The Business Review, Cambridge

Vol. 15 * Number 2 * Summer. 2010

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

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Quilts As A Real Investment Instrument: Creating an Index to Measure Risk and Return

Dr. Julie-Anne Gasper, Creighton University, Omaha, NE

Dr. John R. Wingender, Jr., Creighton University, Omaha, NE



The purpose of this study is to create the first price index for quilts in order to facilitate the study of how investment in quilts may be analyzed by collectors, dealers, investors, galleries, and portfolio managers.  Over the last several decades corporations have been diversifying their investment portfolios with real assets.  Quilts have migrated from the bedroom to the corporate boardroom.  The starting point for investigating the risk and return characteristics of the quilt market is to construct an index of quilt sales prices.  After deriving the Quilt Price Index, the mean annual quilt price change is calculated to be 21.83 percent, with a standard deviation of quilt price changes of 54.02 percent and a coefficient of variation of 2.47.  These risk and return characteristics indicate that there are high returns possible from investing the real assets of quilts.  However, the risk of investing in quilts is quite high. Over the last several decades corporations have been diversifying their investment portfolios with real assets.  These real assets include collectibles such as quilts, art, stamps, and sports memorabilia.  Real assets provide a different dimension for investment portfolios composed of standard financial securities.  Each of these assets provides different return, risk, and diversification characteristics, especially when compared to equity investments.  For many of these types of real asset investments, there are indices that enable an investor to track changes in the general market value of the assets.  However, there is no such index for quilts.  The motivation for our study is to create an index for quilts and to use the quilt index to calculate measures of return, risk and diversification for this collectibles market.  Quilts have migrated from the bedroom to the corporate boardroom.  As many corporations join with quilt enthusiasts to become quilt owners, the interest in a comprehensive benchmark for the value of quilt collectibles has increased.  This research discusses the development of quilts as a real asset investment alternative, drawing on the finance literature about the investment characteristics of collectibles.  The starting point for investigating the return, risk, and diversification characteristics of the quilt market is constructing an index of quilt sales prices.  Returns on the quilt index are quite high; in fact they are better, on average, than a similarly constructed S&P 500 index portfolio.  The Quilt Price Index’s high average annual rate of change comes with a higher standard deviation of annual returns than the S&P 500 index.  The quilt market demonstrates diversification benefits for equity portfolio investors due to its negative correlation with the S&P 500 index, as well as many other asset markets.  Many large corporations have invested in quilts as part of their public art initiatives and of their alternative investment portfolio strategies.  Corporations as diverse as PorterNovelli, Fidelity Investments, Randolph Associates, Piper Jaffray, Rolex, Esprit De Corp, Persis, Neutrogena, and Georgia Power and Light have invested in quilts for wall art in their corporate headquarters.  The quilt market has shown examples of dramatic spot price appreciation potential.  The monetary value of quilts is based on several criteria, including design, condition, artistic quality, historical interest, age, verified provenance, and market interest.  A quilt with an image of the galaxy as it was known in the late 18th century recently sold for $225,000.  The Sotheby’s sale of Lucinda Ward Honstain’s Reconciliation Quilt for $264,000 in 1991 established a world-record price for an auction sale.  Atchison (1989) illustrates the rate of return potential of this investment vehicle with some examples of repeat sales (Table 1).


The Entrepreneurial Manager in Health Care Organizations

Kristina L. Guo, Ph.D., MPH, Program Director, Health Care Administration, University of Hawaii-West, Oahu, Pearl City, HI



Key internal and external environmental forces impact the viability and performance of health organizations.  Organizations rely on a strong senior management team to work collaboratively with well trained and skillful support staff in order to make major contributions and develop strategies that lead to organizational success in the current competitive health care environment. One of the most essential aspects for organizational survival, growth, and development is effective management.  Managers must be skilled at working effectively with employees across the organization to direct, support, and influence them to achieve organizational goals.  Managers are responsible for constantly adjusting to external and internal changes, resolving conflicts, and making timely and appropriate decisions.  The purpose of this paper is to address strategies needed by health care organizations to improve organizational performance, thereby enabling survival and success. To take into account the need for more flexible, innovative, and rapid decision making, this paper argues for the development and implementation of entrepreneurial strategies. Specifically, the study describes the unique and important responsibilities of health care managers in the complex health care environment.  Health care entrepreneurial strategies are discussed as essential for building and maintaining organizational success.  In particular, entrepreneurial managers determine organizational readiness for entrepreneurial strategies.  Using a set of essential entrepreneurial roles, an entrepreneurial manager can be most effective in assuring the future success of health care organizations.  Challenges in the U.S. health care system are immense, and reforms are sought to control rising health care costs, expand access to millions of Americans who lack health insurance, and the ongoing need to improve quality of care. The complexity of the system is demonstrated by a multitude of organizations and individuals who regulate, finance, provide, and utilize health care.  Government is responsible for financing and regulations.  Payers include both private and public insurers. Providers offer a range of services including acute, rehabilitative services, hospice, and integrated care in a variety of settings such as hospitals, physician offices, clinics, nursing homes, and home health care.  Suppliers include pharmaceutical and biotechnology companies. Education and research organizations such as medical schools, professional associations, and private foundations help to advance research. Beneficiaries or users of health care include those with and without health insurance who access health services including preventive, primary, and specialty care. The U.S. health care system is unique and different from health care systems in other nations in that U.S. employers currently are not mandated to provide health insurance to their employees (with the exception of the State of Hawaii, where employers must provide health insurance for its employees who work 20 hours or more), so that participation in health insurance programs is voluntary.  As a result, the system is very fragmented and not well coordinated which has led to overutilization or wasteful consumption, inappropriate care, and inaccessibility.  Several key external and internal environmental forces impact the viability and performance of health organizations.  External forces include declining reimbursement, decreased supply of workers, increased population needs, escalating competition, and external pressure on health organizations for accountability and performance.  Internal pressures for organizations include having adequate resources. In particular, these organizations rely on having a strong senior management team combined with well trained and skillful support staff to work collaboratively to make major contributions and develop strategies that lead to organizational success in the current competitive health care environment. One of most essential aspects for organizational survival, growth, and development is effective management.  Managers must be skilled at working effectively with employees across the organization to direct, support, and influence them to achieve organizational goals.  Managers must build commitment, involvement, and learning for their employees.  Furthermore, they are responsible for constantly adjusting to external and internal changes, resolving conflicts, and making timely and appropriate decisions.  The purpose of this paper is to address strategies needed by health care organizations to improve organizational performance, thereby enabling survival and success. To take into account the need for more flexible, innovative, and rapid decision making, this paper argues for the development and implementation of entrepreneurial strategies. Specifically, the study describes the unique and important responsibilities of health care managers in the complex health care environment.  Health care entrepreneurial strategies are discussed as essential for building and maintaining organizational success.  In particular, entrepreneurial managers are responsible for determining organizational readiness for entrepreneurial strategies.  Using a set of essential entrepreneurial roles, an entrepreneurial manager can be most effective in assuring the future success of health care organizations.


Risk-Adjusted Returns on American Depositary Receipts from the U.K. and Ireland

Dr. Onur Arugaslan, Western Michigan University, Kalamazoo, Michigan

Dr. Ajay Samant, Western Michigan University, Kalamazoo, Michigan



This study evaluates the risk-adjusted performance of American Depositary Receipts (ADRs) on shares of stock of British and Irish companies. The first part of the study examines the nature of these ADRs (based on depositary bank, sponsorship status, industry classification and listing). The second part of the study evaluates the performance of these ADRs using statistical measures grounded in modern portfolio theory. Returns are adjusted for the degree of total risk and systematic risk inherent in each ADR, and the securities are then ranked on the basis of risk-adjusted performance. Two relatively new evaluation metrics, the Modigliani and Sortino measures, are used. The objective of the study is to provide documentation to global investors who are contemplating participation in British and Irish stock markets via depositary receipts. Over the past decade, there has been a significant rise in investor comfort with global financial securities, aided by the ease and convenience with which transnational corporate information can be accessed via the internet. One of the most convenient vehicles for accessing corporate securities listed outside the investor’s home country is a Global Depositary Receipt. In the United States, these securities are known as American Depositary Receipts (ADRs). As of January 2009, there were 2034 ADRs listed on the New York Stock Exchange (NYSE), American Stock Exchange (AMEX), the NASDAQ system, and on private trading networks. This study examines the nature and performance of ADRs on shares of firms incorporated in Great Britain and Ireland. Many US based investors find it inconvenient, for a variety of reasons, to invest directly in stock markets in the U.K. and Ireland, and, therefore, prefer to invest in ADRs based on their stocks. These ADRs may be created at the request of investors or corporations whose stock is held in trust as collateral for the ADR. These securities serve a dual purpose: they enable firms incorporated in the U.K. and Ireland to raise funds in developed capital markets without having to meet the stringent listing requirements of U.S. and European stock exchanges, and, at the same time, enable global investors to earn returns on securities listed on European exchanges without the dual inconvenience of having to deal with time difference between countries and with currency conversion. This study examines the nature of British and Irish ADRs, sorted on basis of depositary bank, sponsorship status, industry classification, and stock exchange on which the security is listed. Data are obtained from the Bank of New York and CRSP. The intent of the study is to provide documentation to international investors who would like to hold ADRs from the U.K. and Ireland in their global portfolios. The study should be of interest to international investors, managers of mutual funds who are exploring opportunities to diversify their global portfolios, managers of corporations who are planning to sponsor the issue of depositary receipts, and to bank managers who provide international financial services. The primary securities that underlie an ADR may be corporate stocks or bonds. The earliest ADRs (1927) were issued at the request of institutional investors. These ADRs are “unsponsored.” Most of the ADRs that are currently listed are “sponsored” programs, issued at the request of the firm whose securities underlie the ADR. When a sponsored ADR is issued, there may or may not be a corresponding creation of new capital. There are four grades of sponsored ADRs. Level I ADRs are traded in the OTC market. Level II ADRs trade on national stock exchanges (such as the NYSE).  If new capital is raised during the process of issuing sponsored ADRs, then the ADRs are categorized as Level III and IV. Level III ADRs are listed on national stock exchanges. Level IV ADRs are privately listed, and are usually issued under rule 144A of the US Securities and Exchange Commission.  This study examines the nature and performance of ADRs on British and Irish companies. The rest of the paper is structured as follows. Section 2 reviews the literature on ADRs and summarizes pertinent studies in the area of modern portfolio theory. Section 3 examines the sponsorship status, choice of depositary bank, industrial classification, and market listing.  Section 4 evaluates the performance of these ADRs on a risk-adjusted basis, using the Morgan Stanley Capital International (MSCI) Europe, Australasia, and Far East (EAFE) Index as a benchmark for comparison purposes. Section 5 concludes the paper. Treynor (1965), Sharpe (1966), and Jensen (1968) pioneered the evaluation of the performance of investment portfolios. They developed statistical techniques that are the most commonly used portfolio performance measures even today. Treynor (1965) suggested a way of evaluating the performance of a portfolio by adjusting the mean excess return for the degree of market risk and thus calculating the performance of the portfolio. Sharpe (1966) computed mean excess return and adjusted for the degree of total risk involved in the portfolio. Jensen (1968) devised a method of determining whether the deviation of portfolio returns from market returns was statistically significant, and, therefore, determining whether the excess return could be attributed to superior management, or purely to chance. The techniques used in these three pioneering studies were further refined by Kon and Jen (1979), Henrikkson and Merton (1981), and Chang and Lewellen (1984).


