial characteristics among Croatian business students in order to define their entrepreneurial profile; (2) to evaluate to what extent entrepreneurship education at university develops entrepreneurial capacities and mindsets. This paper offers the results of the survey conducted among Croatian business students at the University of Split in the academic year 2008/2009. A questionnaire for testing entrepreneurial characteristics /personality traits/ was administrated to a sample of 265 students of business in the final year of their degrees. Among given answers for each question respondent had to choose the one that best describes his/hers believes values, need and attitudes.  Based on research result, this paper provides evidence for the thesis that entrepreneurship education plays important role in developing entrepreneurial capacities and mindsets. Apart from providing suggestions for increasing the role of education in developing students’ entrepreneurial behavior, this research contributes to enhanced understanding of students’ entrepreneurial characteristics at the edge of graduation, providing insights into characteristics that could be developed more in order to educate successful entrepreneurs. Entrepreneurship is a process of action an entrepreneur undertakes to establish a business organization which provides goods and services, create jobs, and contributes to national income and overall economic development (Sethi, 2008). These actions, as the twenty-first century unfolds, are viewed as critical pathways to competitive advantage and improved performance in organizations of all types, sizes, and ages (Covin and Slevin, 1991; Brown et al. 2001). Entrepreneurship is about the entrepreneur that recognizes economic opportunities and takes action to exploit them into a market (Landstrom, 2008). Among the first to identify the entrepreneur as an entity worthy of study was Schumpeter (1934). He described him as an individual, whose function was to carry out new combinations of means of production, making thus clear distinction between entrepreneur, business owners, and managers.  Researchers’ interest in entrepreneurship has been increasing over time is increasing. Exponentially, growth of entrepreneurship, as a field of research, is evident in terms of a number of researchers, articles, conferences, journals and business education programs. Entrepreneurs are being studied from different perspectives. Cunningham and Lischeron (1991) have indentified six main schools of thought with distinctive understanding of an entrepreneur. “Great person school” views an entrepreneur as a person who was born with intuition, energy, persistence and self-esteem; “classical school” identifies entrepreneurship with innovation, creativity and discovery; “management school” describes an entrepreneur as the one who organizes, owns, manages and assumes risk; “leadership school” views an entrepreneur as the one who motivates, directs and leads; “intrapreneurship school” focuses on skilful managers within complex organizations and “psychological characteristics school views entrepreneurs as individuals with values, attitudes and needs, which drives and differentiates them from non-entrepreneurs (Koh, 1996, p. 13). Empirical studies that follow premise of psychological characteristics school and its trait model (considering entrepreneurial characteristics) has prevalence above others (e.g. Schere, 1982; Churchill and Lewis, 1986; McClelland, 1987; Shaver and Scott, 1991; Brockhaus, 1991; Ho and Koh, 1992; Herron and Sapienza, 1992; Herron and Robinson, 1993; Thomas and Mueller, 2000; Gurol and Atsan, 2006; Kumara and Sahasranam, 2009). These studies are focused on identification of personality characteristics that an individual as entrepreneur possesses, what gives him higher potential to perform entrepreneurial acts than someone who does not possess such characteristics.  Namely, people vary in the degree of entrepreneurial characteristics they possess. Market needs employees which have expressed entrepreneurial characteristics. That is why management of today’s entrepreneurial companies routs its activities to the recognition and attraction of these types of people. It is often the case that entrepreneurial characteristics are tested in the recruitment process in organization of all types and sizes, because management finds people that have those characteristics valuable for their organizations. They see them as fuel for entrepreneurial ventures. Question which arises here is: what are the personality characteristics of an entrepreneurial person? Among various, frequently cited are: need for achievement, locus of control, risk taking propensity, tolerance of ambiguity, self-confidence and innovativeness. Noticeably, apart from these, there are also other characteristics which are of great importance for an entrepreneur to posses them, and they are related to an additional aspect of ones personality. These personal characteristics (traits) can be acquired by training and practice (Kumara and Sahasranam, 2009, p. 9). Broadly viewed, an entrepreneurial education can be explained in terms of skills that can be taught and the characteristics that can be engendered in individuals that will enable them to develop new and innovative plans (Jones and English, 2004, p. 412). It can prepare individuals for new venture initiation by transferring knowledge and developing relevant skills that improve the self-efficacy and effectiveness of the potential entrepreneur (Gorman et al., 1997 in: Rasheed and Rasheed, 2003, p. 5). Generally speaking, a researcher suggests that an inherent assumption of ones entrepreneurial education is that his entrepreneurship characteristics and skills can be developed. In other words, ones inclination toward entrepreneurship is allied with several personal characteristics that can be influenced and developed by a formal program of entrepreneurship education. As a result of this cognition, quality of entrepreneurship education has gained huge attention in countries all over the world.  Building on the assumption that university students constitute a significant portion of the pool of potential entrepreneurs in both developed and developing countries (Thomas and Mueller, 1998 in: Gurol and Atsan, 2006, p. 31) and the fact that entrepreneurship has proved to be a considerable alternative for young university graduates (Kostoglou and Siakas, 2008, p.46), this research was undertaken to determine entrepreneurial profile of business students in Croatia. The results of the survey provide a reader with knowledge that entrepreneurship education plays important role in developing entrepreneurial capacities and mindsets. It analyses thirteen different entrepreneurial characteristics among students at the edge of graduation providing insights in characteristics they possess and cognition about which characteristics can be developed more to educate successful entrepreneurs.

