The Business Review, Cambridge

Vol. 17 * Number 1 * Summer. 2011

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

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FDI Spillovers in Member Countries of Integrated Markets

Dr. William L. Casey, Jr., Professor of Economics, Babson College, Babson Park, MA




Membership in an integrated single market, such as the EU, does offer relatively poor member nations the opportunity to employ inward foreign direct investment (FDI) as an engine of economic growth and development. Free access to the regional market means that multinational corporations (MNCs) can take advantage of favorable labor market conditions and low taxes in host countries, locate production facilities within, and export duty free throughout the market. However, there is a dark side to common market membership. Free unrestricted resource movement enables MNCs to import intermediate goods and other industrial inputs rather than develop relationships with suppliers in the local economy. Common market arrangements also promote the mobility of MNCs throughout the region leading to frequent plant closings. Member nations of integrated markets will have difficulty capturing positive spillover effects and avoiding negative spillovers unless these issues are addressed in the form of national and regional policy responses. In examining the impact of inward foreign direct investment on economic growth and development, a key issue in the economics literature has been the ability of host countries to capture positive spillover effects and to avoid negative spillovers.  Proponents of FDI-fueled economic development argue that the growth potential for inward FDI flows is multifaceted. Contributions to the host country’s developmental aspirations can occur in many ways including the infusion of needed capital as well as the spillovers from technology transfers, the introduction of new production processes, related gains in productivity, the infusion of managerial skills and know-how, employee training, the establishment of international production networks, and expanded access to international markets (Alfaro, 2003).  Positive spillovers can be either horizontal, in which local competitors gain knowledge, know-how or insight operating at the same level of production as multinational corporations, or vertical in which supply chain linkages between MNCs and local firms (either upstream or downstream) provide the same benefits. (Hanson, 2001).   Empirical evidence seems to suggest that the potential for inward FDI to fuel growth and development is not always realized. Failure is often linked to host countries’ limited capacity to take advantage of positive externalities. These limitations may be linked to infrastructure deficiencies, human capital unavailability, macroeconomics instability, institutional problems, or a hostile policy environment in the local country.


A Strategy for Enterprise Sustainability

Dr. Dennis F. X. Mathaisel, Professor of Management Science, Babson College, Babson Park, MA

Dr. Clare L. Comm, Professor of Marketing, University of Massachusetts, Lowell, MA



 Sustainability is the ability to endure. For any entity or any enterprise, sustainability is the ability to remain productive long term while minimizing waste and creating value. To be sustainable, the entity or enterprise, whether it is an ecological, environmental, human, or service enterprise, must possess five “abilities”: availability; dependability; capability; affordability; and marketability. This paper presents a strategy for sustainability based on these five abilities which should be adhered to throughout all phases of the life cycle of the entity or enterprise.  Sustainability is an ability - the ability to endure. In ecology, sustainability describes how biological species survive. For the environment, it is assessing whether or not project outputs can be produced without permanent and unacceptable changes in the environment. For humans, it is our long-term physical and cultural well-being. For mechanical systems and structures, it is maximizing reliability while conserving required resources and reducing waste. For an entity or an enterprise, it is the ability of the enterprise, its products, and its systems to remain competitive and productive long term, without failure, while minimizing waste.  Sustainability and sustainable development have become popular goals. They have also become wide-ranging terms that can be applied to any entity or enterprise on a local or a global scale for long time periods. Sustainability has many interpretations. Recently, the term has been used more in the context of “green”, which refers to having no negative impact on the environment, community, society, or economy (Bromley 2008). However, the traditional meaning centers around the words “endure”, “maintain”, or “support”, which is the focus of this paper. Here, sustainability means to aim to maintain the readiness and operational capability of systems or services in the enterprise or entity through the adoption of a strategy that meets established performance requirements in the most effective, efficient manner over the entity’s life cycle. The scope varies among entities, of course, but it does include the key word “ability”. Thus, to be sustainable, an enterprise must possess the following abilities: availability, dependability, capability, affordability, and marketability. This paper presents a strategy for sustainability based on these five abilities.  Most of the work on sustainability has focused on systems: ecosystems, biosystems, or mechanical systems.  A few articles have considered how these systems, or the entity, or enterprise can become sustainable. Morris (2010) looked at economics and sustainability.  She maintains that sustainability seeks to balance three things: (1) economic growth, development, or well being; (2) ecological or environmental protection and preservation; and (3) socioeconomic equity and equality.  The main thrust of her research was that sustainability must be taught from the economic perspective.


The Reality of International Business Environment and the Challenges of Small Businesses in Pennsylvania-Conceptual Review

Dr. Mengsteab Tesfayohannes and Dr. Jerrell Habegger

Sigmund Weis School of Business, Susquehanna University, Selinsgrove, PA



 Small Businesses (SBs) are the engine of sustainable economic growth and innovation in the Commonwealth of Pennsylvania (PENN). They make a pivotal contribution to the socio-economic development of PENN as they represent more than 99% of all existing businesses in the State. However, SBs in PENN have continued to confront formidable challenges due to the new reality marked by increasing international business interactions and socio-economic and technological interdependency affecting all developed and developing economies around the globe.  This in turn has brought enormous intricacies and complexities in conducting business both domestically and internationally. The impact of massive technological discoveries and innovations is now felt everywhere with the ever expanding outreach around the globe. Unfortunately, many SBs’ Entrepreneurs in PENN are insufficiently aware of this phenomenon. Many of them specially the smaller ones have continued to devote their full time and energy in a limited local domain which might not warrant them business sustainability and growth. This paper attempted to conceptually review how SBs in PENN so far reacted to the demands of global business environment. In this paper our approach is to conduct a foundational study based on secondary data. We believe that our study can give a general picture of the scenario.  The developmental reality of the 21st century is one of complex socio-cultural, economic, political and technological leaps forward and intricate challenges. During the last 60 years, extraordinary entrepreneurial novelty and frequent occurrences of ground breaking technological innovations and discoveries as “Killer Applications” have been observed. Killer applications (or “Killer apps”) are not merely innovations that improve the way something is done. They are not even something that merely changes a market or an industry. Killer applications are milestones in the technological development continuum that change the way society itself works and functions (Schindehutt, 2009). Given the present widespread interest in emerging global markets and rapid technological development, it is reasonable to expect internationalization will proceed in the future (OECD Report, 2008;  Departement of Community and Economic Development, 2007; Amjad Hadjikhani, 2002). Due to the blossoming of extraordinary innovations and progress in the information technology, our planet is becoming smaller and smaller at an accelerating speed. Within minutes any noticeable event is disseminated all over the world. Globalized businesses’ modus operandi has continued to dominate the world and affect virtually all firms. Indeed, this epoch of knowledge-based society and increased global integration of national economies has forced organizations of all sizes to expand their business outreach and impact beyond their domestic domains. This scenario has created a heightened trend of competition in virtually all areas including manufacturing, trade, finance, technology, and in all sorts of entrepreneurship.  On the other hand, it has also created an atmosphere of cooperation and partnership at both macro and micro socio-economic and technological levels. These collaborations can happen between companies of all sizes and between countries and regional groupings for common strategic objectives and faster socio-economic development (Morisson, 2002). Increased competition and international cooperation are not contradictory. Rather, they are complementarities contributing to the process of global wealth creation and achieving sustainable socio-economic development.  The current reality has enhanced the multidimensional role of enterprises in the international business environment. The new global reality is marked by sector shifts, policy reforms, greater global interactions and the influence of economic and noneconomic factors.  This has continued to happen in both developed and developing nations.