An Examination of Wellness Orientation and Dental Care Attitudes Among Dental Patients: Conceptual Model and Empirical Evidences for Turkey

Dr. Talha Harcar, Pennsylvania State University at Beaver, PA

Dr. Orsay Kucukemiroglu, Pennsylvania State University at York, PA



This study investigates the impact of dental care satisfaction on the wellness and preventive health care of Turkish citizens. 250 randomly selected respondents were asked to indicate their agreement to various wellness orientation statements, preventive dental care, dental care knowledge, dental problems and customer satisfaction on a seven point Likert scale. By means of structured equation modeling the authors analyzed the data. The findings surprisingly suggest a non-significant link between dental problems and customer satisfaction of dental care provider. The finding of data analysis reveals that daily diet has a strong positive effect on dental care knowledge and negative effect on dental problems, no significant effect on preventive dental care. Further the findings show that only dental care knowledge has a positive effect on dental care customer satisfaction, whereas dental problems and preventive dental care do not.  Considerable research in the area of consumer with services has focused on health care in general (Aday et al., 1980), and dental care services particularly (Gopalakrishna and Mummalaneni, 1993). The outlook of dental services has experienced significant revolution during the last two decades. Demographic shifts, a profusion of dentists, and radically better oral hygiene have mutually initiated an extremely aggressive dental service market. Therefore, many dental care providers are challenging an "open appointment book" problem, wherein their patient load is less than they desire (Grove et. al, 1994). Previous study concerning to dental services has acknowledged significant reasons considered by patients when first choosing a dentist (e.g. Barnes and Mowatt, 1986), and factors effecting consumers satisfaction with dental care services (e.g. Gopalakrishna and Mummalaneni, 1993). McAlexander et al. (1994) have pointed out that patient satisfaction with dental care and evaluation of overall service quality contribute to intentions to select a dentist.  In general, the primary attributes considered by consumers when choosing a dental practitioner, or subsequently evaluating the quality of service are those related directly to provision of the core service offering itself, quality of service, professional competence, attitude of dentist and the support staff, methods of pain control, etc., features other than the core service offering, e.g. location, parking facilities, office atmosphere, etc. and the reputation of the dentist and the use of advertisements. The perceived reputation could be brought about through word-of-mouth recommendations from friends and family or through advertising. Procter & Gamble’s research supports previous results that quality of care is the most important factor followed attitude of dentist and other dental care providers. Barnes and Mowatt indicated that personal recommendations are the source most frequently used the choice of dentist. Consumer satisfaction becomes more important in dental care service not only for retention of the current customer but also  with the fact that 81% had recommended their dentist to the others seeking dental care. (Barnes and Mowatt, 1986).  The model presented in this study analyzes the relationship among variables that focus on preventive dental care, dental care knowledge, life style, wellness orientation, life style, daily diet, dental problems and consumer satisfaction of dental service. Such a model can provide dental care providers with an understanding of the relationships that exist between the preventive dental care variables, dental problems and consumer satisfaction. This is important for dental care professionals so they can intervene in a timely fashion thus reducing the curative remedies that are costly and many times ineffective because the disease has progressed too far. Dental care knowledge and preventive dental care behavior that promote an understanding of these consumer dental problems and consumer satisfaction are at the core of the model. Giving consumer information that tells them what, why and how to deal with their dental care issues can be an effective way to efficiently and effectively reduce the incidences of poor dental health. This study examines the evidence regarding the importance given to preventive dental care, dental problems, dental health knowledge and customer satisfaction of dental care in Turkey.  Because developing countries have such dynamic economies and growing populations, it is important that research presents the strength, weaknesses, opportunities and threats that are confronting the dental care systems that are now developing in Turkey.  The research purpose is to build an exploratory model of the Turkish consumers’ attitudes toward preventive dental care, dental care knowledge, and to also find the level of knowledge consumers have about dental health care.  This paper is organized into six parts. The first part introduces an overview of healthcare systems generally and the major issues that the paper will address. The second part develops a literature review of the topic. Section three discusses the research methodology, research design, data collection activities and results of the analysis that emerged from the investigation. The final part of the paper discusses the conclusions, implications and limitations and suggested research that needs to be completed.


A Social Marketing Approach for De-Marketing Sex Tourism

Dr. Gregory S. Black, Metropolitan State College of Denver



This study proposes a model to help determine the competitiveness of countries as a sex tourism destination, and then suggests a social marketing approach for de-marketing sex tourism.  The study conducts a literature survey on competitiveness, destination competitiveness, sex tourism, and social marketing and integrates these concepts in a model developed and named in this paper as the Sex Tourism Destination Competitiveness (STDC) Model.  The model explains that the STDC of a country is determined by demand conditions, country attributes, industry structure, and social support.  In attempting to utilize this model, problems will naturally arise in attempting to gather sensitive data from countries.  Few countries readily admit to being a popular sex tourism destination and may limit the availability of related data.  Sex tourism appears to be a severe problem throughout the world.  Marketing, in particular, social marketing, may be valuable in de-marketing sex tourism. Hall (1999) defines sex tourism as “tourism where the main purpose or motivation is to consummate commercial sexual relations” (p. 65).  Lately, the negative effects of sex tourism (human trafficking, child sex and child pornography, increased HIV/AIDS/STD healthcare costs, organized crime, etc.) have been extensively assessed in the literature.  Conversely, the economic benefits of any tourism, including sex tourism (growth, employment, inflow of foreign exchange) have also been noted.  Destination competitiveness refers to the touristic appeal or attractiveness of a country given by various historic (Egyptian and Mayan pyramids, Great Wall of China, or Machu Picchu in Peru), geographic (American Grand Canyon, African Safari, or sandy beaches of the Caribbean and Pacific islands), cultural (carnivals, religious congregations, or ethnic tours), and tourism-related (shopping, organized tours, hospitality industry, theme parks, etc.) attractions.  An accumulation of these attributes of a country make one country more appealing than others.  Managing the destination competitiveness of a country (e.g., the “Amazing Thailand” or “Smile Singapore” campaigns) is a major goal in tourism planning.  This notion is increasingly gaining importance.  Sex tourism destination competitiveness (STDC) of a country refers to the ability of a country to attract tourists for sex or sex-related purposes under free and fair market conditions.  For sex tourists, STDC is of primary importance.  Few countries are willing to officially sanction this aspect of their destination competitiveness and would not use this factor in any promotional campaign.  With the help of a model introduced in this paper, this study explains the influence of various factors determining the STDC of a country.  The STDC of a country depends on the dynamic interplay of four factors: demand conditions, country attributes, industry structure, and social support.  For countries wishing to reduce the prominence of sex tourism in its destination competitiveness, policy suggestions to combat, or de-market, sex tourism, using a social marketing approach is also presented.  As a broad concept, destination competitiveness refers to the degree to which a country is able to attract international tourists as a source of destination under fair market conditions (e.g., Dwyer and Kim 2003).  The country able to attract tourists depends on its relative advantage in providing what people look for in a destination. Crouch and Ritchie (1999) provide one of the most comprehensive models of destination competitiveness.  According to them, four factors that determine the destination competitiveness of countries are core resources and attractors (i.e. physiography, culture and history, market ties, mix of activities, special events, and superstructure), supporting factors and resources (i.e. infrastructure, accessibility, facilitating resources, and enterprise), destination management (i.e. resource stewardship, marketing, organization, information, and service), and qualifying determinants (i.e. location, dependencies, safety, and cost).  Dwyer and Kim (2003) note, the ultimate goal of destination competitiveness is to increase the economic prosperity of the people.  Destination competitiveness is influenced by three factors: demand conditions, situational conditions, and destination management.  These three factors are in turn affected by the endowed resources (natural and heritage) and supporting resources of the country.  Policy intervention is more applicable in the case of created and supporting resources of the country that include safety, hotels, transportation, or entertainment in the country.  A country can improve its overall destination appeal by managing these factors. 


Behavioral Intention to Use Forensic Accounting Services: A Critical Review of Theories and an Integrative Model

Gunasegaran Muthusamy, Professor Mohammed Quaddus, and Professor Rob Evans

Curtin University of Technology, Western Australia



The goal of this research is the development of a conceptual model with the best utility and efficiency to predict the behavioral intention to use FAS in the detection and prevention of fraud. The Theory of Reasoned Action (TRA), Theory of Planned Behaviour (TPB), Health Belief Model (HBM) and Hierarchy of Effects Model (HOE) were first evaluated individually to clarify their strengths and weaknesses. The four models were then cross-examined to conceptualize the key variables that could be utilized towards the development of the theoretical framework for this study. The incorporation of the strong points of each model formed a unique, comprehensive, yet parsimonious combined model. The integrative approach of merging individual level variables of cognitive and threat perception factors with organizational determinants of normative, external and control factors gave a complete view of this behavioral intention. This integrative model could be utilized in future research to statistically confirm the influence of the predicted factors on organizational behavioral intention to use FAS for the detection and prevention of fraud. The imperative role of accountants in fraud detection and prevention originated from the time of ancient pharaohs (Wells 2000). Even until 1912, the author of “Auditing Theory and Practice” states that the foremost role of auditors is to prevent and detect fraud (Wells 2000). Nonetheless, this crucial and essential role has slowly eroded. Instead, reporting to provide “reasonable doubt” became the primary job of an auditor (Public Company Accounting Oversight Board 2005). Fraud detection and prevention took a back seat and it was not long before fraudsters took advantage of this melting pot of opportunity.  Nevertheless, financial report users still believed that auditors are accountable for detecting all irregularities (Lee, Ali, and Gloeck 2008). This is a widespread misconception and the root of “audit expectation gap” between auditors and financial report users in terms of the actual duties of auditors. Numerous accounting firm scandals including the demise of Arthur Andersen have further undermined public confidence in the credibility of the accounting profession. According to AICPA (2004), extensive forensic procedures have to be included in audits to bridge this expectation gap. W. S. Albrecht, C. Albrecht, and C. C. Albrecht (2008) point out that a ‘reasonable assurance’ by auditors is only achievable by applying fraud audits techniques rather than financial audits.  Ramaswamy (2007) reiterates that internal or external auditors can no longer safeguard a company from fraud; instead, a new category of accountant specifically the forensic accountant is necessary for this purpose. Auditors are not trained to think like forensic accountants but unfortunately, they are called upon to use a set of forensic skills that they have not acquired (Wolosky 2004). T. W. Singleton and A. J. Singleton (2007) emphasized that it is unreasonable to rely on financial auditors to detect any fraud because they lack the intuition, experience and training vital to fraud auditing. Furthermore, financial audits cannot be relied upon to detect immaterial frauds as well as when controls are subject to management override and collusive manipulations (Pearson & Singleton 2008). The evidences indicate that, forensic accounting services (FAS) are imperative, effective, and crucial in fraud detection and prevention. However, the underutilization of these services as noted by numerous fraud surveys has been addressed as the cause of escalating fraud and contributes towards the low recovery rate of fraud loss (Ernst & Young 2003; PricewaterhouseCoopers 2006). Globally, only 38% of companies are willing to invest in FAS (PricewaterhouseCoopers 2006). The reason for the low usage of an essential service needs to be uncovered. Hence, the focus of this research is to develop a functional conceptual framework to assist this investigation. The arrangement of this paper is as follows. First, the relevant theories will be examined followed by the critical review of these theories. Next, is the development of an integrated theoretical model that will incorporate the salient variables. Finally, the theoretical contributions, implications, and future research directions will be discussed.  The literature indicates that research on behavioral intention has used a core set of theories namely Theory of Reasoned Action (TRA) and Theory of Planned Behavior (TPB). TRA asserts that intention to perform a particular behavior depends on attitudes towards that behavior and subjective norms (Ajzen and Fishbein 1980). Attitudes are beliefs that an individual accumulates over his lifetime. However, only a few of these beliefs influence attitude. These are salient beliefs and they are the “immediate determinants of a person’s attitude” (Ajzen and Fishbein 1980, 63). Subjective norms are the person’s believe whether their behavior would be accepted, encouraged, or promoted by relevant important people. The perception of the opinion of significant referent is weighted by the motivation to comply with the referent. Both attitude and subjective norms directly influence intention and intention is a direct antecedent of behavior. However, TRA is limited because of the assumption that all behavior is under volitional control. To overcome this deficiency, perceived behavioral control was added to the TRA. TPB is the extended version of TRA with the addition of the new construct. Perceived behavioral control was defined by Ajzen & Madden (1986, 457) as “the person’s belief as to how easy or difficult performance of the behavior is likely to be.” Perceived behavior control is determined by control beliefs, which is the individual’s belief on the presence of factors that may assist or hinder behavior. TPB is represented in figure 1 below.