 

Creating Sustainable Value for Society: Social Entrepreneurship

Dr. Ayla Zehra Oncer, Marmara University, Istanbul, Turkey

Dr. Muge Leyla Yildiz, Marmara University, Istanbul, Turkey

 

ABSTRACT

The firms that operate in the field of meeting social needs, in their own niche do not bring success in solving societal problems. For this reason, there is a need for social entrepreneurs along with the classic entrepreneurs who have profit motives.  This is the reason why social entrepreneurship, which is one of the most current subjects in recent years, is the focus of our study. In this context, the “Wheat Movement” which has been a worldwide example for the social entrepreneurship move started in Turkiye is studied as the sample case. Depth interview and document analysis are chosen as the suitable data collection methods for the research pattern and interpretive analysis has been used as the analysis method. In our study, the conception of social entrepreneurship and the social value created from these activities have been approached and we tried to explain what sort of sustainable values these sample cases create for the society.  The traditional division of society into two sectors, one called public and one called private. Traditionally public duties like schooling, sanitation and official transportation are in many countries often taking care of by private enterprises, and various traditionally private businesses are often run by governments, nationally or locally. But above all a third sector has emerged as an important alternative in today's societies in the past decade or so. It has come to be called the social sector. However, that it would be more appropriate to convince of today's society as consisting of three sectors: one common sector (the traditional public sector, financed by taxes); one business sector driven by market forces; and one public, rather than social sector, where community goals are achieved by creating sociality, including public businesses (Hjort and Bjerke, 2006).  Entrepreneurship involves the identification, evaluation, and exploitation of opportunities. In this sense, opportunities represent occasions to bring new products or services into existence such that individuals or organizations are able to sell new outputs at prices higher than their cost of production. The implication, of course, in this definition is that the fundamental mission of entrepreneurial activities involves profit generation, and these profits help entrepreneurs to build personal wealth. In recent years social entrepreneurship, has gained increasing attention (Certo and Miller, 2008). There has been an upsurge of interest in social entrepreneurship driven by several changes occurring in the competitive environment (Weerawardena and Mort 2006).   Social and traditional entrepreneurial opportunities differ because the two forms of entrepreneurship have different objectives. Social entrepreneurship begins with the discovery of novel means to achieve constructive social change. Social purpose is embedded in it. Although social and traditional ventures both operate on cash flows and revenue streams, social ventures do not intend to maximize stakeholder economic value. Instead, they emphasize the value contribution to society, such as the reduction of financial illiteracy or promotion of care for the elderly (Murhpy and Coombes, 2009).  Therefore the definitions of traditional and social entrepreneurs have some differences too. For example, Ashoka, a premier organization that invests in social entrepreneurs, defines a social entrepreneur as an individual with innovative solutions to society’s most pressing social problems. Similarly, The Skoll Foundation, which also invests in social entrepreneurs for systemic change, identifies social entrepreneurs as society’s change agents: pioneers of innovation that benefit humanity (Neck et al. 2009).  Over the past 5 years, a literature has emerged which debates definitional and domain issues; compares social entrepreneurship to the more traditional notion of entrepreneurship; discusses opportunity spaces afforded by environmental and sustainability movements; and presents qualitative, case-based studies that introduce powerful and inspiring stories of various types of social entrepreneurs. Definitions of social entrepreneurship vary in both content and approach. There are process based definitions including the creation of nonprofits, new structures to solve social problems, innovative behavior for social objectives, social value creating activities and entrepreneur-centric definitions (Neck et al. 2009). A summary of the social entrepreneurship definitions presented in Table 1 in chronological order:  To summarize, defining social entrepreneurship requires appreciating the motivations of individuals and groups who take the risks associated with conceiving, building, launching and sustaining new organizations and business models to create sustainable value for society. Based on all these approaches, we suggest the following definition: Social entrepreneurship involves non-profit activities and processes to create sustainable value and social change on social issues that public and private sector organizations couldn't generate solutions.  Social entrepreneurship involves the recognition, evaluation, and exploitation of opportunities that result in social value - the basic and long-standing needs of society - as opposed to personal or shareholder wealth. Social value has little to do with profits but instead involves the fulfillment of basic and long-standing needs such as providing food, water, shelter, education, and medical services to those members of society who are in need (Certo, 2008).  Social entrepreneurship is primarily social mission. The greatest challenge in understanding social entrepreneurship, though, lies in defining the boundaries of what we mean by social. First of all, there is no such thing as non-social entrepreneurship; in fact traditional entrepreneurship creates certainly an important social function. Social entrepreneurship recognizes and acts upon what others miss: opportunities to improve systems, create solutions, and invent new approaches. Traditional entrepreneurship sees the creation of social wealth as a by-product of economic value created by entrepreneurs. In social entrepreneurship, by contrast, social value creation appears to be the primary objective, while economic value creation is often a by-product that allows the organization to achieve sustainability and self-sufficiency. In fact, for social entrepreneurship, economic value creation, in the sense of being able to capture part of the created value in financial terms, is often limited, mainly because the customers social entrepreneurship serves may be willing but are often unable to pay for even a small part of the products and services provided (Seelos, 2005).