State and Local Government Fiscal Crises:  Causes and Solutions

Bassam AlBassam, Florida Atlantic University, FL



 State and local governments play a major role in the national economy, so we cannot investigate fiscal crises and explore solutions without studying and analyzing the situations of state and local governments. To find better solutions, studying the current fiscal situation and clarifying the roots of the problem is necessary. Many suggestions and solutions have been circulated among authors and specialists, although these have mostly been temporary solutions. Federal centralization and long-term planning are two solutions presented and discussed in the current paper.  The structure of the U.S. government is based on three levels of government: federal, state, and local. For the most part, state and local governments are independent in almost all government functions, including the financial system, budgetary system, and government functions. Therefore, every state is responsible for managing its own financial system. Here we have to note that state and local governments receive aid and grants from the federal government, whether directly in lump sums or indirectly through applying for federal programs. In addition, local governments receive aid from the state. Since decision-making at the state and local levels is revenue-driven, aid from higher levels of government affects how states and local government construct their regulations and laws (Gianakis & McCue, 1999).  State and local government is truly “big business” (Freeman et al., 2009). Since the U.S. was established as a nation, the role of state and local government in the economy has been important in many ways. First, state and local governments are responsible for providing services to people, so they are the first line providing services to the public. “Local governments are important economic agents. Because they make substantial purchases of goods and services and have employees who buy products and pay rent or mortgages, local governments contribute to the economic well-being of a community” (Miller & Svara, 2008, p. 4-5). State and local governments employ almost 17 percent of the workforce compared to 2 percent for the federal government (Boyd, 2009). This high percentage makes state and local governments the main engine for the whole economy, and illustrates the importance and effect of state and local government in terms of the national economy.  According to the U.S. Census Bureau (2002), there were 87,576 governmental units in the U.S. as of June 30, 2002. In addition to the federal government and the 50 state governments, there were 87,525 local government units. Here, we have to notice that every state and local government has its own financial and budgetary system, which makes thinking of a “one-size-fits-all” solution to economic crises impossible. One the other hand, there are general rules approved by the federal government and Congress that control specific financial issues, although the federal government and Congress responsible for control and regulate the financial market and institutions.


General Education Curricular Foundations in Business Education

Dr. David S. Harrison and Dr. C. Michael Ritchie, University of South Carolina Aiken



 Articles in the popular press, and a significant study on the effectiveness of higher education by former Secretary of Education Margaret Spelling, have called into question the long-accepted, conceptual foundation approaches to learning, including collaborative, active-based, and integrative approaches.  Arne Duncan, current Secretary of Education, has instituted a new, “Race to the Top” $4.3 billion initiative, exceeding any previous amount of Department of Education discretionary spending, to create far-reaching improvements in our nation’s schools.   As with previous administrations, most of the changes are structural, and systemic reform, rather than learning modality approaches.  Absent from his core initiatives are innovative approaches to learning, including those emphasizing conceptual framework building.  Most university business programs favor that conceptual approach, yet appear to retain the same “discipline-segmented, non-integrated, general education / major specialization curriculum model” prevalent for many, many years, without significant change. We surface these critical issues, and follow with a survey of course requirement, current practices at regional, mid-sized public universities.  The survey had an eighty percent response rate (65 universities); the results of the survey are presented, with some commentary.  General Education:  Do we need it?  Columbia and the University of Chicago have strictly dictated curricular requirements; Cornell and Brown are student-driven and flexible.  Business schools in India, teach business [only]. What is the true value of a general education curriculum? Here’s an interesting quote: “The quality of a liberal education that makes it so effective is that the subject matter one studies is not use-eh-ful.”  (Ferral, V.E., 2008.)  The point being that the appreciation of knowledge, learning, has inherent value that transcends whether or not it leads directly to marketable skills.  Also examined in this broad view of education is the focus on pedagogical platforms that move from traditional methods of delivery to more effective systems. In July of 2009, Arne Duncan, Secretary of Education, announced the creation of a $4.3 billion program branded as “Race to the Top”.  (The current and prior administrations seem not to lack in talent for program marketing, catchy lingos.)  The $4.3 billion is dwarfed by the $70 billion in educational stimulus money directed at the state level (Rotella, C., 2010).  This $4.3 billion, however, is discretionary funding that the Department of Education has directed toward rewarding innovative approaches, and is by far the highest level of such discretionary funding ever .  States applying for and receiving this funding, however, must change their standards from current application to comply with four basic changes mandated by Washington (Duncan, 2009). These include: (1) Adopting internationally benchmarked standards and assessments that prepare students for success in college and the workplace; (2) Recruiting, developing, rewarding, and retaining effective teachers and principals; (3) Building data systems that measure student success and inform teachers and principals how they can improve their practices; and (4) Turning around our lowest-performing schools. (Duncan, 2009)  It seems that every administration has its views on the problems inherent in “current” [meaning predecessor] education policies, and has its own views as to how to solve these problems.  A key component of the “Race to the Top” initiative will lift restrictions on the number of charter schools allowed.  In addition, linking teacher pay to student achievement, and requiring states to adopt nation-wide academic standards, is also a requirement. (Obama Education Dept. Announces, 2009).  The key elements of the program are directed toward educational structure, systems, standards, and measurement of results.  Innovative approaches, emphasis on critical thinking, conceptual development, and core learning principles are not emphasized.


Educational Leadership Cost-Effectiveness and High School Completion Among Oahu’s Public School Districts

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



 The following study attempted to ascertain the leadership cost-effectiveness of public high school administrators towards completers through a financially based econometric analysis. Essentially, public high school leadership expenditures and completer data were collected and bivariate interaction analyzed through a correlation and linear regression procedure. Based on the collective results, with the exception of the Windward and Leeward District that reported a positive though statistically insignificant relationship, both the Honolulu and Central Districts reported a statistically insignificant negative relationship. Despite the positive results from the Windward and Leeward District, public high school administrators in each of the four public school districts on Oahu were found to have no econometrically meaningful effect towards high school completion from 2000 to 2007. Educational leadership, other than instruction, is a critically important factor that contributes to high school completion, where it is school administrators that set the goals and strategic direction for teachers to accomplish this task (Heck & Hallinger, 2010; Jarrett, Wasonga, & Murphy, 2010; Riley & Mulford, 2007). Although there are many techniques to measure the productivity of educational leadership, assessing its effectiveness through a financial perspective remains one practical way to accomplish this task (Beard, 2009). Consequently, this study will specifically analyze Hawaii’s Department of Education’s (DOE) high school leadership expenditures (i.e., school management, program/operations management, and overall management) and its econometric relationship with high school completers among the four public school districts on Oahu both individually and collectively (Hawaii Department of Education, n.d.). With this research, it is hoped that the results will provide a current snapshot of the effectiveness of Oahu’s DOE’s administrators in fostering high school completion from an economic perspective.  Table A1 summarizes the DOE’s high school leadership expenditures, size of graduation classes, and high school completers in its Honolulu District from 2000 to 2007. Based on Table A1, high school leadership expenditures have been increasing on an average of 0.4% with a standard deviation of $831,673 per year, respectively. The lowest increase in high school leadership expenditures was actually a decrease seen during 2006 to 2007 and its highest increase seen during 2002 to 2003 (See Figure A1). Graduating classes has seen much decline in the beginning and slow periods of growth during this period and had an overall negative average growth rate of -0.7% with a standard deviation of 96 students per year, respectively.