Technical Analysis: Evidence from the Mexican Stock Market

Dr. Xavier Garza-Gomez, Dr. Massoud Metghalchi, and Dr. Chien Chen

University of Houston – Victoria



This paper tests four technical indicators trading rules for the Mexican Stock Market. Our results indicate that moving average rules do indeed have predictive power and could discern recurring-price patterns for profitable trading. However, RSI, MACD, and PSAR are not as strong as the moving average trading rule.  For all of the indicators studied in this paper, the mean buy days are greater than the mean buy and hold strategy with highly significant t-statistics.  In this paper we will apply four technical trading rules to Mexican stock index.  If we can find some form of technical trading rules that can predict changes in the Mexico’s Stock Index (IPC), we could then question the efficiency of the Mexican equity market.  According to Shleifer . (2000) points out, the attitude of academics towards the Efficient Market hypothesis (EMH) at the end of the 1970s was indeed one of the great triumphs of twentieth-century economics.  Fama (1970) defined an efficient financial market as one in which security prices always fully reflect the available information; any new information will be quickly and instantaneously reflected in prices. Given that any news is unpredictable, (arrives randomly), price changes will follow a random walk.  After more than four decades of research and thousands of journal articles, economists, finance researchers and practitioners have not yet reached a consensus whether technical analysis could discern recurring-price patterns for profitable trading. The overwhelming majority of financial economists and academicians support the efficient market hypothesis.  Much  of earlier research supported the random walk hypothesis. To name a few, the following studies have long supported the market efficiency hypothesis: Larson (1960), Osborne (1962),  Alexander (1964), Granger and Morgenstern (1963), Mandelbrot (1963),  Fana (1965), Fama and Blume (1966), Van Horn and Parker (1967), Jensen and Benington (1970).  However since early the1990s, technical analysis has won more and more supports from both the practitioners and academicians. There have been numerous empirical studies to support the predictability and profitability of technical trading rules with a variety of indicators in stock markets globally.  The cornerstone of this new research on technical analysis is an article by Brock, Lankonishok and LeBaron, (1992), BLL analyze 26 technical trading rules using 90 years of daily stock prices from the Dow Jones Industrial Average (DJIA) up to 1987. They tested long moving averages of 50, 150 and 200 days with short averages of 1,2 and 5 days. They conclud that their “ results are consistent with technical rules having predictive power”. Other researchers have followed BLL’s moving average and trading breakout rules and applied it to other markets. For example Bessembinder and Chan (1995) conclude that moving average and breakout rules are successful in predicting stock price movement in Japan, Hong Kong, South Korea, Malaysia, Thailand and Taiwan, with the predictability strongest in the last three markets. . Hudson et al. (1996) examine apply the moving average and trading breakout rules to the Financial Times Industrial Ordinary Index (FTI) over 1935 to 1994 in UK stock market and conclude moving average and trading range breakout rules have predictive ability if sufficiently long series of data are considered. Rodríguez et al. (1999) judge whether some simple forms of technical analysis as variable moving average, fixed moving average, and trading range break-out can predict stock price movements in the Madrid Stock Exchange. They use the daily data of the General Index of the Madrid Stock Exchange from 1966 to 1997 and the bootstrap methodology to provide strong support for profitability of these technical trading rules. Ergul , Holmes and Priestley (1997), apply technical analysis on  63 stocks traded on the Istanbul Stock Exchange and conclude that technical analysis on volume can aid the prediction of returns which cannot be predicted by the analysis of past returns in isolation. Pruitt and White (1998), conclude that technical trading rules outperform a simple buy-and-hold strategy even adjusting for transaction costs. Bessembinder and Chan (1998) confirm the profitability of technical trading but argue that the when considering transaction costs, we cannot reject EMH. Gencay (1998a, 1998b), Ratner and Leal (1999) also support the predictive power of technical analysis. Kwon and Kish (2002), investigate an empirical analysis on technical trading rules (the simple price moving average, the momentum, and trading volume) utilizing the NYSE value-weighted index over the period 1962-1996. Their findings indicate that the technical trading rules add a value to capture profit opportunities over a buy-hold strategy. Ready (2002) points out that the apparent success of the BLL moving average rules  is a result of data snooping.  Metghalchi and Chang (2003) apply various moving average rules to the Italian stock index and conclude the profitability of technical trading over the buy and hold strategy. Wong et al. (2003) focus on the role of technical analysis in signaling the timing of stock market entry and exit. Using Singapore data, their results indicate that the moving average and the relative strength index (RSI) can be used to generate significantly positive return. Chang et al (2006) have used moving average trading rules for Taiwan stock market and conclude that they have identified profitable trading strategies for Taiwan stock markets over the time period of 1983 to 2002. Vasiliou et al. (2006) investigate the performance of moving averages and moving average convergence divergence (MACD) in the Athens Stock Market. The study covers the period from 1990 to 2004 and provides strong support for the examined technical strategies. Lento (2007) examines the effectiveness of nine technical trading rules, including filter rules (momentum strategies) which generate buy and sell signals, in eight Asian-Pacific stock markets for periods ranging from January 1987 to November 2005. Compared to a naive buy-and-hold strategy, technical trading rules are profitable in most of the markets except the Nikkei and the All Ordinaries. Disregarding statistical significance, the results reveal that 56 out of the 72 (77.8 per cent) trading rule variants tested on all data sets were profitable after accounting for transaction costs. Vasiliou et al. (2008) examine the Athens Stock Exchange (FTSE/ASE-20 Index) over the period of 1995 to 2005 by applying six rules with buy-sell method over two models to show that the technical analysis overwhelmingly support a strong increase in trading performance over time. Metghalchi et al (2008), apply various moving average variations to the Swedish stock market and conclude even accounting for data snooping and transaction costs, moving average rules can beat the buy and hold strategy.  


Tax Simplification and Australia’s Future Tax System: Using Benchmarks for Long Term Assessment of Tax Reform

Dr. Jeff Pope, Director, Tax Policy Research Unit, School of Economics and Finance,

Curtin University, Perth, Australia



A Review of Australia’s Future Tax System (AFTS) was under consideration for over eighteen months during 2008 and 2009. The Henry Tax Review, so-called after its Chair Ken Henry, Head of the Treasury and comprising a small Panel selected by Government, includes the equally complex transfer system and its interaction with the tax system. It is the first major, comprehensive review of Australia’s tax system for over 30 years since the Asprey Committee Report. The AFTS Panel reported to the Treasurer at the end of 2009. The Government will publish its findings and recommendations early in 2010 together with an initial Government policy statement. The objective of this paper is to develop criteria and benchmarks for the objective assessment of the tax simplification aspects of the Henry Review. The rationale of this paper is that it is important and fairer to develop sound, objective criteria independently of the probable lobby and other vested interest groups commentary and media attention that will follow, assuming the Henry Review has done its job thoroughly and properly, with recommendations for innovative, challenging and possibly politically-difficult proposals for tax-transfer reform.  The Review of Australia’s Future Tax System (AFTS) was announced by the Treasurer on 13 May 2008. To the surprise of some it comprised a small review panel of five persons with Dr Ken Henry AC (Secretary to the Treasury) as Chair, and Dr Jeff Harmer (Secretary of FaHCSIA), Professor John Piggott (University of New South Wales), Mrs Heather Rideout (Australian Industry Group) and Mr Greg Smith (Adjunct Professor, Australian Catholic University and formerly at the Treasury). The Review also included a strategic review of the retirement income system (Treasury, 2009). The Henry (Tax) Review, as the AFTS review is generally referred to, delivered its final report to the Treasurer in December 2009, who has announced that its public release will follow in ‘early 2010’ after the Government has fully considered it. The Treasurer has also indicated that an initial Government response will accompany the release of the Henry Review, which he sees as a ‘10-year plan’; some options may require a mandate from the people (Business Spectator, 2009).  The (Henry) Review has consulted widely probably more so than any other tax review in Australia’s history. It has considered over 1,000 submissions from the community, and has held public meetings and focus groups, as well as meetings with business and community groups and discussions with other government departments and agencies. A two-day conference in June 2009 afforded leading international experts and a range of academics and other interested persons to contribute to the discussion on key issues. It is to the Review’s great credit that research papers, public submissions plus a great deal of data and information has been made publicly available, usually in a timely manner, by the Treasury eg Henry Review website (2008/2009), Treasury (2008 and 2009).  The terms of reference of the Henry Review (section three) lists six main areas for ‘comprehensive review’: 1. The appropriate balance between taxation of labour, capital and consumption (excluding the Goods and Services Tax (GST)) and the role of environmental taxes;  2. Improvements to the tax and transfer payment system for individuals, working families and retirees;  3. Enhancing the taxation of savings, assets and investments, including the role and structure of company taxation;  4. Enhancing the taxation of consumption (including excise taxes), property (including housing) and other forms of taxation collected primarily by the States;  5. Simplifying the tax system, including the appropriate administrative arrangements across the Australian Federation; 6. The interrelationships between these systems as well as the proposed emissions trading system (ETS). The remaining terms of reference noted the main constraints upon the review, including the exclusion of GST, maintenance of tax-free superannuation pensions for the over 60s and so-called ‘aspirational personal income tax goals’ (longer-term rate reductions). The Review should recognise that the role of government and its size should be maintained and maintaining cohesiveness of the tax-transfer system was emphasised. Domestic and international economic and social developments and impacts should also be taken into account. The role of tax expenditures was also clearly included in the Review. The Review is supported by a working group from within the Treasury as well as other Commonwealth departments and State Governments where necessary.