 

Alternative Perspectives on New Product Innovation

Danupol Hoonsopon, Chulalongkorn University, Bangkok, Thailand

Dr. Guntalee Ruenrom, Chulalongkorn University, Bangkok, Thailand

 

ABSTRACT

This paper proposes a combination way to look at product innovation distinct from the previous literature that classified product innovation from customers and technological perspectives. In this paper, researchers view product innovation as the combination of technology and customer perspectives. Understanding the characteristics of a new product can help firms to form guidelines to develop new products according to firms’ resources and environment.   At present, many firms acknowledge the importance of new product innovation to increasing their performances and sustaining their businesses in the market or industry (Brown and Eisenhardt, 1995; Heeley, Matusik, and Jain, 2007; Srinivasan et al., 2009). For example, 3M has a commitment to develop innovative new products to improve its performance and sustain its growth (3M, 2009). In a dynamic environment, changing customer preferences, technology, and the reduction in product life cycles  drive firms to develop new products to survive (Pil and Cohen, 2006; Xu and Li, 2007).   Past literature classified product innovation into various dimensions. For example, Wuyts, Stremersch, and Dutta (2004) divided product innovation by degree of newness (radical and incremental innovation). Srinivasan, Lilien, and Rangaswamt (2006) defined product innovation in terms of architecture design. Further, Dell'Era and Verganti (2007) defined product innovation as serving the emotional needs of customers in the market.  However, Hoonsopon and Ruenrom (2009) suggested that the characteristics of a new product could be classified into three perspectives: technology, customer, and a combination of technology and customer perspectives. The technological perspective focused on how the technology of the new product differs from previous technology. The customer perspective focused on the new attributes, benefits, or functions that the new product offers to customers. A combination of technology and customer perspectives focused on new technologies and new benefits to the market.  Academics and practitioners should understand the different characteristics of a new product from each of the three perspectives because the different characteristics of a new product have consequences on the performance of a new product and the resources a firm requires to develop a new product. Further, the impact of antecedents such as organizational structure, operational efficiency, and external environment on new products from different perspectives is diverse.  The purpose of this paper is to explain the three perspectives from which product innovation can be viewed. Understanding these perspectives will help firms choose appropriate strategies for product innovation based on their capabilities, resources, and their external environment. The insight into product innovation is derived from related literature in the past. Contributions of this study are discussed.  Trott (2005) defined innovation as the management process which integrated all activities such as idea generation, R&D, know-how, engineering, manufacturing, marketing, and financing of a new product. Kok and Biemans (2009) defined innovation as a process of translating superior customer preferences into new products to be launched to the market.  However, invention was generating ideas or concepts for new products and developing theses ideas and concepts to be new products (Chandy et al., 2006). Invention did not become innovation until a product was launched, introduced, or commercialized into the market (Chandy et al., 2006; Garcia and Calantone, 2002; Katila and Ahuja, 2002) and diffused to customers (Schreier and Prugl, 2008; Weigelt and Sarkar, 2009). Therefore, invention was a part of innovation (Khilji, Mroczkowski, and Bernstein, 2006; Li and Atuahene-Gima, 2001) but innovation was the overall business processes which included idea generation, development, production and commercialization of a new product.   This paper, however, focuses on new products launched into the market rather than on product prototypes. Innovation is therefore the focus in this paper rater than invention.  The classification of product innovation has been diversed.  In previous studies, product innovation was defined in terms of the degree of newness, radical and incremental product innovation being the principal types. Iyer, LaPlaca, and Sharma (2006) defined radical innovation as the introduction to the market of products that had new technology relative to existing technology and incremental innovation as the process of improving or modifying existing products. Atuahene-Gima (2005) revealed that radical products involved technological changed within a firm and offered benefits to customers. Both radically and incrementally innovative product must offers new benefits and attributes to the market. Incremental innovation represented small changes in technology and attributes compared with current products.  Radas and Bozic (2009) defined radical innovation as to the introduction of new products into the market and incremental innovation referred to products that are modified from existing products.  Product architecture has been defined in previous literature. Ulrich (1995) defined product architecture as the arrangement of each function within a product including a mapping of physical components and the pattern of interface of physical components. Henderson and Clark (1990) explained product architecture innovation as changing the architecture of a product but not changing the components within the product. Product architecture that was dominant in design makes might become outstanding in a product category. Products that dominate in design might become the standard for the market or industry (Anderson and Tushman, 1991; Mikkola, 2006). However, products that dominated in design might not be innovative compared with other products (Koski and Kretschmer, 2007). For example, Video Home System (VHS) was the dominant design and a domination format for home videocassette recorders (VCRs) in the 1980s despite the technology of VHS not being superior to that of Betamax (Cusumano, Mylonadis, and Rosenbloom, 1992).  Competence enhancing product innovation was the extent to which a product was continuously improved in price or performance based on existing know-how within the existing product (Tushman and Anderson, 1986). On the other hand, competence destroying product innovation was defined as the development of a product that created a new class of product or replaced existing products in the market (Tushman and Anderson, 1986). Further, competence destroying product innovation offered new designs and functions that departed from these of current products to attract new customers (Abernathy and Clark, 1985)  Product symbolic innovation was proposed by Hirschman (1980). The objective of product symbolic innovation was to satisfy the emotional needs of customers (Dell'Era and Verganti, 2007). Product innovation in term of product symbols, signs, and languages presented values and meanings which communicated to customers (Dell'Era and Verganti, 2007; Zhao, Hoeffler, and Dahl, 2009). Further, aesthetic products increased the purchase intentions of customers (Bloch, Brunel, and Arnold, 2003). Dinnin (2009) suggested that three factors helped customers to perceive product newness: involvement, pristine product, and possession. Involvement was customer’s level of emotion toward the product. Pristine product was the customer’s sense that the product was truly new compared with the existing product. Possession was how stimulated customers were to try to possess the new product from rational and emotional reasons.