A Suggested Computer Related Teaching Technique to Replace Debits and Credits in the Introductory Accounting Course

Lee Tagliaferri, Pace University, New York, New York



 I studied the role of debits and credits which are embraced as a primary teaching technique in the introductory accounting course, although they are outmoded in the contemporary data processing of computers. In particular, I probed if the role mandates debits and credits as a teaching technique and precludes a change in methodology. The reason for my study is to explore the feasibility to adopt, as an alternative for the teaching technique of debits and credits, a computer related tutelage. A comparative study of the alternatives gives evidence that a computer related tutelage is less complex, more comprehensible and easier to learn than the teaching technique of debits and credits. I investigated Particularis de Computis et Scripturis (De Scripturis), written by Luca Pacioli, in order to gain an insight of the rationale for debits and credits and how it correlates to learning in the introductory course. I find that the pedagogy of the introductory accounting course does not mandate debits and credits as a teaching technique. On this premise, I suggest a computer related teaching strategy to replace the technique of debits and credits in the introductory accounting course.  The teaching technique of debits and credits in the introductory accounting course does not correspond to the practical application of instruction for data processing by computers. The purpose of my study is to discern in this anomaly the role of debits and credits. I investigated if the role mandates integration of the teaching technique of debits and credits and precludes an alternative tutelage. Debits and credits in the introductory accounting course have far reaching implications. In addition to bookkeeping, they teach how, in accordance with generally acceptable accounting principles, business transactions change the balance sheet, the essence of the introductory accounting course. I studied the source of debits and credits in the first printed exposition of accounting and bookkeeping, De Scripturis, written by Luca Pacioli. After more than 500 years, the treatise continues to be the cornerstone of the pedagogy of accounting principles and bookkeeping controls in Financial Accounting textbooks, and this has earned him the title “father of accounting”. The scope of my study is to examine the purpose of debits and credits devised in the pedagogy of Luca Pacioli, as translated by Brown and Johnston (1963), Cripps (1994) and Crivilli (1924). I probed if the purpose of debits and credits introduced by Luca Pacioli in 1494 continues to be applicable for the pedagogy of the introductory accounting course. As manifested by the title of his publication, translated Details of Accounting and Recording, Luca Pacioli distinguishes accounting from bookkeeping. He stated that a merchant must be a good accountant and employ good bookkeepers. My paper follows this dichotomy.  I find that the pedagogy of the introductory accounting course does not mandate debits and credits as a teaching technique in the contemporary business world. On this premise, I suggest a revision of the teaching strategy of the introductory accounting course. My study provides evidence that in a computer related methodology which omits debits and credits students would find accounting and bookkeeping less complex, more comprehensible, and easier to learn than at present. Student endorsement of my assertion has been unanimous in my introductory accounting course. (2). My suggested teaching technique supplements the pedagogy of textbooks in my lectures.


The Role of Corporate Values on Business Students’ Attitudes:  A Comparison of Undergraduates and MBAs

Dr. Denise Kleinrichert, Dr. Michael Albert, and Dr. Jamie P. Eng

San Francisco State University, San Francisco, CA



 Undergraduate business student attitudes about business values have not been analyzed for the impacts these views will have on business school curriculum, corporate recruiting of BSBA graduates, and these students’ future roles as change agents in business. Our empirical research on 715 undergraduate business students’ perceptions indicates that undergrads and MBA students are concerned that their values conflict with those they anticipate in the workplace.  The focus of this paper is undergraduate business student attitudes about business values and its underlying corporate initiatives, which has not been directly studied. There has been, however, a comprehensive study of MBA students. We seek in this paper to begin a dialogue on the study of U.S.-based undergraduate business student attitudes about the role of business values in society. For example, the evolving attitudes of MBA students - their learning in business schools and their thinking about the relationship between business and society, and whether this relationship involves ethical managerial practices – has been investigated by The Aspen Institute’s Center for Business Education (Aspen 2008).  One aspect of business education ought to include “moral imagination,” a complicated definition that includes a form of reasoning that serves as “a process composed of distinctive forms of moral sensitivity, moral judgment, moral intention, and moral behavior” toward corporate responsibilities to stakeholders (Moberg & Seabright 2000: 847-8). We should be concerned with whether undergraduate management-development education ought to reflect the context of ethical commitment by individuals to their corporations and to business practice based on the use of qualitative factors as well as quantitative indicators (Bishop 2008). The notion that corporations are value-neutral is quite antiquated – ethics education in business schools has been an accrediting vanguard of the AACSB for over 90 years (Kennedy & Horn, 2007). Moreover, the ethical corporation is socially-based in issues of corporate social responsibility and sustainable business practice, or better termed as an “ethics based social culture,” found in the changing mindsets of both students and business school faculty (Kennedy & Horn, 2007; Grey 2004).  This paper reflects on our empirical research of 715 undergraduate business student survey responses on attitudes about the role of ethics in the company. Our findings, the first such comprehensive study of undergraduate Bachelor of Science in Business Administration (BSBA) students’ views on the role of ethical values in business result from a survey modeled on the Aspen Institute’s 2007 MBA survey of fifteen MBA program student populations. Our purpose is to closely examine attitudes among a culturally diverse, urban population of undergraduate business students studying at an AACSB-accredited U.S. state university at two key points during the business school curriculum: 1) entering junior year core business curriculum coursework, and 2) graduating senior year business curriculum stages.


Crisis Management: Corporate Recovery in Business Environment with Non-zero Mean Losses

Dr. Valery Shemetov, Strayer University



 A corporate recovery in a chronic crisis is considered, and an extension of an earlier proposed model for the recovery is developed. This extension takes into account possible non-zero environmental losses. Using the solutions for a corporate recovery in a crisis given in this paper, and a technique for calculating probabilities for survival in the recovery, one can estimate a probability for survival for each available recovery program, and choose the one providing the highest probability for a success.  This paper continues a quantitative study of a chronic (cumulative) crisis (Hwang and Lichtenthal, 2000) germinated by an internal or external event in a company’s business environment and making corporate return on assets (ROA) continuously decrease over time. Industry risks generate a random flow of losses threatening the corporation’s survival when its assets decline to a certain level. A company’s probability for survival on a delay with implementation of a recovery program relative to the crisis onset, and the ROA increment secured by the program is considered on the following assumptions (Shemetov, 2010): A1)  a cumulative effect of the losses caused by volatility of the corporation’s environment on corporation assets is small compared to the losses caused by a crisis: A2)  the time needed for converting corporate productive assets into cash is small A3)  a corporation uses no loans  A4)  corporate ROA changes uniformly in a crisis A5)  a flow of environment losses follows a Poisson’s distribution. When corporate assets are reasonably high, one can ignore environmental losses. However, when corporate assets decline due to a crisis, a moment comes when the effect of environmental losses becomes comparable with the losses caused by the crisis. The objective of this study is to expand the model developed in the cited paper withdrawing the assumption (A1).  A success of a corporate strategy leads to a steady growth of corporate assets over a long-term interval. More accurately, it can be put as follows: let us break a long-term interval of corporation’s activity [0,T] into n equal steps of length ∆t= T/n. A change in corporate assets at i-th step is Ai+1= Ai×(1+ ROAi×∆t); Ai and ROAi are an asset value and return on assets at i-th step. This equation describes Ai+1 as a function of all previous ROAk values (k = 0, 1, …, i).