Adolf Berle and Revolution in the Modern Corporation

Dr. Donald Margotta, Northeastern University, Boston, MA



Adolf Berle is best known as co-author of "The Modern Corporation and Private Property," one of the most cited works in the corporate governance literature.  This paper discusses the significance of “The Modern Corporation” in shaping current corporate governance debates and also examines other Berle works for their insight into broader changes in the widely held corporation in society today, changes Berle characterized as a revolution.  Berle was a prolific writer who began publishing in the mid 1920’s and continued until shortly before his death on February 17, 1971. While he is most often cited for his observations on the separation of ownership and control in the widely held corporation the following discussion looks also at other observations on the corporation which he developed though more than 50 journal publications and 11 books. After reviewing Berle’s well known comments on the separation of ownership and control, and suggesting that even this well known facet of his work has been misunderstood or misinterpreted by researchers, the paper looks at why Berle called the changes in the public corporation a revolution. Why he thought these changes constituted a revolution is illustrated by looking at his views on how “finance capital” had changed, and on how the responsibility of shareholders had changed,  and on how increased share ownership by institutional shareholders might affect the corporation. Berle used the phrase “separation of ownership from control,” the phrase for which he is best known, to describe the changes he saw occurring in the stock ownership of major U.S. corporations around the early 1900’s as corporate magnates such as Rockefeller and Carnegie distributed the stock of companies they once owned and managed to heirs and foundations who in turn sold stock to the general public. The upshot was that such companies no longer had controlling stockholders managing them. Instead, they had numerous outside small shareholders with essentially no power to influence the company, while professional managers with relatively little stock ownership, controlled the companies.  The following section from "The Modern Corporation" (Berle and Means, 1932) contains the “separation of ownership and control” phrase that launched more than seventy years of subsequent research in economics, finance, law, corporate governance, and political science: (1)  Though the American law makes no distinction between the private corporation and the quasi-public, the economics of the two are essentially different.  The separation of ownership from control produces a condition where the interests of owner and of ultimate manager may, and often do, diverge, and where many of the checks which formerly operated to limit the use of power disappear. Although Berle's views on the separation of ownership and control are usually attributed to "The Modern Corporation," he actually articulated them in an earlier work (Berle, 1928) where he sought to: examine the nature of the power exercised by corporate managements, the basis upon which it rests, and the probable line of development toward ultimate delimitation of that power lest the feudal overlordship of such managements be permitted to undermine the entire system of applying private savings to economically productive uses.  Berle also acknowledged that a similar idea appeared earlier in Veblen's "Absentee Ownership” (Veblen, 1923). In fact, the same general idea was expressed much earlier 1776 by Adam Smith in “The Wealth of Nations” (Smith, 1776) where he said of public companies, “directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same vigilance with which the partners in a private copartnery frequently watch over their own.” "The Modern Corporation," however, is usually cited in the scholarly literature as the source for the idea that the separation of ownership from control may lead non-owner managers to act in their own interests rather than in shareholder interests. It probably derives this distinction because it was the first publication to provide empirical evidence documenting that ownership of the public corporation in the United States was becoming more dispersed, thereby shifting control of corporate assets to non-owner managers. Berle’s suggestion that managers might use that control in their own interests at the expense of shareholders remains the prevailing view in most current corporate governance literature. However, Berle subsequently clarified what he meant in this regard. While his clarification may be surprising to some, it is consistent with all of his work subsequent to the Modern Corporation. He said on this point (Berle, 1962): When we stated that the corporation would be operated financially in the interest of “control,” we stated at least part of what has happened.  Not that the “control,” or the managements have become thieves; quite the contrary.  Rather, they have come to recognize (perhaps as “business statesmen”) that, for example, the first duty of a steel company is to make steel, and have it there in sufficient quantity to meet the existing or foreseeable future requirements of the community.  These needs take precedence over the dividend desires of any body of passive stockholders-as indeed they should. (2) The continued relevance and prescience of Berle’s comments have been illustrated in numerous cases in recent years. For example, in 2007 there was a well publicized fight between investor Carl Icahn and Motorola. Icahn had become one of Motorola’s largest individual investors owning approximately 1.5% of its stock. He was demanding that Motorola consider distributing the $12 billion it had on its balance sheet as dividend. Motorola argued that it needed the funds for ongoing research and other corporate activities. (3) Berle’s belief that the “needs of the corporation take precedence over the dividend desires of any body of passive stockholders - as indeed they should” would likely have put him on Motorola’s side in this fight but, more importantly for this discussion, it illustrates that he foresaw the tensions that would develop between outside shareholders and corporate managers over the allocation of corporate assets in the modern corporation.


Brand Ecosystem Strategy for Olive Oil

Dr. Musa Pınar and Dr. Paul Trapp, Valparaiso University, Valparaiso, Indiana



Effective branding has become critically important as organizations struggle to differentiate themselves in increasingly competitive markets. The global olive oil industry is no exception. Developing an effective brand ecosystem that delivers compelling brand experiences to a carefully understood target market may offer organizations sustainable brand success. A brand ecosystem is simply all of the activities that provide the brand with its identity and meanings. Driving a brand ecosystem, and giving it focus and direction are the intended experiences that an organization wishes to provide its customers. This exploratory paper applies the brand ecosystem concept to the olive oil industry. In today’s global marketplace, brand development and management have taken on a new level of importance. In fact, according to Kotler and Armstrong (2010), these may be the most distinctive skills of marketing executives, as brands are the major enduring assets of a company, outlasting a company’s specific products, facilities, and even people. A brand is more than just a name or symbol; it represents consumers’ perceptions and attitudes about a product, its meanings, and its performance (Keller, 2008; 1993; Kotler and Keller, 2006). Thus, the real value of a brand is its ability to inspire customer preference and loyalty. A brand is an organization’s promise to consistently deliver a specific value proposition to its customers time after time. The brand promise must be simple and honest, and differentiated from competing promises in the marketplace (Keller, 2008; 1993). The real power of a successful brand is that the promised experience not only meets, but exceeds the expectations of customers in a way that competitors are unable to. At its best, a brand represents promises kept, which builds loyalty through trust, which in turn results in continued demand and profitability (Reichheld, 2001, 2006). The importance of branding today can be seen across many industry settings. In this regard, agricultural products are no exception. Since agricultural products historically have been generally perceived as commodities, the marketing challenge is how to differentiate these products in order to generate customer preference. Successful branding is at the core of differentiation as it is what sets the (previously) commodity product apart from its generic competitors. Starbucks Coffee and Tallgrass Beef are two prominent examples (Pinar and Trapp, 2008). What’s important to note is that in both cases commodity-type products became strong brands through controlling all the activities in each stage of their respective value chains. This suggests that all customer value-creating activities are deeply interrelated, ultimately influencing the customer experience, as well as resulting perceptions and attitudes toward the brand.  In recent years, as olive oil has become more popular among consumers, olive oil manufacturers/companies became interested in creating their own brands in order to differentiate olive oil products and to take an advantage of branding benefits. As in the Starbucks and Tallgrass cases, olive oil companies should understand all activities in all stages of the value creation process for success with their branding strategies. In this paper, we suggest that a brand ecosystem framework (Pinar and Trapp, 2008) could be utilized in developing successful branding strategies, which shows the relationship and interactions among all value-creating activities at each stage of the olive oil value-chain. As will be presented below, we believe that this framework could allow brand managers to identify and manage the key value-creating activities/networks that are critical for developing and creating strong olive oil brands.  From a strategic perspective, brands can be designed to deliver greater customer value by building a “brand ecosystem” that directs the value activities/networks at each stage of brand value building. This concept is similar to several other value-delivery frameworks. For example, Porter (1985) proposed the value chain as a framework to describe how the activities of a business contribute to its tasks of designing, producing, delivering, communicating and supporting its products to create value. In a similar way, Kumar (2004) presented a “3Vs” framework which includes valued customers (who to serve), a value proposition (what to offer) and a value network that will deliver the value proposition, with all activities in the value network driven by the end-consumer’s preferences and desired experiences.


Utilization & Implementation of the Predictive Index ® (PI) for Global Leadership Development

Erika L. Koski, R. L. Polk & Company, Detroit, Michigan

Dr. Stewart L. Tubbs, Eastern Michigan University, Michigan



One of the most vexing problems for any organization is the ability to accurately and efficiently assess the leadership potential of both new hires and existing talent within the organization. (Atwater, and Stevens, 2008; Berns, 2008; Charan, 2001; Gladwell, 2008; Kouzes, and Posner, 2007;  McCauley, Moxley and Van Velsor, 1998;  Tubbs, 2010; and Whetton, and Cameron, 2005). One useful alternative is the Predictive Index ® (PI) created in 1955.  The founder, developed the prototype of this assessment instrument based on his experience as former US Air Corps bombardier.  He also formulated a training process for making the survey's results understandable and useable by business managers. In 2005 the firm marked the 50th anniversary of the Predictive Index, and the PI is now being used by thousands of companies in over 125 countries and in 58 languages and a version in Braille.  PI has offices in the United States, Canada, Europe, South America, Africa, Dubai, Asia, Australia, and India. ( Since 1955, thousands of businesses have depended on the Predictive Index for a variety of uses, including employee selection. To this day, PI Worldwide remains dedicated to conducting research that ensures that the PI is work-related, free of bias, valid and reliable. Clients around the world have confidence in the Predictive Index not only because of its repeatable accuracy, but also for its scientific and research-based foundation: The Predictive Index was developed and validated in compliance with Equal Employment Opportunity Commission (EEOC) Guidelines, as well as the professional standards established by the American Psychological Association (APA) and the Society of Industrial & Organizational Psychology (SIOP).  PI has amassed an extensive library of over 400 criterion-related job validity studies covering multiple jobs, industries and countries which document the instrument's validity and usefulness in the business world.  The PI is used as a practical, reliable indicator of workplace behavior, which helps organizations make sound, people-smart decisions with the best results for the company and for the people themselves. The Predictive Index process improves effectiveness and productivity across all levels of an organization. The PI process is a combination of Employee Assessment, education and consulting. ( The Predictive Index survey is a managerial assessment tool that provides insight into the natural workplace behaviors of prospective and existing employees – resulting in improved hiring decisions, team performance, overall communication, and workforce productivity. The PI survey includes two sections and only takes a few minutes to complete.  Individuals taking the PI are asked to select adjectives that they feel describe the way they are expected to act by others from a list of 86.  The second section of the PI assessment asks individuals to select the adjectives that they feel describe themselves from the same list of 86 words.   The PI Drive Pattern is determined from the adjectives that the individual selects and the relationship between them.   The PI produces three drive patterns the Self, Self-Concept, and Synthesis. The Self graph is used for leadership development as this graph descries the individuals “innate mental hard-wiring.” * Whether a drive is Low or High is based on the adjectives selected while taking the PI assessment and the correlation they have with one another.  A PI Drive Pattern can include up to three high or three low drives.  All four drives cannot be high or low.  Low Drives are individual’s traits.  A low drive is a drive that falls to the left of the norm line (see an example PI drive pattern below).  The lower the drive, future to the left of the norm line, the more intense the trait is displayed by the individual.  The lowest drive, furthest to the left of the norm line, is the most intense trait displayed by the individual.  A high drive is a drive that falls to the right of the norm line (see an example PI drive pattern below).  High drives, any drive to the right of the norm line, are motivators.  The future to the right of the norm line the drive is the more intense the motivation.  The highest drive, the furthest to the right of the norm line, is the predominate, single motivator for the individual.  If the drive falls on the norm line the person has an average amount of that drive, but tends to fall to the high side of the drive (i.e. has more characteristics of the high drive).  We will discuss the four drives and their means and implications in the next section. 