 

An Empirical Study on Transactional and Authentic Leaders: Exploring the Mediating Role of Trust in Leader on Organizational Identification

Dr. Meltem Ceri-Booms, Khazar University, Baku, Azerbaijan

 

ABSTRACT

This research presents the empirical results of a study regarding the relationships between the concepts of transactional and authentic leadership, trust in leader and organizational identification. The sample used in the analysis (N=232) was taken in Turkish companies that abide by Corporate Governance Rules. The results of the study indicate that the aforementioned leadership styles (transactional and authentic) have a positive relation with trust in leader. Furthermore, trust in leader, as a full mediator, develops organizational identification among followers. The results also specify leader behaviors that promote followers’ trust for their leaders. Implications and directions of future research are discussed at the end of the paper.  The world of business is changing. Organizations are becoming flatter and hierarchical structures are being compressed, while maintaining and developing the continuous potential of companies’ workforces becomes the key for remaining competitive. In order to comply with these changes, businesses seem to be focusing more on “their employees”. Grojean and Thomas (2005) suggest that the result of employee-focused efforts is the establishment of employee identification with the organization, referred to as organizational identification (OI), which consequently causes increases in performance and commitment. Evidence indeed shows that a person who identifies him/her self with an organization will likely behave in the best interest of the organization (i.e De Cremer & Van Knippenberg, 2002, Kitapçı et. al., 2005, Riketta, 2005).  There are undoubtedly many organizational and individual factors that develop OI. This study, however, concentrates on the relationship between leader behaviors and OI. Although the literature has made considerable progress towards understanding the antecedents of OI (Mael & Ashforth, 1992, Riketta, 2005), how leaders develop OI in followers is still a vague concept. Researchers many times argued that leaders influence OI because of their impact on their followers' self-concepts (Mael & Ashforth, 1992, Lord & Brown, 2004). However, what it is exactly that makes leaders so influential on followers remains unknown. This study tries to answer this question. It examines if leaders create OI through building trust on their followers. In order to do this, the study explores the mediating effect of trust in leader between leader behaviors and OI.  Two leadership styles that are expected to create OI through trust in leader are analysed in this study: transactional and authentic leadership. The results exhibit, first, the specific leadership behaviors developing trust in leader and, second, whether or not this effect develops OI among followers. The concept trust in leader is similar to interpersonal trust in its nature, only the parties involved in the trust relationship change to “the follower and the leader”. Nyhan and Marlowe (1997) define interpersonal trust as “the level of confidence that one individual has in another's competence and his or her willingness to act in a fair, ethical, and predictable manner”.  Research on organizational and individual outcomes of trust in leader presents very important results for the efficiency of organizations. Wasti et al. (2007) claim that when the leader is viewed as trustworthy, subordinates will be motivated to show higher organizational outcomes such as performance, satisfaction and lower turnover rates, which in turn contribute to the leader’s perceived effectiveness. Dirks & Ferrin (2002) reported on a meta-analysis that analyzes the relationships between trust in leader and 23 different constructs. They found significant and strong relationships between trust in leader and organizational commitment, belief in information provided by the leader and satisfaction with the leader.  Riketta (2005) suggests that all different definitions of OI in the literature refer to the individuals’ feeling of being a part of the organization, internalizing organizational values and /or feeling pride in his/her membership. OI can be considered as an overlap between the employees’ image of the organization and the self (Riketta & Van Dick, 2005), because people who have OI may see themselves as personifying with the organization (Kitapçı et. al., 2005). In other words, via OI, the organization provides the individual with a sense of identity.  In the literature, several benefits of OI are discussed. Kitapçı et. al. (2005) claim that employees with a high level of OI are more likely to focus on tasks that benefit the organization, rather than those that serve purely self-directed goals. OI also acts as an important precondition for having high job satisfaction. Riketta (2005) presented a detailed meta-analysis of the research on OI. 96 different studies with 20,905 independent samples were analyzed. Occupational and work-unit attachment, job and organizational satisfaction and job involvement were correlated significantly and positively with OI. Furthermore, the intention to leave was strongly (r= -0.48), significantly and negatively related with OI, while in-role and extra role performance were weakly (r=.17), significantly and moderately related with OI.   There are some studies analyzing the relationship between trust in leader and many organizational and individual outcomes (i.e. Podsakoff et al. 1990, Jung & Avolio, 2000). However, among them, studies that have taken OI as an outcome are very limited in number. In the study of Kitapçı et al. (2005) which was conducted on 133 middle level managers working in 35 manufacturing firms in Turkey, it was found that trust in supervisor has an effect on OI and both trust and OI were negatively related to turnover intentions. Based on this limited evidence in the literature, the first hypothesis is formed. The reasons for the following assumed relationship will be discussed in the section about the mediator role of trust in leader:  Hypothesis 1: Trust in leader will be positively related to organizational identification.   Goodwin et al. (2001) define transactional leaders as “those who focus on the motivation of followers through rewards or discipline, clarifying for their followers the kinds of rewards that should be expected for various behaviors” (p.759). Therefore, their behaviors can be seen as an exchange process of implicit bargaining (Den Hartog et al., 1997) between the leader and the follower, which is based on their contractual obligations (Antonakis et al., 2003).