Research Proposal: Investigating Sustainable Enterprise Wikis

Jeffrey Stewart and Brian Clark, University of Cincinnati, OH



The knowledge-based view of the firm states that firms should organize around their knowledge assets (Grant, 1996).  To effectively organize using this view, firms must first identify what knowledge exists in the firm, and where.  Wiki technology is a flexible, dynamic web technology that can be used to capture organizational knowledge in the work process by users.  This research proposes to study the factors that influence user adoption and use of enterprise wiki technology as a decentralized knowledge and project management tool.  Additionally, the proposed research will investigate the factors that influence success and sustainability of enterprise wiki technology.  This describes a collaborative research effort between Jeffrey Stewart & Brian Clark, University of Cincinnati, and the R&D department of a major corporation It is designed to gain understanding of key phenomenon in planning, implementing, and evaluating modern knowledge management systems (KMS), specifically focusing on syntactic and semantic wiki tools as decentralized forms of user-generated and user-managed forms of KMS.  The results from the research will help identify pathways for achieving R&D’s long-term and short-term knowledge management (KM) goals; additionally, resulting data sets can be used for academic purposes, including pursuit of a dissertation and publication while maintaining compliance with confidentiality restrictions.  The knowledge-based view (KBV) of the firm states that the production and services offered by a firm are a result of the knowledge in the firm (Grant, 1996).  In the KBV, the firm is organized in a manner to best use the knowledge resources and competencies of the firm.  One way of organizing and incorporating the knowledge of employees is a knowledge management system (KMS).  A KMS stores business and process knowledge in a repository that can be accessed and distributed through the firm.  The goal is to capture tacit employee knowledge and make it explicit, codified knowledge (Alavi & Leidner, 2001).  The process perspective of knowledge management views knowledge as a process of applying expertise.  Knowledge is seen as a flow and the focus is on the process of creating, sharing, and updating the knowledge base.  The role of IT in the process perspective is to provide links among sources of knowledge and increase the depth and breadth of the organizational knowledge base. (Alavi & Leidner, 2001)  Wiki technology is an effective means to facilitate the process view of knowledge management because it is a flexible technology that builds links between sources of knowledge and users are solely responsible for the contribution and maintenance of knowledge content (Hester, 2009).


Financial Crisis and Corporate Restructuring

Dr. Chaiporn Vithessonthi, Mahasarakham University, Thailand



 Although a financial crisis can be thought of as an economic event, it is rather unique and has significant consequences for the economy. Hence, a financial crisis should be treated differently than other economic events in the study of corporate restructuring. In this paper I propose a model for the impact of financial crisis on the corporate restructuring strategy of firms in emerging market countries. The purpose of the framework is to change how managers and scholars perceive corporate restructuring strategies. In this article, I ask, what is the impact of financial crisis on environmental conditions of organizations? What is the effect of financial crisis on financial market conditions? Is the need for corporate restructuring affected in different ways? Do corporate restructuring strategies remain effective during financial crisis as in other economic conditions? In this paper, I have identified (1) key antecedents of the need for corporate restructuring and the capacity to adopt corporate restructuring strategies, (2) the effects of financial crisis on the organization’s internal and external factors, (3) new propositions for research in the context of emerging market countries, and (4) new ways of thinking about managing corporate turnaround during financial crises.  Financial crises have occurred relatively more frequently in both emerging market countries as well as developed countries during past decades  ADDIN EN.CITE  ADDIN EN.CITE.DATA (Allsopp, 2002; Freedman et al., 2010; Glick and Hutchison, 2005). The latest global financial crisis of 2007-2008 results in the substantial economic downturn in almost all countries  ADDIN EN.CITE  ADDIN EN.CITE.DATA (Kashyap and Zingales, 2010; Longstaff, 2010), posing a challenge to both domestic as well as multinational firms across the globe. There have been a handful of studies that have examined the effects of financial crises on the economy  ADDIN EN.CITE  ADDIN EN.CITE.DATA (e.g., Doraisami, 2004; Farmer, 2010; Freedman et al., 2010; Glick and Hutchison, 2005; Kamin and Rogers, 1996); however, there seems to be no prior study on the effect of financial crises on a firm’s corporate restructuring. This raises an important question that is of relevance to both scholars and managers: Does a financial crisis influence corporate restructuring strategies differently?   Although financial crisis can be thought of as an economic event, financial crisis is rather unique and has substantial consequences for the economy. Hence, financial crisis should be treated differently than other economic events. My primary objective here is to extend the corporate restructuring literature by exploring how financial crisis affects firms’ corporate restructuring. I propose a model for the impact of financial crisis on the corporate restructuring strategy of firms in emerging market countries. The purpose of the framework is to change how managers and scholars perceive corporate restructuring strategies. I ask, what is the impact of financial crisis on environmental conditions of organizations? What is the effect of financial crisis on financial market conditions? Is the need for corporate restructuring affected in different ways? Do corporate restructuring strategies remain effective during financial crisis as in other economic conditions?


“Introducing ERPs to SMEs: A Two-Dimensional Review and Analysis”

Dr. Kostas Metaxiotis, Assist. Prof., University of Piraeus, Greece



 Small and medium-sized enterprises (SMEs) are a vital part of any national economy .To survive in the global economy, SMEs have to improve their products, services and processes, exploiting their intellectual capital in a dynamic network of knowledge-intensive relations inside and outside their borders. In order to accomplish these objectives, more and more companies are turning to the Enterprise Resource Planning systems (ERP).ERPs assist large enterprises in automating and integrating corporate cross-functions and provide the basis for business process management integration in order to minimize costs and increase efficiency and effectiveness of enterprises. However, in the case of SMEs, there is currently strong debate in the research community about the ERP adoption of SMEs and the final benefits for them.  In this framework, this paper aims at throwing light on the diffusion of ERPs in SMEs, analyzing several key issues and barriers. A wide range of academic and practitioner literature related to ERPs and SMEs is reviewed. On the basis of this review, the paper gives answers to specific research questions and presents future research directions.  During the last decade, the global economy has entered a new era where the future of enterprises essentially will be determined by their ability to wisely use knowledge, a precious global resource that is the embodiment of human intellectual capital and technology. The knowledge-based economy places great importance on the diffusion and use of information and knowledge, as well as its creation. In this new global economy, SMEs, being a vital part of any national economy, are obliged to focus on maintaining and enhancing their knowledge capital in order to innovate, and their ability to learn, adapt and change becomes a core competency for survival (Perry, 1999).  On the other hand, modern information and communication technologies (ICT), expeditious data processing models, configurable platforms, networking, the internet have facilitated enterprises to have access to external sources of knowledge and have provided them the opportunity to foster intra/inter-organizational integration with the aim at achieving higher efficiency, effectiveness, better quality of services and minimization of costs. In this context, Enterprise Resource Planning (ERP) systems have been shown to powerful ingredients in the success of enterprises (Davenport, 1998; Alsene, 2007). ERP is a strategic IT tool that helps a company to gain competitive advantage by integrating business processes and optimizing the resources available. A successfully implemented ERP can link all areas of an enterprise including customer relations, manufacturing, human resources, financial management, and forming a highly integrated system with shared data. Benefits include drastic declines in inventory, reduction in working capital, abundant information about what customer wants and needs.  Implementation of an ERP system does not end with the system 'going live' (Rose, 2006). It is an ongoing process where new functionality, modules, updates, and corrections need to be carried out in conjunction with changes in organisational processes (Kosalge et al., 2008). These software and process changes continue throughout the lifetime of an ERP system as it evolves in parallel with the organisation. It is important not just how well the ERP system itself performs (e.g. accuracy, reliability, and response time), but how well the business improves its performance with the ERP system.