Econometrically Analyzing the Leadership Effectiveness of Public High School Administrators Towards Native Hawaiian Completers

Dr. Larson Ng, University of Hawaii at Manoa, Honolulu, Hawaii



 The following study attempted to ascertain the leadership effectiveness of public high school administrators towards Native Hawaiian completers through an econometric analysis. Essentially, public high school leadership expenditures and completer data were collected and bivariate interaction analyzed through a correlation and linear regression analysis. Based on the collective results, a statistically insignificant negative relationship was noted statewide and a relatively statistical positive relationship noted for the densely populated Native Hawaiian Leeward District. Hence, public high school administrators in the Leeward District were seen as having a relatively more positive influence towards Native Hawaiian completers in contrast to statewide results from 2000 to 2007.  According to the 2005 Native Hawaiian Educational Assessment conducted by the Policy Analysis & System Evaluation at Kamehameha Schools, Native Hawaiians are the least likely ethnic minority to graduate from high school (Kanaiaupuni, Malone, & Ishibashi, 2005). As suggested by the 2005 Assessment, the monitoring of high school completers and the factors that contribute to them can be one way in improving the overall educational well-being of Native Hawaiians (Kanaiaupuni, Malone, & Ishibashi, 2005).  Educational leadership, other than instruction, is a critically important factor that contributes to high school completers, where it is school administrators that set the goals and strategic direction for all teachers (Riley & Mulford, 2007). Although there are many ways to decipher educational leadership effectiveness, assessing educational leadership through a financial perspective remains one practical way to accomplish this task (Beard, 2009), especially given the historical lack of educational funding for Native Hawaiian students in the public school system in Hawaii (Kanaiaupuni, Malone, & Ishibashi, 2005).


Financial Systems Regulation in the Global Context:  The Australian Experience

Carlo Soliman, Solicitor, New South Wales

Wayne Guild, Charles Sturt University, Wagga Wagga



 This research paper examines the effectiveness of the various protective measures of the Australian financial system in the context of the Financial System Inquiry (‘FSI’). The FSI was the product of three inquiries into the banking and finance industry which culminated in the Wallis Report in 1997. The objective of the FSI was to facilitate and promote economic efficiency, accountability, transparency and assist business to adapt to change in the financial climate. These aims were achieved by a series of reforms to the regulatory environment which would stimulate economic activity and place the Australian financial system in a strong position to meet the challenges of a globalised world economy.  Future reform should be directed at the creation of greater interagency cooperation and clarity amongst the regulators to keep costs down for business and to encourage a culture of compliance. It is also suggested that the utility of legislation be measured through a performance-based appraisal system which involves the regulated entity as a key stakeholder.  Financial services represent a major contribution to Australia’s Gross Domestic Product and account for a significant proportion of the accumulated wealth of many Australians. (1) Therefore, an efficient and well functioning financial sector is essential for the effective operation of the economy. In order to promote such goals the Australian Financial System has been subjected to several detailed reviews during the twentieth century. (2) The most comprehensive review culminated in the Financial System Inquiry (‘FSI’).


Retasking Professional-Level Labor

Dr. Robert Runte and Dr. Mary Runte, University of Lethbridge, Alberta, Canada



 The upskilling/deskilling debate generally overlooks the possibilities of other strategies in job design. Retasking, in which formerly delegated tasks are reabsorbed into professional-level labor, is one such strategy. Retasking lowers the total labor bill by expanding the work carried out by professional and managerial labor without a corresponding increase in compensation. Professional and managerial labor may not recognize and resist retasking as speed-ups because emergent technologies may obscure the line between work/family time; because the speed-ups may present as a reintegration of a more holistic work process; or because the elimination of supports is interpreted as the unavoidable consequence of forces external to the organization. Thus, retasking may be one factor in the expansion of long-hours culture within a bifurcated labor market.  In the face of announced cutbacks to the provincial education budget, our university's administration laid off a number of support staff. The affected faculty members complained vociferously that it would be impossible to get any work done without their administrative assistants; but the rest of us had a slightly more incredulous reaction: Your Faculty still had secretaries?


Knowledge Sharing, Social Networks and Organizational Transformation

Dr. Chaiporn Vithessonthi, Mahasarakham University, Thailand



 This paper has contributed by integrating the social network, knowledge management, and organizational transformation literature to understand (1) how environmental dynamism plays a key role in the relationship between the strength of social network and knowledge acquisition and recombination of a multinational firm and (2) how organizational transformation is influenced by the strength of social ties. I have argued that environmental dynamism, which represents uncertainty, moderates the relationship between social ties and knowledge acquisition and recombination of a multinational firm and that the strength of social ties can influence a range of strategic changes undertaken in a multinational firm.  The internationalization literature suggests that when firms enter foreign markets, it is important that they align themselves with local market conditions as quickly as possible so as to compete effectively with competitors (e.g., Bartlett and Ghoshal, 1989; Prahalad and Lieberthal, 1998). On the other hand, multinational firms can leverage their knowledge in order to develop competitive advantage in foreign markets by reusing their (probably superior) organizational practices in multiple foreign operations (Jensen and Szulanski, 2004; Kogut and Zander, 1993). Empirical research provides evidence to suggest that the extent to which knowledge is proprietary affects foreign subsidiary performance (Delios and Beamish, 2001).  The ability to align with local markets may be limited due to the liability of foreignness and the limited access to a source of information about local markets (Mezias, 2002; Zaheer, 1995). Empirical studies suggest that there exist some liabilities of foreignness (Johanson and Vahlne, 2009). For instance, Mezias (2002) has found that foreign firms operating in the United States tend to face more labor lawsuit judgments than do US firms and has suggested that these labor lawsuit judgments is viewed as a liability of foreignness for foreign subsidiaries operating in the United States.


The Influence of Vietnam’s Administrative Reform on Entrepreneurial Orientation in Micro-Enterprises

Dr. Mai Thi Thanh Thai, HEC Montreal, Canada



 Basing on the results of a face-to-face survey and secondary data from General Statistics Office of Vietnam, we found that the administration reform of Vietnam has had a positive impact on entrepreneurial orientation (EO) on all of its three dimensions, namely managerial perception, firm behavior, and resource allocation in Vietnamese micro-enterprises.  The firms have shown to take higher risks and be more proactive but they have not put an emphasis on innovation yet. In this paper, we present the reform’s milestones and the evolution of EO in Vietnamese microenterprises along these three dimensions.  Under an ambitious administrative reform scheme since 1986, Vietnam has been transforming itself from a centralized economy to a socialist-oriented market economy. From 1986 to 1990, Vietnam employed a multi-sector commodity economic system and exercised trade liberalization, privatization of state-owned enterprises, and the renovation of the financial system. Between 1990 and 2000, Vietnam eliminated state monopoly in distributing goods and services, authorized enterprises of various economic sectors to engage in trade, and cancelled all restrictions on the circulation of goods. In 2000, the Communist Party started to implement strategies to make Vietnam a socialist-oriented market economy. Since then, the country has been following this direction.


High-performance Human Resource Practices, Entrepreneurship and Entrepreneurial Performance:  A Study in Taiwanese SMEs

Dr. Ming-Chu Yu, National University of Tainan, Taiwan



 This study examines the effects of high-performance human resource practices (HPHRPs) and entrepreneurship on the entrepreneurial performance of small- and medium-sized enterprisesSMEs. We build and test a causal model using data obtained from Taiwanese entrepreneurs and find support for our hypotheses. The results indicate that HPHRPs in SMEs can encourage the entrepreneurship among employees, which could positively enhance entrepreneurial performance. In addition, the entrepreneurship of SMEs positively affects entrepreneurial performance, and it partially mediates the relationship between HPHRPs and entrepreneurial performance. The implications and future research directions are discussed. With the changes in the industrial environment and with intensified industrial competition, the traditional HR model has been unable to cope with current challenges and changes. Therefore, this strategic HRM study proposes the design of HPHRPs in order to boost the function, encouragement, and performance of employees (Liao et al. 2009). These closely related practices will improve work skills, be involved in strategic design, and create output (Appelbaum et al. 2000), resulting in excellent performance and long-term competitiveness (Way 2002).


An Empirical Study on How Characteristics of General Purpose Technology Factoring in Both Internal and External Properties of Business Impact on Intention of General Purpose Technology Development

Dr. Kilsun Kim, Sogang University, Seoul, Korea

Dr. Sunghong Kim, Chungbuk University, Seoul, Korea

Sanghyun Lee, Sogang University, Seoul, Korea



 Bresnahan and Trajtenberg (1995) considered technology like dynamo to be gerenal purpose technology, or GPT.  According to them, a GPT is a fundamental invention that may appear of little value in and of itself but that is shared both within and across industries, and enables valuable inventions and innovations within a wide variety of application areas.  In existing literature, it is conceptually suggested that GPTs possess three distinctive characteristics (Bresnahan and Treajtenberg, 1995; Cummins and Violante, 2002; Hall and Trajtenberg, 2004; Petsas, 2003; Jovanovic and Rousseau, 2005; Youtie, Lacopetta, and Graham, 2008).  The current study aims to specify three characteristics based on the precedent.  In addition, unlike previous studies that measured GPTs with respect to macroeconomic indice, we are to assess GPTs at the firm level.  To evaluate how firms conceive GPTs, we took both internal and external factors into account. When it comes to internal factors, we examined which psychological factors affected users‘ behavior.  In terms of external factors, we made use of network externality effects that was already pointed out in the Bresnahan and Trajtenberg(1995) research in order to evaluate developing practice and intention of GPTs in firms.  This study will be the first case that explores GPTs on an individual firm level.  Whenever a new class of technologies emerges, conjectures are advanced on how likely it is that they will change firm`s productivity, household production, consumption patterns, and socio-economic relationships.  If a core technology has a substantial and pervasive effect across the whole of society, it is often termed a “General Purpose Technology” (GPT).  The dissemination of electricity at the turn of the 19th century is often said to have the character of a GPT, with reference made to the long wave of downstream innovations spawned by the electric dynamo that reshaped the functioning of the economy. 