 

Relationship Marketing and Customer Loyalty: An Empirical Analysis in the Healthcare Industry

Dr. Aykut Ekiyor, Gazi University, Turkey

Dr. Dilaver Tengilimoğlu, Gazi University, Turkey

Dr. Sengun Yeniyurt, Rutgers University

Ergin Ertürk, Acıbadem Health Group, Turkey

 

ABSTRACT

This study was carried out to determine the role of relationship marketing in achieving customer loyalty in the healthcare industry and to identify patients’ perceptions of relationship marketing activities. A questionnaire was utilized to geather date from 371 patients at a private hospital in Turkey.  An exploratory empirical analysis indicates a significant link between customer satisfaction and customer loyalty.  The results also reveal a significant relationship between patient trust in the hospital and customer loyalty. Other important factors that could impact customer loyalty considered in this study include: the availability of special services, communication, and politeness.  The long term and permanent relationships with customers based on relationship marketing activities have become important competitive factors in today’s world. Achieving customer loyalty constitutes a significant competitive advantage for organizations.  Loyal customers become less sensible to price changes, remain insensible to the actions of rival organizations, purchase more frequently and in a higher quantity.  Because of such behavior, loyal customers are a significant competitive advantage for any organizations.  Relationship marketing is an important tool for achieving customer loyalty, to protect and increase market share, and to obtain long term competitive advantage.  Relationship marketing is a business practice that focuses on the long term customer relationship. The new understanding brought by the concept of relationship marketing to marketing theory and practice is related to keeping existing customers and building strong long term relations instead of looking for new customers continuously.   Relationship marketing is defined in various manners by different authors. Although there is no consensus on one definition, a review of different definitions reveals several common characteristics. The concept of relationship marketing was first defined in 1983 by Berry (1991) as process of formation, protection and improvement of customer relationship.  Building upon this definition, Grönnroos (1996) posited that relationship marketing is the effort to set up long term relationships with customers to achieve objectives, to keep and improve the relationships. Cram (1994) has defined relationship marketing as the application of personal information emerged as a result of communication made with customers to develop permanent and long term relationships that are beneficial to both parties.  One of the primary objectives of marketing is to form and develop customer loyalty. There is a wide consensus in the marketing literature with respect to customer satisfaction as a key driver of customer loyalty.  Several different definitions can also be found in the literature for customer loyalty.  In general, all definitions emphasize the importance of customer relationships and its effect on customers’ behavior.  Odabası (2004) described customer loyalty as tendency, desire and behavior of preferring the same business with regular frequency to satisfy his/her needs or purchasing the same brand repeatedly when customer has a choice. Another customer loyalty definition is purchasing the same goods and services continuously, in spite of marketing efforts to change customer preferences (Oliver, 1999).  Griffin (1997) has defined loyal customer as a person who shops from the same place regularly, purchases many products or services from the same place, recommends the store to other customers, and shows his/her loyalty to the company in spite of all competitor’s actions.  In summary, customer loyalty can be defined as a willingness to purchase various services from the same organization regularly and to recommend that organization to other costumers.  Achieving high levels of customer satisfaction is an imperative in today’s globally competitive business environment.  Therefore, companies are forced to continuously search for ways to improve their product and service quality to maximize the satisfaction of their customers and gain their loyalty (Barutcu, 2002).  While traditionally the focus of marketing actions is achieving superior sales performance, customer relationship literature reveals that not all customers are equal.  While it is important to target and attract new customers, extant research indicates that keeping customers loyal to company’s products and services is more beneficial.  Loyal customers not only purchase the products and services or the company repeatedly, providing a steady stream of revenues, but also are a lot less susceptible to the actions of the competition.  So, customer relationship marketing techniques are frequently utilized to keep customers loyal to the company.   Successful relationship marketing will result in loyal customers that are generators of positive word of mouth, acting like ambassadors for the company.  The importance of relationship marketing is even greater in the services industry. . Ravald and Grönroos (1996) indicate that the most significant aspect of relationship marketing is achieving customer loyalty by forming long term relationships that generate stable and mutual benefit.  Hsieh et al. (2005) clearly state that relationship marketing is a key marketing action that can be utilized to develop loyal customer relationships which are more profitable to the firm.   Odabası (2004) has also supported this point of view, stating that relationship marketing is an essential strategy that pays attention to customer loyalty, purchasing in higher quantity and more frequently, and increasing the customer lifetime value while cutting costs.  As a result of longer term customer relationships, fewer customers are lost, customer portfolio increases and marketing and operating costs decrease (Selvi, 2007).  Hence, the investments made in relationship marketing and customer loyalty have important implications for the marketing performance of an organization.  Extant research indicates that by employing relationship marketing strategies, companies are able to increase their profits.  A 5% increase in customer loyalty can be translated into as much as 85% increase in profits (Reichheld, 1994).  Reichheld and Sasser (1990) provide a list of the clear benefits of relationship marketing and increased customer loyalty:  The cost of gaining a new customer is 5 times higher than the cost of satisfying and retaining existing customers.  A company not proficient in customer relationship management can lose its customer at a level of 10% per year.  A 5% decrease in customer defection rate increases business profits between 25% and 85%, depending on the industry. The profit generated from a loyal customer increases over the life time of the customer.  Therefore, it is clear that companies that want to be successful in today’s challenging competitive environment have to maintain strong long term customer relationships by nurturing high levels of customer satisfaction.  Colgate and Danaher (2000) investigated the effect of successful implementation of relationship marketing strategies on customer satisfaction and loyalty.  