Mean-Reversion of Net Sales Predictability in the Case of Polish Public Companies

Dr. Jacek Welc, Wroclaw University of Economics, Poland



 Corporate financial results (measured by e.g. sales growth, profitability, earnings growth, leverage) are characterized by the long-term reversion toward the levels average for the whole economy. Empirical research also shows that the Beta coefficients (reflecting investment risk) of public companies are strongly mean-reverting. Because Beta coefficients are at least partially correlated with variability and predictability of corporate sales and earnings, the long-term mean-reversion of Beta coefficients suggests the possibility of the mean-reversion of the variability and predictability of firms’ sales and earnings. In this paper we explore the reversion toward the mean of net sales predictability in the case of companies listed on the Warsaw Stock Exchange in the period of 2000-2009. The research confirmed the strong tendency of net sales predictability to revert toward the mean.  Forecasting corporate earnings constitutes an essential element of most models of corporate financial analysis and valuation [Moyer, McGuigan, Kretlow 1995; Penman 2007; DePamphilis 2008]. Analysts, when making forecasts, usually exploit a wide range of available information concerning the company under investigation. The second approach to forecasting earnings is based solely on corporate historical financial results and the predictions are made with the use of mechanical methods. However, the empirical research finds generally high inaccuracy of earnings predictions made by professional analysts as well as obtained from the extrapolative models [O’Brien 1988; Brown 1996; Dreman 1998; Malkiel 2007; Rothovius 2008]. It’s also not unequivocally clear whether detailed forecasting approaches are superior to the simpler ones or vice-versa.  Abundant research shows that the characteristic feature of corporate financial results (measured by e.g. sales growth or profitability) is a long-term reversion of those results toward the economy-wide average levels [Fama, French 1999; Keil, Smith, Smith 2004; Bajaj, Denis, Sarin 2005; Murstein 2003]. However, despite its importance and strong evidence, reversion toward the mean seems to be neglected or even unknown by most financial analysts, resulting in over-extrapolation of the historical earnings trends. One research found that the consequence of this neglect is the fact that the most optimistic and most pessimistic earnings forecasts are usually too optimistic and too pessimistic and the forecasts’ accuracy can be improved by shrinking them toward the mean [Keil, Smith, Smith 2004].  High unpredictability of earnings makes investors appreciate companies characterized by relatively high (as compared to other companies) earnings predictability. According to the valuation models based on discounted cash flows the relatively high / low earnings predictability should has positive / negative impact on market valuation of stocks. This is so because market belief in high / low predictability of profits of a given company (which often results from the observation of historical earnings behavior) implies relatively low / high perceived investment risk, decreasing / increasing the discount rate. However, because investors tend to over-extrapolate the historical earnings trends it seems probable that they also over-extrapolate the scope of historical earnings predictability. If they do this and if the earnings predictability is mean-reverting, the result is the overvaluation / undervaluation of the companies showing relatively high / low earnings predictability (due to the understatement / overstatement of the expected risk associated with earnings predictability on the basis of the observation of the historical earnings predictability).  In our previous research we confirmed the strong tendency of Polish public companies’ sales growth and net profitability to revert toward the mean [Welc 2010; Welc 2011]. However, market valuations of stocks are derived not only from growth and profitability, but also from the perceived investment risk (that in turn is significantly influenced by the historical earnings predictability). Because forecasting net sales is usually the first key step in building long-term earnings and cash flow projections (and many cash flow elements, like working capital or profitability, are forecasted on the basis of the sales predictions), the accuracy of net sales prediction is crucial for the final accuracy of earnings and cash flow predictions.


Motivation to Change Project Manager’s Position With Line Manager’s Position and Vice Versa

Niksa Pivac, Ericsson Nikola Tesla, Split, Croatia

Dr. Snjezana Pivac, University of Economics, Split, Croatia

Josko Ravlic, Ericsson Nikola Tesla, Split, Croatia



 The realization of projects is characterized  by the extreme complexity and uncertainty, all as a result of the increasing complexity of business activities and the environments in which the projects are implemented and in particular due to the rapid development of science, technology and humanity as a whole. Thus, the dynamics of nowadays business in a global and powerful competition as the main precondition sets strong interconnection of all the participants and immediate response to rapid market fluctuations.  Visibility and performance of the projects are always evaluated and directly reflected in the fundamental objectives of each project: to conclude all the activities on time (i.e. the shortest possible time), within planned range of costs (i.e. the minimum costs) and at the same time fulfilling a required scope of the project. Project manager should be a key factor of the project success and consequently a key player of a successful business enterprise. The question arises whether project managers are adequately recognized in their workplace and whether their roles and responsibilities are in accordance with their influence and position in the enterprises.  In this respect, the main goal of this paper is to perform an empirical analysis in order to get insights on the actual role, significance and influence of project managers in their enterprises and generally in a society. A special emphasis has been given on the relationship between project managers and line managers throughout their organizations. The paper has made a comparative analysis of position of a relevant management levels in the Croatian enterprises and the enterprises in the selected countries.  Each and every organization has a lot of challenges on its way to success and vision. And it streams to reach desired position completely focused on the results and solutions, to be internally and externally perceived as innovative, dynamic and competitive regardless of dynamic and complex surroundings, to build strong and transparent relationships with customers. The fact is that the only constant is change and there is a major challenge for an organization to continuously find solutions and keys for business success. Competitive advantage in the marketplace can be achieved with unique services, products or internal processes and that can be achieved through the projects.  Application of principles, methodologies and tools of project management in daily business is a successful strategic guidelines and it is certainly an efficient response of business organizations on today's trends and turbulent environment. Many companies and organizations from different regions and industries have recognized the advantages of performing and conducting business activities through the projects and project organization and have become aware of their benefits and their success can thank to this approach. Today we meet up with projects in almost all branches in daily operations, such as the construction industry, telecommunications, financial sector, manufacturing, most services such as IT, marketing, public relations, tourism, organization of events, etc. Project managers carry the major role in project completion and represent the main responsible factor of a project success.