An Empirical Test of the Mediating Effect of IT Utilization on Entrepreneurial Intensity and New Product Development Success

Dr. Olimpia C. Racela, Assumption University, Thailand



 This research examined the relationships among entrepreneurial intensity, information technology (IT) utilization, new product development (NPD) success, and performance. The research model postulates the mediating role of IT utilization in the relationship between entrepreneurial intensity and two aspects of new product development success (i.e. NPD product performance and NPD process effectiveness) and it examines their indirect relationships with business performance. Results based on a sample of 98 manufacturing firms from over 12 different industries indicated a positive relationship between entrepreneurial intensity and IT utilization and a positive relationship between IT utilization and NPD product performance. However, IT utilization did not have a significant relationship with NPD process performance. In addition, business performance had a positive relationship with NPD product performance, but had no relationship with NPD process effectiveness. A discussion and future research implications are also provided.  New product development (NPD) remains at the heart of business survival and extant research reveals the necessity to scrutinize the antecedents to and outcomes of new product development. Review of literature on NPD and management (i.e., Brown and Eisenhardt 1995; Henard and Szymanski 2001; Troy, Hirunyawipada and Paswan 2008) shows that this field focuses on both internal and external contexts of NPD as antecedents to new product success, which also can be viewed as intrinsic and extrinsic to an organization. While most research explores the effects of both organizational/internal factors and external forces on new product success with a greater emphasis on the internal factors than the external issues (e.g., Gatignon and Xeureb 1997; Moorman and Slotegraaf 1999; Sethi, Smith, and Park 2001), some focus only on organizational factors as antecedents to NPD success (e.g., Ayers, Dahlstrom and Skinner 1997; De Luca and Atuahene-Gima 2007; Griffin 1997). Similarly, the present paper aims at exploring the relationships between two organizational factors, namely entrepreneurial intensity and the role of IT utilization, and the success of new product development.


The Effects of Entrepreneurial and Customer Orientations on Performance: The Mediating Role of Radical Product Innovation

Dr. Amonrat Thoumrungroje, Assumption University, Bangkok, Thailand



 This paper synthesizes the literature on marketing and entrepreneurship and investigates the relationships among entrepreneurial orientation, customer orientation, radical product innovation, and performance.  It postulates the combination of the driving nature of entrepreneurial orientation and the driven characteristic of customer orientation to be total market orientation and it explores their indirect relationships with business performance.  The author also presents a conceptual model together with the proposed relationships among the aforementioned constructs.  Discussion and directions for future research are provided at the end.  For every business, continuous product innovation is key to staying competitive (Sivadas and Dwyer 2000; Sorescu and Spanjol 2008; Tellis, Prabhu and Chandy 2009) and to achieve profitability (Urban, Weinberg, and Hauser 1996). However, mere innovation without understanding the market can turn out to be a disaster. This idea is well supported by marketing literature, such as that by Day (1994), who states that business performance is the result of superior skills in understanding and satisfying customers’ (p. 49).  Therefore, being customer oriented is important in product innovations.  Product innovation can be considered a market driving activity if the products are radically new (Kumar, Scheer, and Kotler 2000).  Market driving refers to a business orientation that emphasizes directing, or shaping the market in a way that enables a firm to achieve competitive advantage (Carpenter, Glazer, and Nakamoto 2000; Jaworski, Kohli, and Sahay 2000; Kumar et al. 2000). 


Intrapreneurship in a Fast Growing Economy: A Study of the Emirates of Dubai

Dr. Gwendolyn Rodrigues, University of Wollongong in Dubai, United Arab Emirates



 Intrapreneurship plays an important role in the expansion of corporate business. However, an ‘intrapreneur’ just like an entrepreneur must have the ability to successfully execute his own ideas.  The study is an attempt to measure the intrapreneurial intensity index based on certain constructs via a model developed and validated by Moerdyk and Hill.  Data is collected from executives of 260 service and manufacturing industries in Dubai., United Arab Emirates.  The Intrapreneurial Intensity indicated the overall position of strength and weakness and also provides an insight into the direction of improvement.  Findings of the research show that the overall level of Intrapreneurial intensity in the UAE and also Service Sector ‘moderately high’ based on various enablers.  Intrapreneurship in Manufacturing Sector is comparatively lower. The study is unique in that it identifies factors that could enhance intrapreneurial ability.  The rate of growth in Dubai has increased at a phenomenal rate during the last decade.  Sustainable competitive advantage can be gained and the economy can stay ahead in the competition, if it evolves a strategy in which entrepreneurial ability is nurtured and innovation is encouraged. In every economy ‘Intrapreneurship’ or ‘corporate entrepreneurship’ plays a pivotal role in the expansion and diversification of business.  This is necessary if the economy wishes to enjoy an accelerated economic growth.  It is therefore, vital to establish and cultivate an ‘intrapreneurial’ climate in SME as well as large scale industry within the country. Intrapreneurship is basically about bringing entrepreneurship behaviour into an organization.  An intrapreneur concentrates on improving an organisation’s financial and market performance by improving the competitiveness of the enterprise through innovation.


The Influence of Quality Management Culture, Quality Consciousness, and Service Behavior for Operating Efficiency

Dr. Wei-jaw Deng and  Ming-lu Sung, Chung Hua University, Hsinchu, Taiwan, R.O.C.

Hsiu-li Huang, Yuan Ze University, Chungli, Taiwan, R.O.C.



 This research discusses the influence of quality management culture, quality consciousness, and service behavior for relative operating efficiency. The research method includes descriptive statistics, reliability analysis, factor analysis, paired-t Test, data envelopment analysis (DEA).  The respondents of questionnaire survey are the front-line employees of international tourist hotel in Taiwan. Total numbers of valid questionnaires are 261. The research result shows quality management culture, quality consciousness, and service behavior three factors have significant positive influence for relative operating efficiency.  Within globalization and higher consumer conscious market, the excellent quality and higher customer satisfaction are important factors for achieving firms’ competitive advantage in today higher competitive industry. Because the indivisible character of production and consumption and the unfeasibility of final quality control before delivering service product in service industry, the competitive advantages of excellence quality and higher customer satisfaction are more important to service industry than other industries. Hence, the manager of service organization needs to manage organization culture and front-line employees for pursuing excellent service quality and higher customer satisfaction and furthermore constructing firm’s competitive advantage.


Managers’ Perceptions of Customer Service for an Ageing Population

Alf Kuilboer, James Cook University, Queensland, Australia



 This paper explores small business managers’ perspectives on customer service for an ageing population.   Australia, like most developed countries, has an ageing population, with one of the longest life expectancies in the world.  The shift from a younger to an older population will affect the economy, health priorities, urban planning, housing, recreation, transportation and customer service.   This study is based on a sample of 59 service providers from seven regional towns in North Queensland, Australia.  Using semi-structured interviews, data were collected on site with the owner-managers identifying their perspectives on population ageing and its impact on business, the effectiveness of information flow from all levels of government, and their understanding of good customer service.   Results suggest managers lack both a detailed understanding of population ageing and an awareness of government policies/strategies concerning this issue.   Managers did recognize that a shift in population ageing could have both positive and negative implications for their business.  Awareness of providing good customer service to the general population was largely supported; however the majority of respondents would not change their approach to customer service delivery as a result of a population shift. 


Supply Chain Coordination between Supplier and Retailer in a VMI (Vendor-Managed Inventory) Relationship

Professor Bowon Kim and Chulsoon Park, KAIST Graduate School of Management, Seoul, Korea



 We look into linked decision makings in a supply chain arrangement. Consider a VMI (vendor-managed inventory) relationship, where the retailer decides the retail price while the vendor determines its capacity commitment. Assuming it’s a supply chain arrangement, the retailer and the vendor need to coordinate their decisions in order to maximize a total profit, combining the two participants’ profits together. Suppose the demand follows a Bass diffusion model. Then, the vendor should take into account the demand pattern throughout the product life cycle (PLC) when it decides its capacity commitment, which will affect its inventory management cost during the PLC. Similarly, the retailer should change the retail price over the PLC so as to maximize the revenues and at the same time to minimize the inventory cost. In this paper, we focus on the dynamic coordination of key decision variables by the supply chain partners.  Coordination is important to effective supply chain management (Kim 2000). In this paper, we explore what specific decision variables the supply chain participants coordinate, and how these variables are dynamically interacting with each other. We consider a specific form of SCM arrangement, i.e., VMI (vendor-managed inventory) relationship. VMI is a supply chain arrangement, where coordination between vendor and retailer is an essential part (Cachon and Fisher 1997, Dong and Xu 2002, Mishra and Raghunathan 2004). More specifically, in a VMI relationship, the vendor or supplier is in charge of managing the inventory on its customer’s (e.g., retailer’s) premise (Cetinkaya and Lee 2000, Kaipia, et al. 2002, Lee and Chu 2005).


Value Co-creation in Business Models: Evidence from Three Cases Analysis in Taiwan

Dr. Yung-Ching Ho, Dr. Hui-Chen Fang, and Jing-Fu Lin, National Chung Cheng University, Taiwan, R.O.C.



 Business models have received great attention from, and have been widely applied by, both academic and practical fields. Utilizing a longitudinal dataset of 3 Taiwanese firms in different industries from 2000 to 2008; this study finds that, first, taking business model as the unit of analysis can effectively explain the process by which an organization and its partners can co-create value; second, business model design is a source of corporate innovation, and can create a competitive advantage; third, a business model is a dynamic, evolutionary process allowing a firm to respond to change in the external environment, and make appropriate adjustments that enable it to seize opportunities and create even greater value. Overall, results of this study shed significant light on the issues concerning dynamics of business model evolution.  Globalization, an intensely competitive environment, and the emergence of information and communications technology have blurred corporate boundaries, and have expanded the roles of market participants (buyers, suppliers, competitors, complementary products), and reached across the industry (Eisenhardt and Martin, 2000; Moller et al., 2008). As a result, scholars and managers have noticed that boundary-spanning business models best demonstrate that an organization must be connected with the external environment so that it can effectively sense and seize market opportunities (Brink and Holmen, 2009; Dyer and Singh, 1998; Kale, et al., 2002; Kodama, 2009; Teece, 2007; Zott and Amit, 2007; 2008).