 

Pilot Study Regarding Organizational Culture Dominant Values: Romania’ Case

Dr. Ionut Pandelica, Agora University of Oradea, Romania

Dr. Amalia Pandelica, University of Pitesti, Romania

Dr. Bianca Dabu, University of Pitesti, Romania

 

Abstract

After 20 years of transition, the culture of Romanian companies is still dominated by some remaining block culture mentalities proper to Eastern and Central European countries. Although, from a technical point of view the transition may be regarded as an ended process, it is certain that there is still a communist inheritance strongly integrated in this culture in series of remaning mentalities. Such mentalities are to be found in the culture of Romanian companies framed into a vicious circle of inertia representing significant change resisting structures.  Thus, this paper displays the results of a pilot study meant to establish the diagnosis of the dominant values of Romanian companies’ culture. The results reveal the fact that although some reminiscences of the communist period are still integrated in the culture of Romanian companies some of those mentalities have been overcome.  Within the transition toward a competitive market, the capacity of Romanian firms to initiate internal changes and to cope with the external ones that is their adaptation capacity is conditioned mainly by some old mentalities of block culture characteristic to Eastern and Central European countries. Block culture represent that cultural fund common to all Central and Eastern European countries, acquired in over 40 years of command economy regime. It practically synthesizes the entire range of cultural remains of a 40-year experience, being a drawback to effective change, an impediment to the reforming process. This occurred, as Sztompka (1994) stated, as a result of old socialist regimes intention to forcefully modernize the society but still preserving traditional elements. Such a block culture can be placed at intermediary level between national cultures and global cultures, and its effects on change processes are deeply negative as they rather keep that conditions that favoured them.  The existence of such a culture, with all specific features, was highlighted by the empirical results of some researches made on different capitalized and evolutive components of transition societies (Bakacsi and Takacs, 1997; Karacsonyi, 2006; Taarniczky, 2006). In the 80s, most communist countries began their reforms. In Romania, the situation was a little different considering that 1989 was the year when Ceasescu was removed and the communist regime ended. The uniqueness of the Romanian case could be more evident if we mention also: (1) the aggressive anti-abortion policy stated by Ceausescu in 1965 and operated until 1989, (2) the rationing of some basic goods, (3) the higher level of communicative isolation of people in Romania as compared to other communist countries (Romania being the only one without a capitalist neighbour). Since 1990, Romania involved into a series of deep reforms of economic sytems, institutions, economic processes, individual fundamental attitudes and concepts. According to Scarlat and Scarlat (2007), Romania experienced  three major distinctive levels in her way towards a free market economy: (1). 1990-1997: this level represented the period in which the socialist model was abandoned and free market economy principles were adopted. This period was characterised by high transition social costs such as: a dramatical lowering of living standard, a high unemployment rate due to the fact that many state enterprises were closed; high inflation and a low exchange rate for the nationl currency; (2) 1998-2001: represented the period when liberalization and privatization reforms were accelerated and policies for econmic increase were adopted. This stage was dominated by a series of structural reforms and austerity policies; (3). 2002-2005: In the above-mentioned authors’ opinion, this stage marks the end of the transition period in Romania. According to EU Country Report, the transition period for a country ends when the economic system of the respective country reaches the level of a functional market economy. Thus, in 2003, the European Commission, stated in the report: ”Romania may be rated as a functional market economy considering the progress made and the continuation of these progresses.” At the same time, this period was marked by the reformation efforts in order to accomplish the requirements for integration in EU. On 1st January 2007, Romania became full member of the EU. Although from a technical point of view, transition in Romania may be considered accomplished, it is certain that Romania must also overcome the communist inheritance and some remains of mentality that are still deeply integrated in her culture. Thus, in spite of all reforming progresses in the last 20 years, the remains of the communist past have not disappeared completely, yet. They are to be found in the culture of Romanian companies being strong resistance structures against change that frame them into a vicious circle of inertia and affect their competitiveness and performances. For example, the fear for the superior or the spur to hide mistakes is still common realities in Romanian companies. That is why, the efforts of Romanian managers to change the organizational culture should be a priority. Romanian companies should break the vicious circle of inertia and involve into a genuine process of change for increasing competitiveness and performances. Although, low performances should represent a major force in considering the change steps as Hill and Hull (2004) point out, in fact it rarely happens that such performances represent a reason for unleashing the process. The authors above mentioned, empirically proved that usually the organization needs external events in order to break the vicious circle of inertia. Taking into account that nowadys Romanian companies are a part of the global hyper-competition and considering the unprecedented dynamics of changes that alter the business environment, the need for a change becomes an essential condition of survival for companies. But organizational change should not represent a mere effect of restructuring and reforming. This change cannot be effective and efficient as long as it remains clustered to some stricly structural factors such as: changing property, technology or organizational structure. A change that disconsiders the organizational culture may be formal and very often blocked and obstructed by a series of factors that belong to the way and manner of structuring and understanding the formal and informal relations within the organization. Behaviour and attitude patterns developed during a certain period within an organization are not only difficult to change, because of their inertia, but practically represent the most important and difficult to change structures.  In the context above described, the main question of our research was: At what extent the culture of Romanian companies is still dominated by some remaining communist economy mentalities and how many of them have been overcome?” Organizational theories have known since 1960s a quick development starting from the different aspects regarded as relevant for the study of an organization and ending with the radical changes within the organization.