Toward A Model of Drivers for IT Outsourcing in a Developing Country: Jordan Public Sector Case Study

Dr. Maen Al hawari, Al Ain University of Science and Technology, Abu Dhabi, U.A.E

Mohammad S. Awwad, University of Arab Academy for Banking and Financial  Studies, Amman, Jordan

Dr. Mohammed Al hawari, Sharjah University, Sharjah, U.A.E



 IT outsourcing has experienced a high degree of growth at least in the latest decade, basically as a result of IT revolution and its huge use in organizations and then the increasing complexity of its management.  This study presents findings from five interviewed organizations in the public sector in Jordan. The findings revealed that IT outsourcing decision in any organization is affected by thirteen factors, nine of them are internally, and the other four are externally.  The findings revealed five new drivers that influence the outsourcing decision in Jordan (pressure from the sponsor, pressure from top management, pressure from external service provider ESP, the role and skills of CIO and distrust to internal skills. Furthermore, the majority of the interviewed managers do not prefer the option of the external outsourcing. This general attitude is referring  to the difficulties and some failures encountered   the organizations in practicing the outsourcing. Therefore, this study reveals the need for more cases in other developing countries to confirm and generalize the results of the study.  Statistics indicate that spending on IT outsourcing is about US$56 billion in 2000 (Suhaimi et al., 2005), $ 156 billion in 2004 (Bahli and Rivard, 2005), which means surely that the number exceeded $ 200 billion in 2010, and the market size of IT outsourcing is significantly growing.  The large market of IT outsourcing has motivated many researchers to explore the factors affect and motivate organizations to outsource some or all of their IT functions.  Most studies and literatures give a high importance to the considerations of cost, skills, and core-noncore business as main motivations to go toward outsourcing. Some researchers expanded their analysis by reviewing some theories such as, transaction cost economics and the resource-based view for more support and justification to their hypotheses about these factors (Marshal et al., 2007).  The majority of researches that identify motivations of outsourcing are discussed this issue in developed countries. Therefore, very rare studies cover the issue of outsourcing in developing countries, and more specific in Jordan. This research is a first stage in investigating this gap toward develops a model of IT outsourcing motivations in developing countries, and Jordan public sector is selected as a case study.  Consequently, this research contributes to the literature of outsourcing, and gives cases on countries are not part of the developed world.  To achieve the purpose of this research, five different interviews held with different managers in five different public organizations. The organizations are the ministry of finance MOF, ministry of Transportation MOT,  Jordan customs  (JC), Civil Aviation Regulatory Commission CARC (the new name of Civil Aviation Authority), and Ministry of Industry and Trade(MOIT)  .


Implementation of Classification Methods in Determining Human Resource Bundles

Ivana Tadic, University of Split, Split, Croatia

Dr. Snjezana Pivac, University of Economics, Split, Croatia



 In today volatile and every day changing business environment, human resources represent one of the crucial company’s resources. Changing from traditional to modern economy, it is not enough for company to possess substantial material and financial resources. It requires possessing unique human resources, with specific knowledge, skills and abilities important for survival of the company and creating company’s sustainable competitive advantage. Two decades ago, reputable authors started to research influence of human resource activities and organizational performances. Moreover, many researches provided empirical evidence of the importance of creating human resource bundles, which represent set of combined human resource activities. Due to their more direct and stronger synergic effect, human resource bundles provide greater effect on companies’ performances, instead of isolated and separated human resource activities.  The aim of this paper is to present different bundles, created by the implementation of classification methods (factor and cluster analysis) and their correlation with the most influential companies’ financial performances. Bundles are created using nine groups of human resource practices and their particular activities. The sample of this research includes Croatian public companies listed on Croatian Stock Exchange Market which were provided by written survey. Survey was generally designated to human resource managers, investigating their subjective opinions on the level of development of human resource practices within their company. These data are paired by companies’ financial indicators in order to disclose their relations. Second analysis creates the most influential human resource bundles, distinguishing them according to the company’s main activity, in order to reveal their characteristics which results from specificities of different industries. 


Comparative Analysis of Lattice Based Option Pricing Models

Dr. Branka Marasovic, University of  Split, Split, Croatia

Dr. Bosko Sego, University of  Zagreb, Zagreb, Croatia

Ivan Marasovic, Brodomerkur d.d., Split, Croatia




Binomial and trinomial option pricing models are very popular numerical methods for pricing American option. In general, there is unfortunately no analytical solution to the American option problem. Since, no closed form solution is derived, lattice based models as binomial and trinomial model can be used in order to obtain approximate solutions. The binomial option pricing model was developed in 1979. This model involves the construction of binomial tree to represent the various probabilities for the future price over the life of the option. However, the binomial model assumes that the option price can either go up or down over a time step. It does not assume that the option price may remain unchanged. In 1986 Boyle proposed the trinomial option pricing model. Under the model, in each period, the prices can go up, down or remain unchanged ant that‘s the reason why author of trinomial model present it as an improvement of binominal model. However, trinomial model have never achieved popularity of binominal model. This phenomenon inspired authors of this paper to research rate of convergence of previously mentioned models.  In this paper authors will generalize research of M. Horasali (2007) in which he research rate of convergence of binominal and trinomial model for “in the money” options. In this paper we research rate of convergence for “in the money”, “at the money” and “out of the money” options. Furthermore, authors will be, also, determined time which computer spends to calculate value of options with given precision.  There are many models for pricing options, out of which the Black-Scholes option pricing model and the binomial option pricing model are the most popular. Black-Scholes model was the first model to be developed in 1973. This model is mathematical and based on various assumptions, some of them, unrealistic. It is also not able to give the value of an American put option on a dividend paying stock. Binomial and trinomial approximations are useful to solve this problem but using a lattice model introduces approximation error. The binomial option pricing lattice was developed in 1979 (Cox, J.C., S. Ross, M. Rubinstein, 1979). It is a very useful model that involves the construction of a binomial tree to represent the various probabilities for the future price over the life of the option. The binomial model assumes that the option price can either go up or down over a time step, but it does not assume that the price may remain unchanged. In 1986, Boyle (Boyle, P.P. 1986) proposed the trinomial option pricing model, which is supposed to be more accurate than the binomial one and will give the same results as the binomial one in lesser number of steps. However, the model could never gain popularity. Therefore, in this paper, our aim is to answer on question is the trinomial model improvement of the popular and often used binomial model or not. We will generalize research of M. Horasali (2007) in which he researched rate of convergence of the binominal and the trinomial model for “in the money” options. In this paper we research rate of convergence for “in the money”, “at the money” and “out of the money” options. Comparison of models is based on the number of nodes produced, computer time used and approximation error.  The paper is organized as follows: following this introduction, in Section 2, we describe the binomial model for valuing options. Section 3 presents the trinomial option pricing model. In Section 4 approximation errors and convergence speed of these two models are compared. Section 5 summarizes the paper and indicates the possible directions for further research.


A Scale Development Study on Implicit Leadership Theories of Selected Management and MBA Students from Turkey

Ibrahim Ugur Baser, Ph.D. Candidate, Marmara University and

Director of Vocational School of Studies, Istanbul Bilgi University, Turkey

Yasin Rofcanin, Ph.D. Candidate, Bogazici University and Istanbul Bilgi University, Turkey