Business Ethics and Anti-Competitive Behavior

Dr. Alina Mihaela Dima and Dr. Radu Musetescu, Academy of Economic Studies Bucharest



The relationship between ethics and anti-competitive behaviour is a very sensitive and still un-documented issue in the literature. Business ethics is questionned when companies searching for competitive advantges in a highly concentrated markets, engage in business relationships with their suppliers/distributors. Aggreements to fix the retail prices or to impose certain conditions are not ethical vis-a-vis the others competitors, partners or consumers; moreover, they can be considered anti-competitive practices and might be considered an infrigement of the competition law. In the present paper, we tested the relevance of the ethical concepts for those respondents engaged in vertical anti-competitive practices on the Romanian market. The research is based on the answers provided by 425 companies included in the survey. The relationship between ethics and law, especially from a business perspective, is still a highly controversial issue. There is an empirical perception that, more too often, the business succes was not only independent from ethics but even a result of unethical business practices. Individuals who adopted immoral practices have succeeded in gaining competitive advantages that allowed them to win over competitors and get market power in their industry and, consequently, abuse their consumers. This perspective is increasingly criticized by the analists from business disciplines who have reached the conclusion that immoral business practices are not only unsustainable but worsens the position of the company vis-a-vis different categories of stakeholders.


A New Dyadic Level Approach to Analyze Country-Risk Stemming From International Interdependencies

Jean-Samuel Cloutier, James William Campbell, and Dr. Zhan Su, Laval University, Quebec, Canada



 This paper proposes a new dyadic level approach to analyze the effect of international interdependencies on country risk. The paper develops and tests a new methodology derived from social network theory. Based on data gathered for 4800 OECD countries trade dyad, the findings of this study show that such an approach has highlighted country risk differences that were not acknowledged by previous scholars using country aggregated level approaches. These simple descriptive findings suggest that country risk research would benefit from the adoption of such an approach in combination with more traditional country level factor analysis.  Since trade policy reforms in the postwar period, the collapse of open trade in the late nineteenth century following two world wars and the great depression, postwar liberalization has restored an open trading system and therefore promoting a global economic integration (Sachs, Warner & Fischer, 1995). For example, according to OECD stats 2008 data, OECD countries imports and exports of commodities have more than doubled over the last decade. Undoubtedly, global economic integration has created a stronghold of interdependencies among countries. Indeed, studies at the dyadic level have shown that trade integration is even higher than what traditional openness indicators suggest (Arribas, Pérez & Tortosa-Ausina, 2009).


Consumer Arbitrage and Product Characteristics: A Theoretical Analysis

Dr. Ya-Chin Wang, Kun Shan University, Taiwan, R.O.C.



 To come up with personal arbitrage, we designed a consumer participation game in a horizontal product differentiated model. Consumer participation is divided into two categories: consumerization (ex-ante participation) and customerization (ex-post participation). Consequently, when a firm posits production characteristic by consumer participation, the payoff and economic welfare will change. Capturing the spirit of consumer participation allows for personalized interaction between consumers and a monopoly firm in different stages of production and retailing. The main findings are: the consumer uses ex-post participation to reduce preference deviations, increase welfare for both producer surplus and the consumer surplus. In addition, when the consumer uses ex-ante participation, consumer surplus will rise and welfare will rise if and only if the set-up costs are not too high. The firm can also utilize price incentive to induce consumer’s arbitrage behavior. The concept of consumer participation has been discussed in marketing literature due to its importance in enhancing customer satisfaction and business success. Consumer participation is about fitting the customer’s preferences by building a meaningful one-to-one relationship. From the firm’s point of view, ‘unique’ characteristics are attractive to consumers and will enhance the value of goods.


Firm-Specific Attributes, Dispersion of Opinions, and Contrarian Profits: Evidence from the Taiwan Stock Exchange

Chu-Chun Cheng and Dr. Day-Yang Liu, National Taiwan University of Science and Technology, Taiwan

Dr. Yen-Sheng Huang, Ming Chi University of Technology, Taishan, Taiwan, R.O.C.



 This paper examines the performance of contrarian strategies and investigates whether such contrarian profits are related to firm-specific attributes and dispersion of opinions. Using data from all listed stocks on the Taiwan Stock Exchange over the period 1990-2008, this paper finds a significant abnormal return of 19.39% earned by the contrarian strategy of buying prior losers and selling prior winners ranked by the cumulative abnormal returns over the three-year performance period. Moreover, both firm-specific attributes and dispersion of opinions can be utilized to enhance the performance of the contrarian strategy. The contrarian strategy of buying the losers in the bottom market-to-book quartile and selling the winners in the top market-to-book quartile earns a significant abnormal return of 41.18%. Similarly, the contrarian strategy of buying the losers and selling the winners in the top quartile ranked by standard deviation of returns earns a significant abnormal return of 41.57%.  DeBondt and Thaler (1985, 1987) proposes that investors tend to overreact to unexpected and dramatic news events. They suggest that extreme movements in stock prices will be followed by subsequent price movements in the opposite direction. Moreover, the more extreme the initial price movement, the greater will be the subsequent price adjustment. As a result, investors may overvalue firms with unexpected good news and undervalue firms with unexpected bad news. Subsequent to the overreaction, price reversals will occur to correct for the mispricing.


Cash Flow Ratios vs. Accrual Ratios: Empirical Research on Incremental Information Content

Dr. Zeljana Aljinovic Barac, University of Split, Croatia



 The aim of this paper is to provide empirical evidence concerning the incremental information content of cash flow ratios and accrual ratios as company’s performance measure. The research hypothesis implies that cash flow ratios, based on the information from cash flow statement are less likely to be affected by possibilities of accounting manipulations than accrual ratios calculated from a balance sheet and income statement data. Therefore, the assessment of business performance based on cash flow ratios will provide more accurate and reliable information than the one based on accrual ratios. Verification of empirical evidence will be provided through the sample of Croatian listed companies, more precisely, their annual financial statements in succession from 2000 to 2006. All variables were based on relevant researches on a similar topic and chosen according to the possibility of their implementation in capital markets. The results of our study showed greater relevance of cash flow information and cash flow ratios in comparison with the balance sheet, income statement information and accrual ratios when judging company's financial performance. For more than half of a century, economists, both academicians and practitioners have been trying to generate optimal models that could help them in decision-making processes by predicting company’s performance, financial distress or stock price movements. The types of data used in models are different, i.e. some are qualitative and others are quantitative. However, one of the main sources of data are financial statements because they are formalized, comparable, publicly available and free. Since the introduction of SFAS 95 in 1988 and IAS 7 in 1994, cash flow statement became a very important source of accounting information. Namely, the users of financial statements seek information that are less likely to be affected by possibilities of “financial number games”. As cash flow statement requires a cash-based principle in its preparation, unlike other financial statements based on accrual principle, it has become a very important tool in financial ratio analysis.


Market-Oriented Corporate Governance and its Impact on the European and International Economic Landscape

Dr. Niculae Feleaga, Dr. Voicu D. Dragomir, and Dr. Liliana Feleaga

The Academy of Economic Studies of Bucharest, Romania



 The interest towards good governance practice is very present in the company laws of many countries. Moreover, the dedicated theories are themselves highly influenced by cultural and local factors. National differences may lead to specific attributes derived from the meaning that is given to the role of competition and market dispersion of capital. The study of corporate governance requires not only the knowledge of economic, financial, managerial and sociological mechanisms and norms, but it must also incorporate an ethical dimension, while remaining aware of the demands of various stakeholders. Based on a research consisting of a critical and comparative perspective, the present contribution is dominated by qualitative and mixed methodological methods. In conclusion, it can be said that a market-oriented corporate governance model, though not part of the European Union’s convergence process, may very well respond to the increasing importance of investors’ rights and to the gradual evolution of corporate responsibilities, beyond the national context, with the aim of ensuring market liberalization. No matter how complex the concept of corporate governance is, it can be eventually reduced to a simple formula by which to optimize its primary objective, the creation and distribution of wealth. Company law and the authorities regulating the financial markets are trying to formulate this optimization equation, thereby helping to design the rules by which to achieve a balance between various interests of corporate stakeholders. The different legal systems of the European Union are engaged in a convergence process: in each Member State, companies are properly functioning due to the harmonization of capital, personnel structures, sales and production opportunities. Conceptual differences relate to several aspects: the shareholders’ involvement is connected to the postulate that managers are primarily appreciated for pursuing the investors’ interests rather than those of other stakeholders, i.e. the degree of protection for employees and creditors.


Financial Crisis Influence on Developed Stock Markets

Dr. Snjezana Pivac, Dr. Zdravka Aljinovic, and Dr. Branka Marasovic

University of Split, Croatia



 The paper investigates financial crisis influence on developed stock markets including the pre-crisis conditions.  This paper examines are there differences or/and similarities between these markets in pre-crisis period (from January 2006 to August 2008) as well as their ‘response’ on actual global financial crisis (the time period from Lehman Shock in September 2008). Developed stock markets are presented by Japanese, American and German stock markets.  Firstly, the paper gives the statistical analysis of relevant stock market indices by correlation coefficients, one-way analysis of variance and nonparametric Mann-Whitney U-test and Kruskal-Wallis test, for both observed periods. In order to investigate the relation and trends of returns and risks in these markets, in the rest of the paper, using modern portfolio theory, the efficient frontiers are estimated for each market followed by comparative analysis.  The statistical mathematical analysis is applied on capital market indices and their constituents of developed stock markets in order to investigate pre-crisis and actual conditions and trends. The representatives of developed stock markets are Japanese stock market in Asia, American stock market and German stock market in Europe.  Firstly, the paper gives the statistical analysis of relevant stock market indices. The analysis shows similar trends of indices especially in actual crisis period. Appropriate non-parametric tests show significant difference between movement directions of indices rate changes between pre-crisis and crisis period.


Theoretical Reflection of Psychological Contracts in the Context of Global Financial Crisis

Mario Pepur, Sandra Pepur, and Dr. Ljiljana Viducic, University of Split, Croatia



 Psychological contract has been in the focus of academic community for several decades because of its importance in the employment relationship and consequently its impact on global economy. This paper presents theoretical proposition for psychological contract. Former research results and theoretical constructs, referring to the definition and dimensions of psychological contract and also its formation and content, are systematically presented. Also, a cause-and-effect relationship between psychological contract and its influence on trust and commitment in employment relationship have long been analyzed throughout former research. A systematic review of former research may be significant for employers in order to compare, improve and adjust their business to employee’s needs in global recession.  Financial crisis imported from the US has shaken the foundations of the global economy. We are bombarded daily by bad news of bankruptcy of large financial institutions, different cases of embezzlement, closing of many production centres and temporary reduction of production which consequently leads to enormous increase of the unemployed worldwide. If we consider major technological changes and ever more global competition, it is obvious that conditions on the labour market have changed significantly. Relationship between the employees and their employers is often described as the relationship of exchange which is known as the concept of psychological contracts. As such it should be based on trust and mutuality.