 

The Determinants of Sovereign Credit Ratings – A Worldwide Study

Ana-Maria Minescu, CEO Advisor, Unicredit Tiriac Bank, Bucharest, Romania

 

ABSTRACT

This paper aims to quantify the relationship between sovereign credit ratings and various determinant factors for a sample of 82 worldwide countries during the period 1996-2008. The study employs regression analysis to assess the explanatory power of several factors. The following factors are found to be relevant explanatory variables: GDP/capita, inflation, default history and corruption.  Sovereign credit ratings attempt to synthesize the assessment of a government’s ability and willingness to repay its public debt. Such ratings are provided by various agencies, but the main ones and most widely recognized ones are Moody’s, Standard & Poor (S&P) and Fitch. Sovereign credit ratings are closely watched by the whole investment community for various reasons, such as: (i) the sovereign credit ratings are seen as an indicator of the level of interest rate at which the government can borrow on the international financial markets; (ii) many types of investors are restricted with regard to the countries where they can invest, being required to invest only in financial instruments from countries with a sovereign credit rating above a certain threshold (in this context, the sovereign credit rating is seen as a measure of risk); (iii) as the existing literature has repeatedly shown, the level of the sovereign credit rating has a direct impact on the rating of corporate debt issued by companies operating in the respective country, acting most of the time as a ceiling – basically the rating of such corporate debt can almost never be higher than the sovereign credit rating.  Sovereign credit ratings are being assigned both to the local currency and to the foreign currency. The difference between the two sovereign ratings is explained by S&P in the Cavanaugh (2005) paper, which argues that the same political and economic factors affect a sovereign’s ability and willingness to repay foreign and local currency debt, but nevertheless repaying local currency debt may be helped additionally by the sovereign’s control of the domestic monetary, financial and fiscal systems, which in theory could give it potentially unlimited access to local currency resources. S&P noticed that the main factor in determining the difference between sovereign foreign and local currency ratings is the monetary flexibility and that sovereigns tend to default more frequently on their foreign currency debt than on their local currency debt. The current study will analyze the sovereign credit ratings assigned to foreign currency debt.  All three rating agencies mentioned above explain in very detailed papers what the determinants of sovereign credit ratings are (see below the “Literature review” section), but they don’t provide a formula. In this context, there have been various papers which tried to quantify the relationship between sovereign credit ratings and such determinants.   This paper aims to analyze the foreign currency sovereign ratings for a large sample of countries and some of their determinants. The paper uses sovereign credit ratings from Moody’s, S&P and Fitch for the period 1996-2008. Regression analysis is performed on the whole sample, using several versions of sets of explanatory variables.  The paper is organized as follows: the Literature Review section below provides a short summary of the methodology used by the rating agencies in rating sovereigns and highlights the main findings of empirical research; the Determinants of Sovereign Credit Ratings section presents a selection of potential determinants of the sovereign credit ratings with definitions and sources for the data; the section Relationship between Ratings and their Determinants presents the results of the regression analysis performed, an interpretation of the results and comparisons with results from previous research. The first step in making a review of the existing literature would be to summarize the determinant factors of the sovereign credit ratings that the three main rating agencies indicate as being part of their analysis preceding the issuing of such a rating. These factors could be classified in the following categories: political environment, economic structure and macroeconomic policies, fiscal policies, government debt burden, monetary policies, external liquidity, and institutional strength of the country. The first part of this section offers a quick overview of these factors based on the agencies’ papers on methodology, namely  Beers & Cavanaugh (2008) on S&P rating methodology; Riley, Rawkins & McCormack (2007) on Fitch methodology; Moody’s (2008):  All three agencies analyze the political environment during the sovereign rating methodology: S&P analyses issues such as: the frequency of changes in the government, public security, political disputes, the relationship with the neighboring countries, national security. Moody’s analyses the political environment in the context of the institutional strength of the country and it focuses on elements such as: the efficiency and the predictability of the government’s actions, the degree of consensus on the main goals of the government, and the respect of the property rights. Fitch analyses elements such as: the durability of the laws initiated by the current government, the motivation behind economic reforms etc.  All three agencies also analyze the economic structure and macroeconomic policies during the process of rating sovereigns - increased attention is paid to the GDP/capita indicator by all of them, but each of them highlights different aspects related to it: According to S&P, a country where property right is respected tends to have fewer errors in the macroeconomic policies and tends to be more respectful of the interests of the creditors than one where the public sector is dominant. On a different note, when analyzing countries which undertake significant economic reforms, it is important to observe the order in which the various laws are adopted, in order to assess how efficient they would be. Moody’s highlights even more the importance of the GDP/capita indicator and suggests this is the most important indicator for economic power and it is a key indicator for assessing the willingness and ability of a country to repay its debt, pointing the fact that so far no country with a GDP/capita above USD 11,000 has ever defaulted on its debt. Fitch introduces in the context of economic structure the concept of inflation, and shows that countries which have benefited from low inflation and stable economic growth for a longer time tend to be assigned a superior sovereign rating.  Fiscal policies represent another element analyzed by all three agencies. S&P is interested mainly in how flexible are the fiscal policies and includes in it analysis factors such as: general government revenues and expenditure, debt burden trends, and off-budget liabilities. Moreover, the taxing system which is most suitable for economic growth would be one with a broad tax base and low tax rates. Moody’s analysis of fiscal policies is tied to the analysis of government’s debt burden –