 Studies on leadership have enfolded that individuals have “implicit leadership schemas” in their minds. In this sense, implicit leadership means the prototypical and ideal leadership attributes that individuals have about a potential leader (Lord, Foti & De Vader, 1984). Even though majority of implicit leadership studies underpin the “general nature” of this literature, recent studies have started to include individual differences as antecedents of implicit leaderships. The purpose of the present study is to elaborate on the construct of implicit leadership and offer a scale on implicit leadership theories. The study utilized a qualitative approach. Senior management and MBA students from Istanbul University and Istanbul Bogazici University were selected as sample groups. Four round focus groups and in-depth interviews were conducted. One managerial case excerpt (Lord et al., 1984) was also used within each focus group.  For internal reliability, inter-judge reliability scoring and test-retest approaches were utilized. Two tenured academicians scored the dimensions revealed from the qualitative studies and inter-judge reliability score was 82.3 %. Following focus group interviews and experimental designs, as further methodological suggestions, a questionnaire is offered that will include the self-developed scale and demographic information section for further purposes.  Despite the rising importance of implicit leadership theories, studies on the scales of implicit leadership theories have been limited, especially in Turkey. Therefore, the perceptions of senior management and MBA students regarding their implicit leadership prototypes will provide important guidelines for recruiting purposes, especially in Turkey.  From global warming to ethnic conflicts leadership is widely regarded as both the cause and the solution to many of the contemporary problems of our world. Although the academic literature on leadership includes hundreds of studies, the dominance of leader focused studies and theoretical fragmentation of the field resulted in a lack of knowledge on leadership as a process involving followers’ perceptions and judgment. In addition to this, leadership is suggested to be like beauty difficult to describe. This means that everybody has a somewhat different view of what leadership is and what leaders are made of. Although at first, this observation about different views may seem insignificant, the social information processing view (Lord and Maher, 1990) which points to the importance of perceptions in the leadership process states that cognitive structures on leadership (implicit leadership theories) plays a dominant role in the emergence and influence of leaders on others. Therefore, it is necessary to understand the contents and structure of the beliefs that make up the leadership perceptions and to examine the sources of these beliefs and views in order to better grasp leadership as a process.  Implicit leadership theories are the behaviors that individuals associate with the concept of leader. The present study elaborates on the formation of implicit leadership theories that individuals have in their minds. Hereby, the purpose of this paper is to put in some efforts to develop a scale on implicit leadership theories via the use of various qualitative techniques.  Studies on leadership have revealed that individuals have “implicit leadership schemas” in their minds. In this sense, implicit leadership means the prototypical and ideal leadership attributes that individuals hold about a potential leader. (Lord, Foti & De Vader, 1984). Depending on the context of the work setting and organizational culture, a person may or may not be viewed as leader in the eyes of others.  The structural positions of individuals in organizations (centrality) and mental cognitive capacities of followers are some of the key factors that account for such a perceptual difference (Shondrick et al., 2010). Based on these characteristics, individuals decide on the desired characteristics of a leader in a given context. Through these schemas, followers see their managers as real leaders or not. These mentally held cognitions allow individuals to categorize the behaviors of their managers and internalize these behaviors as effective or not (Lord, De Vader & Alliger, 1986). Below, key contributions in implicit leadership theories are pointed out.


The Missing Link in Network Dynamics

Dr. Yiu Hing Wong, Dr. Jennifer W. M. Lai, Dr. Tze. L. Yip, and Dr. Ricky Y. K. Chan

Hong Kong Polytechnic University, Hunghom, Kowloon, Hong Kong.



 An important issue in the management of organizational networks is the balancing of relationships at both the interpersonal and interorganizational levels throughout the network while satisfying an external end-customer requirement. Addressing this issue requires an understanding of the key dynamics of a complex network system including the role of trust in relationships. Therefore, in this paper, we first develop a three-level relationship model with a trust transferability concept that evaluates the quality of multiple levels of relationships We then present trust dynamics at the individual level to enhance the overall trust in the system while meeting the required organizational trust with the external customer. The model delivers a statistically sound determination. Furthermore, the model generates managerial insights into related design and control issues of organizational networks. In numerous sectors of industry, including electronics, computers, and automobiles, internal and external relationships usually take the form of a complex dynamic network connecting customers, salesmen, and administrative staff. Throughout the organizational network, there exist different levels of trust associated with the relationships involving customers-salesmen (external, interpersonal), salesmen-back office (internal, intra-organizational), and customers-organization (external, interorganizational). These multi-level trusts affect the overall trust of a network in terms of customization, which in turn affects the minimal trust level witnessed in today’s competitive business environment. Amongst other things, high-level relationships usually produce an efficient level of customer satisfaction, and although the efficient level of both internal and external trust presents competitive advantages, the management of such relationships and trust poses a great challenge to many organizations. We find many examples in the recent American subprime mortgage crisis and the current global financial crisis. One of the most important steps that most institutions, particularly financial institutions, are taking in an attempt to prevent the crisis from worsening is to rebuild inter-party and trilateral trust levels in the global network.  Motivated by these real-world problems concerning trust and relationships, in this paper we develop a structural model approach to deal with the complex relationship network involving both external and internal relationships. By modeling the relationships of such a network, we expand the boundary of the inter-trust (i.e. trust between external individual/collective parties and organizations) and intra-trust (i.e. individual-level trust within an organization) relationship literature. The purpose of this paper, therefore, is to understand the conditions under which trust is developed and transmitted within multi-level relationships. More specifically, we focus on the compound trilateral relationship (Ross and Robertson 2007), which consist of different primary relationships (e.g., customer-supplier, supplier-competitor, and customer-colleague), frequently exist between two entities and we incorporate this concept into our model. This compound trilateral relationship involves the mechanism by which individual trust is translated into organizational trust: the quality of the relationship with customers. The paper continues with an overview of the vulnerability-based trust. Following that, we discuss the concepts of unilateral, bilateral, and trilateral dynamics, together with the role of trust in the trilateral dynamic network. We test our model and contained propositions on a survey sample of trilateral relationships from the garment manufacturing industry in China. The paper concludes with a discussion of some of the empirical and theoretical implications of the analysis.


Empirical Evidence on Innovation Activity in Tourism: The Hotel Sector Perspective

Dr. Smiljana Pivcevic and Professor Lidija Petric, University of Split, Split, Croatia



 Innovation is one of the five drivers of productivity growth alongside skills, investment, enterprise and competition” (DTI, 2007, p. iii.). Tourism is no exception to this. In fact, it is a general opinion that the competitiveness of tourism enterprises to a great extent depends upon their innovation activity. On the other hand and to our surprise, in tourism the research on innovation has so far received poor attention from scholars, especially in the field of empirical research. This article aims at filling that gap. It presents results from an empirical study of innovation activity carried out during the spring/summer 2010 in the hotel sector in Croatia. Due to the problem of empirical measurement of innovation and the specific characteristics of hotel sector, the Community Innovation Survey IV questionnaire design was used and adapted for this purpose. The results suggest that Croatian hotels can be portrayed as only moderately innovative and with different innovation activity according to innovation type and newness. Furthermore, the relationship between the innovation acitivty and hotel performance is investigated. Based upon the research results, managerial implications are given.  In a recent review of research on innovation in tourism Hjalager (2010) states that through its history tourism has been marked by remarkable innovation while at the same time the issue of tourism innovation was rarely discussed in the context of traditional academic research on innovation. Hjalager herself was a pioneer in researching these issues. In an article on tourism, environment and innovation she pointed out that such approach represented "an explorative and analytic approach which tourism research has never before touched on in any systematic way" (Hjalager, 1996, 201 according to Hall and Williams, 2008, 4). On the other hand, almost 15 years later, she reasonably concludes “…there is still only limited systematic and comparable empirical evidence of the level of innovative activities and their impacts and wider implications for destinations and national economies” (Hjalager, 2010, 1).  Several factors have led to this situation. Firstly, tourism is a young research area in which only in early 70-ies of last century a significant involvement of academic research begins (Sørensen, 2004). Today, it is still often called out as insufficiently strong and appreciated academic area (Weaver and Opperman, 2000). In addition, research on innovation in services is also relatively young. Furthermore, a significant obstacle is the problem of defining the "tourism industry" and its distinction from other sectors (Leiper, 1990; Smith, 1988, 1993). In fact, tourism is not an industry/sector which can be found in standard industrial classifications. That is one of the main reasons why most research on this subject is based on case studies or selected samples of companies, as opposed to large national surveys such as Community Innovation Survey (Hall, 2009). Finally, a significant problem of tourism innovation research and its empirical measurement is the problem of tourism product definition (Smith, 1994) and the inappropriateness of standard innovation indicators (such as the number of patents, investments in research and development).