Human Capital Practices in Different Industries in Croatia

Ivana Tadic, University of Split, Split, Croatia



 A crucial element of intellectual capital is human capital with its specificities such as knowledge, special experience, skills, abilities, emotional intelligence which make it a resource which is very hard to copy. With these characteristics, human capital provides basis for the creation of company’s sustainable competitive advantage. On the other hand, human capital contributes to the company’s overall value, especially with its positive correlation to company’s performance. The aim of this paper is to provide empirical evidence in human capital practices in different industries in Croatia. Two hypotheses will be provided. The first hypothesis implies that companies that invest in human capital will obtain better financial results than companies with insufficient investments in human capital. The other research hypothesis tests whether human capital investments are greater in human capital intensive industry or in labour intensive industry. A verification of the empirical evidence will be provided through the sample of Croatian large companies within construction and information technology industries. Financial indicators that will be used in this empirical research are based on previous researches on a similar topic. Contemporary business policies and procedures which include changes that happen in every day surroundings, especially to the instability and discontinuity of the business world and different requirements for business assets have changed the economy from a traditional one into  knowledge economy. A crucial business element long ago in the agrarian epoch was land, in the industrial epoch it was financial and manual labour, while the present key factor in knowledge economy is intellectual capital. In order to survive in such a volatile environment companies have to create sustainable competitive advantage which is possible solely through human capital.


Diffusions of Innovation, Perceived Security and Experience: The Case of Online Banking Service Adoption in Taiwan

Dr. Wen-Hung Wang, National Taiwan Ocean University, Keelung, Taiwan



 This paper demonstrates a diffusion of innovation framework for measuring both positive driving forces and important inhibiter (i.e., the perceived security) that jointly affect an individual retail bank consumer’s decision to use online banking services. Drawing upon the innovation diffusion literature, we present a conceptual model and then evaluate this model using the structural equation modeling (SEM) technique based on 1050 online banking customers in Taiwan. Findings reveal positive impact of relative advantage, compatibility, trialbility, perceived security, and experience using OBS on the attitude toward online banking services; also a positive impact of attitude and experience using OBS on behavior intention, and finally, behavior intention and experience using OBS on the adoption of online banking services. Theoretical and practical implications are discussed in the paper. The Internet is an innovative and increasingly popular medium with unique characteristics and features not to be observed in the traditional off-line channels. Evidence shows that the use of the internet is gaining importance in many parts of the world. For example, the market for electronic information services in the U.S. is predicted to grow by 55.6% from 2004 to 2009, to reach a value of U.S. $105.2 billion (Euromonitor, 2008).


The Fiscal Implications of the Clean Development Mechanism

Dr. Maria Luisa Fernandez de Soto Blass, University CEU San Pablo, Madrid, Spain



 The Clean Development Mechanism (CDM) allows emission-reduction (or emission removal) projects in developing countries to earn certified emission reduction (CER) credits, each equivalent to one tonne of CO2. These CERs can be traded and sold, and used by industrialized countries to a meet a part of their emission reduction targets under the Kyoto Protocol.  Regarding the economic criteria allocative and cost efficiency, flexibility and cost-effectiveness, market-based instruments perform best. For regulation of the CDM, some sort of taxation is adequate given the potential presence of rents or external costs. Permit trade is no option as its design does not suit the problem. Subsidies could work in principle, but would be expensive for society and even increase the potential profits from the CDM.  Any type of taxation of the CDM will extract part of the rent. Rent extraction can take place in basically four different forms. These are the ex-ante extraction by an auction or ex-post extraction by a profit tax, revenue tax or fixed fees. Theoretically, rent extraction by a profit tax then does not alter investment decisions. No projects would become unprofitable as it might be the case under a fixed fee or revenue taxation. Set as a percentage of profit, the profit tax is most flexible regarding costs and revenues. It takes price changes of CERs into account and does not drive projects out of the market that become marginal with falling prices In practice, however, also rent taxation will likely have negative effects on investment, by changing the rate of return relative to other investment options and thus making CDM projects relatively less attractive.


Banking Sector Features as an Indicator of Required Level of Interventions

Vita Jagric, Tanja Markovic-Hribernik, and Prof. Timotej Jagric, University of Maribor, Slovenia



 In this paper we study the features of the banking sectors across Europe in order to set connection between the properties of the banking sector prior the crisis and the level of state interventions. We use fourteen structural indicators of Eurostat’s and ECB’s data to create clusters by applying k-means method. Identified clusters of the banking sectors before the crisis differ by the magnitude of needed state interventions in the banking sector. Together with other bank bailout lessons, our findings might help to prevent taxpayers from future massive support schemes.   When the current global financial crisis swept the world, European countries and their financial systems faced severe financial challenges and feared unintended and complex spill-over effects. Since the crisis has brought about several different detrimental effects, our analysis aims at establishing whether banking sector features of a country played an essential role in the magnitude of the needed help injected into the banking sector.  As stated by Keynes (Greer 1962) many of greatest economic evils of his time are the fruits of risk, uncertainty, and ignorance and we see it applies for our time as well.


Audit Market Structure: The Case of Croatian Listed Companies

Tina Vuko, University of Split



 The purpose of this study is to describe and analyze audit market structure for companies listed on Croatian capital market. The research question of interest is if whether mergers and dissolutions in the audit markets have raised the level of concentration, thereby leading to reduced competition. The research is conducted on the sample of 205 non-financial companies for the year 2008. The level of concentration is measured by the concentration ratios and the Hirschman-Herfindahl index, while audit market shares are calculated using the number of clients, total assets and revenues being audited. The overall results indicate that the audit market in Croatia is still moderately concentrated.  Research on audit market concentration has attracted a great deal of attention in recent years and especially after demise of a big international audit firm - Arthur Andersen. The primary regulatory concern is that the increased concentration in the audit markets globally has resulted in significant decrease in the choice of audit firms for public companies leading to higher audit fees. Namely, there is a possibility that highly concentrated market could lead to more market power and thus to a larger deviation from competitive pricing and collusive behavior. The risk of another big audit firm failing (i.e. Deloitte, PricewaterhouseCoopers, Ernst&Young and KPMG) raises additional worries that already tight oligopolistic structure of the audit markets will further consolidate.


The Value of Aesthetics in the Process of Hiring New Employees in the Service Industry and its Impact on Service Quality

Gregor Pfajfar and Maja Knehtl, University of Ljubljana, Ljubljana, Slovenia

Maciej Mitręga, Ph.D., Manchester Business School, Manchester, UK



 Empirical evidence drawn from the research of Warhust and Nickson (2009) suggest that visual appearance and aesthetics are important factors to assert employees, although being under-researched in the scientific literature. This research aims to evaluate the existence and legitimacy of hiring employees based on visual appearance, its impact on perceived service quality and to define under what conditions the use of such employee selection is economically sound. Previous literature review identified four factors, influencing perceived service quality, created by service performer (professional service performance, emotional intelligence, social skills, and visual appearance and aesthetics), while our research identified additional two factors (personality and match between the consumer and service performer). A synthesized model of hiring employees based on appearance and aesthetics was proposed.  The appearance of a service performer is in marketing most commonly discussed as an element of physical environment of a service organization that emits signals, which influence future buying decisions, and provides evidence, used as an indirect evaluation of service quality by the consumer (Lovelock and Wirtz, 2007, Mattila and Wirtz, 2006). Just recently some authors, including Warhurst and Nickson (2009), began to evaluate also the direct influence of the appearance of a service performer on consumer’s perceived service quality as one of the possible foundations for positioning and establishing firm’s competitive advantages (Warhurst, 2000a, Warhurst, 2000b).


Tax Exemptions to Support Education in Turkey: The Applicability of A Registered Education Savings Plans (Resp)

Ceyda Kukrer, Anadolu University, Eskisehir, Turkey



 In this study, we examine the tax exemptions on private schools in Turkey with the Law 5281 and the other regulations ralated to the education and also we try to understand Canada’s RESP, which offers tax incentives to encourage education with subsidizing student loans and providing special tax treatment of savings through Registered Education Savings Plans (RESPs) and the accompanying Canada Education Savings Grants (CESGs). As a result, when the Education Saving Plan (RESP), which is used in Canada and the Tax Encouraging Policy are applied in Turkey, it will support the tax encouragement policies related to education expenses and private schools.  The information age that depends upon economic and technological developments has increased the demand for education. To meet this rising demand in the face of limited financial resources, it has become necessary for many countries to support education through tax incentives. These tax incentives usually take the form of rewarding support education organizations with tax exemptions. Such tax treatment increases the number of educational organizations.   The Turkish regulation that provides tax relief for educational expenditures reduces their taxable income by an amount not to exceed 5% of each taxpayer’s declared income as provided by Law 4842, which went into effect on April 24,2003. The limit was increased to %10 by Law 5281, which went into effect on October 1, 2005. The regulation also provides tax incentives for educational encourages families to save their income by tax incentives that are applied to educational organizations.  Canada’s tax incentive approach with regard to education differs from that of other countries. Through its Registered Education Savings Plan (RESPs), Canada encourages families to save their income by tax incentives.


The Use of the Hilbert Transform in Market Cycle Analysis

Abdalla Kablan and Dr. Wing Lon Ng, Center for Computational Finance and Economic Agents, University of Essex, UK



 With the growth of computing power and database capacity, increasing interest is being placed upon the analysis and synthesis of financial data that can lead to the development of successful financial market trading strategies. In particular, techniques are sought that can exploit the data from a digital signal processing perspective. One such technique that can be used in this role is the Hilbert transform, which has been an important tool in mathematics and signal processing. Its application within the financial literature, however, has not yet been fully explored, and a deeper exposition of the Hilbert transform within this context is therefore needed. This study examines how the Hilbert transform may be used for the measurement of financial market cycles. The main aim of this paper is to prove that the Hilbert transform is a suitable technique for the measurement of market cycles, which can lead to several unique market indicators that can identify market trends. It exhibits several advantages over more traditional trading methods, attributed to its consideration of complex variables. The practical use of the Hilbert transform appears to require severe truncation in order to produce an acceptable lag for trading and this necessitates several corrections to compensate. It is also found that the Hilbert transform has use in combination with other more exotic mathematical formulations that enables its applicability under more general market action conditions when market cycle measurements are no longer appropriate.


Asset Price Boom/Bust, Credit Cycles and Financial Stability

Ana Rimac Smiljanic, University of Split, Croatia



 Boom and bust in asset prices accompanied with large increase of private sector ineptness often lead to periods of financial instability. Moreover, current global financial crisis can be accounted among crisis largely connected to the asset markets. There is a large number of empirical researches that explain the connection between asset price movements, credit cycles and financial stability in developed countries but those concentrating on transitional countries are rare. Nevertheless, we can document a large increase of asset prices in a number of transitional countries undergoing financial liberalization. The scope of this paper is to find empirical evidence of the importance of asset prices for achieving financial stability in Croatia. Starting from theoretical assumptions, an analysis of Croatian stock and real estate markets will be conducted. The results of empirical research into the link between changes in asset markets and credit cycles and the importance and usefulness of asset prices for achieving financial stability will be discussed. As a result of this research, recommendations will be made for policy makers to use in their future actions. There is a great debate amongst academics and policy makers about the importance of asset prices for monetary policy and regulatory management. However, the majority of them agree that asset prices are important because of their significance in monetary transmission mechanism and for achieving monetary stability (Goodhart and Hofmann, 2001; Bernanke, Gertler 2000; Bernanke, Gertler 2001; Ceccheti et al. 2000). 



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