 

Lot Sizing a Multistage Production Process

Dr. Abdul-Nasser El-Kassar, Lebanese American University, Beirut Lebanon

Dr. Noura Yassin, Beirut Arab University, Beirut Lebanon

Karim Maknieh, Lebanese American University, Beirut Lebanon

 

ABSTRACT

This research extends the production lot size model to a multistage production process that accounts for the various costs involved in the production of an item. A mathematical model is developed and a closed form formula for determining the optimal lot size is obtained. The uniqueness of the optimal solution is demonstrated and numerical examples are given to illustrate and analyze the model.  Most traditional approaches to the problem of controlling and maintaining inventories of goods produced do not consider the different costs involving the finished product. The basic inventory models have been modified and extended in many directions so that they closely describe the actual inventories encountered in real-life situations. The modifications and extensions account for the factors that influence the inventory costs. These factors include deterioration, allowable shortages, costs linked to order quantity, inflation, time discounting and credit facilities.  Time discounted EOQ models was investigated under inflationary trends and cost increases (Bierman and Thomas, 1977; and Mangiameli et al., 1981). The EOQ model was considered under condition of permissible delay in payments (Goyal, 1985). The effects of defective items were incorporated into the basic EOQ model (Porteus, 1986). An EOQ model was proposed with the assumptions that defectives of a known proportion were present in incoming lots and that fixed and variable inspection costs were incurred in finding and removing the items (Schwaller, 1988). A procedure was proposed to determine the optimal time interval of permissible delay in payment model (Chung, 1997). Salameh et al. (1999) investigated the effect of time discounting on the instantaneous replenishment model. Salameh and El-Kassar (1999) studied the optimality of the single period inventory model with credit facility. Salameh et al. (2003) considered the continuous review inventory model with delay in payments.  Considerable research, with many different assumptions, has been done on the tradition production lot size model. A model was developed to determine the optimal lot size where each lot delivered by the supplier contains imperfect items with a known probability density function (Salameh and Jaber, 2000). A study of the production lot sizing with the reworking of imperfect quality items was conducted by Hayek and Salameh (2001). The optimal lot size was determined for the finite production model with random defective rate, a reworking process, and backlogging (Chiu, 2003). The effect of time discounting on the EPQ model was examined by Salameh and El-Kassar (2003). An EPQ model was introduced to account for the cost of raw material (Salameh and El-Kassar, 2007). An economic production quantity model was studied where the items produced are of two different qualities (El-Kassar et al., 2008).  The traditional production lot size model assumes that the production process consists of a single stage and the only costs used to determine the optimal lot size are the setup cost and the holding cost of the finished product.  In this research, we extend the traditional model to a multistage production process that accounts for the various costs incurred at the different stages. We consider the case where raw material acquired from a supplier is processed through a series of stages to produce a single output in the form of a finished product. During the production period the finished product is used to meet the demand and to build an inventory. When production stops, the accumulated inventory is used to satisfy the demand.  First, we introduce the traditional approach and its embedded assumptions. Next, we develop a mathematical model for a multistage production process. The mathematical model is then used to obtain an explicit expression for the optimal lot size and to demonstrate the uniqueness of the optimal solution. Numerical examples are provided to illustrate the new model and compare with the existing models. The paper is concluded with a discussion of the result and future research proposals.  The classical production lot size model (figure 1) describes the situation where a single-stage production process is used to produce a certain item at a production rate a. The traditional approach considers only the carrying cost of the finished product. The traditional model was modified to incorporate the carrying costs of both raw material and finished product (Salameh and El-Kassar, 2007). They considered the case where the raw material of the form of a semi-finished product is acquired from a supplier at a unit cost of Cs and processed into a finished product at a production rate a and a unit production cost of Cp. Given the inventory carrying cost rate i, the holding cost per unit of the semi-finished products is hs = Csi. For the finished products an additional holding cost of hp = Cpi is incurred. Let C = Cs + Cp be the unit cost and let K = Ks + Kp be the sum of the ordering cost Ks of the raw material from the supplier and the production setup cost Kp. Then the total inventory cost functions TCU(y) and TCV(y) become   Consider the situation where the demand rate for an item is 100 units per day and the production rate is 300 units per day. The ordering cost of raw material is $400 and the setup cost is $100. Also suppose that the unit purchasing cost of raw material is $5, the production cost per item is $20 and the carrying cost rate is 36.5% per year or 0.1% per day.  If the traditional model is used, the holding cost of raw material is ignored and the lot size obtained from (2) is y* = 1225, where b = 100, a = 300, K = $100 and h = Cpi = (20)(0.1%) = $0.02 per unit per day.  To account for the holding cost of raw material, we apply the modified model with K = Ks + Kp = $500, hs = Csi = (5)(0.1%) = $0.005, hp = Cpi = (20)(0.1%) = $0.02, and  C = Cs + Cp= $25. The optimal lot size obtained from (6) is y* = 2335.  The actual inventory costs per day for both lot sizes obtained from (2) and (6) must be calculated using (4) and (5). The inventory costs per day for the lot size obtained from (2) are TCU(1225) = $2552.05 and TCV(1225) = $52.05. The inventory costs per day for the optimal lot size obtained from (6) are TCU(2335) = $2542.82 and TCV(2335) = $42.82. Therefore, if the modified model is not used, an additional 21.56% of the total variable inventory cost is incurred.

 

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