Social Responsibility, Crisis and Sustainable Development

Dr. Cornel Nicolae Jucan, Lucian Blaga University of Sibiu, Romania



 The effects of globalization and of the economic and financial crisis have made it clear that it is necessary to find new approaches to the interactions between modes of doing business, the political system and society. Corporate social responsbility (CSR), as a strategic tool, represents a way of bringing together these three elements in order to identify solutions for overcoming the crisis and for achieving sustainable development. This paper aims to provide an assessment and potential demonstration of the fact that adopting and fostering the values of social responsibility in the case of companies, governments and civil society, could be an important step in the sustainable development of society.  In 1972, Edward Lorenz, one of the pioneers of chaos theory, insightfully asked: Does the flap of a butterfly's wings in Brazil set off a tornado in Texas?” In the context of globalization, the  “butterfly effect” is clearly manifested in the economy. A turbulence – natural or of another sort – in Indonesia or China, for instance, may affect the production capacity of many multinational companies, which can in turn have an impact on profits. This is then immediately reflected in the stock market value of these companies’ shares through the modification of the market indices of all the stock exchanges on which the companies are listed. Kotler and Caslione (2009, p 21-37) draw attention to the fact that that there has been a shift from a normal” economy – an economy with upward and downward fluctuations and with some degree of predictability – to the economy of the new normality” characterized by major shocks and incresingly unforeseeable turbulence” , manifested through agitation, random occurrence, lack of predictability. This shift has resulted in higher degrees of overall risk and uncertainty at both the micro and the macroeconomic levels. In Kotler and Caslione’s view, this new phase of the economy is charcaterized by the lack of economic cycles, by boom-ins and unpredictable recessions. In the context of this newly emerged economy, investors are more cautious than ever before, focusing on trully profitable business, on low-risk business, and on a market whose customers have become increasingly conservative. Because of this, the managers’ strategies must be rethought so as to allow efficient and straightforward procedural approaches to the situations emerging in this new economy.


“So, You’re a Millennial — Create us a Facebook Presence.”

Dr. Barbara A. Looney and Dr. Annette Ryerson, Black Hills State University, Spearfish, SD



 Graduating millennials entering the workforce will find their new employers presume them to be competent navigators with social media.   A recent survey conducted by the South Dakota Center for Enterprise Opportunity indicates that, while small business owners in the upper Midwest believe they currently underuse social media potential, most hope to build and grow a social media presence.  Employers look to new hires for social media strategies.  However, student adeptness with personal social connectivity does not guarantee a graduate’s ability to produce well-targeted and beneficial business media.  In fact, most higher education texts in business communication, as well as in advertising and marketing, have yet to develop instructional segments for adapting social media to business use.  Business students risk graduating underprepared to meet their employers’ aspirations and expectations.  As business faculty, the authors offer a prescriptive approach for educating students to meet future employment needs.  The buzz of social media potential navigates across contemporary business journals, newsletters, magazines, and textbooks.  For those in business, decisions about adopting social media options are a question of when and to what degree, not whether.   The tools of social media, such as MySpace, Facebook, Twitter, LinkedIn, blogs, and e-mail blasts, offer businesses enormous broadcast potential to a wide and targeted audience at minimal expense.  The decision by PepsiCo Beverages America, for example, to step away from their tradition of 23 years and withdraw advertising with the 2011 Super Bowl, provides a mega-company example of how businesses are re-evaluating their resource allocation and implementing social media with stunning effect.  In Pepsico’s case, $20 million in Super Bowl advertising funds were set aside for an online contest in which consumers submit ideas and compete for votes to win grant money.  Logging on to Twitter and Facebook., participants make known their preferences.  As described by Shiv Singh, head of digital marketing for PepsiCo, this social media directed giving was “not corporate philanthropy” but an investment “designed to drive brand health” (Preston, 2011).  Scaling involvement to suit their own economies, small businesses feel compelled to follow mainstream, corporate entities and develop social media for promotion and customer interaction.   Our cultural movement through social media has exploded job potential toward new areas of demand in marketing, sales, and advertising.  A recent entry in Advertising Age bears out this shift with an announcement remarking how “[m]arketers are looking to add workers with social-media savvy more than any other type of digital-marketing expert this year” (Patel, 2011).  As social media shifts, flows, and morphs so quickly, preparing students to join contemporary business culture becomes a challenge.  As educators, the authors ask themselves, how can we better prepare students for the dynamic, social media infused business environment that awaits them?


The Convergence of Corporate Social Responsibility and Corporate Sustainability: Starbucks Corporation’s Practises

Dr. Alev Katrinli, Dr. Gonca Gunay, and Dr. Mehmet Efe Biresselioglu

Izmir University of Economics, Izmir, Turkey



 The evolution of Corporate Social Responsibility (CSR) and the concept of Corporate Sustainability (CS) have converged resulting in a similar objective of achieving the balance between economic prosperity, social integrity and environmental responsibility. This paper aims to demonstrate this convergence based on energy related CSR projects pursued by Starbucks Corporation both in Turkey and globally. In addition, it aims to illustrate how CSR projects are able to simultaneously achieve economic, social and environment goals, without creating conflicts of interest between different domains.  Corporate Social Responsibility (CSR) is an important phenomenon that has recently received increasing attention both from academia and the business world. This paper discusses how this important concept of CSR is converging with Corporate Sustainability (CS) on the goal of satisfying the environmental, societal and economic demands, and aims to illustrate this convergence, focusing on CSR projects related to renewable energy and energy efficiency pursued by Starbucks Corporation both in Turkey and globally. Moreover, it also tries to show how those CSR projects related to energy serve economic, social and environmental domains simultaneously. Thus, it starts with a discussion on the CSR and CS concepts, followed by the section on the role of energy in CS. Then, within this framework, Starbucks’s CSR practices related to energy are explained and discussed from the viewpoint of global energy trends and renewable energy use in Turkey.  Corporate Social Responsibility (CSR) consists of actions that appear to further some social good beyond the interests of the firm and that which is required by law (McWilliams & Siegel, 2001). Although the concept has received growing attention from business scholars in recent years, Bowen provided the first modern definition of the concept as early as 1953, stating that businesses are responsible for their actions beyond profit and loss statements.   The most often cited definition is Carroll’s (1979) statement that “the social responsibility of business encompasses the economic, legal, ethical and discretionary expectations that society has of organizations at a given point in time.” Hence, there is consensus on its broad definition and every business now makes some degree of effort to engage in CSR projects. In addition to business, consumers and governmental organizations are increasingly focusing their attention on CSR (Konrad et al., 2006). However, there are different views regarding the exact meaning of CSR.  Early views saw CSR as merely eroding shareholders’ profit by requiring costly investments in socially responsible activities. According to Friedman (1970), managers are the agents of shareholders whose major concern should be increasing shareholder value by maximizing profits. Hence, any investment to serve social interests beyond economic rules is the breach of this principle-agent relationship. In this view, managers’ actions for the good of society should be at their own expense.  On the other hand, the view that supports CSR suggests that stakeholders are not limited to shareholders alone. In order for a company to succeed, the impact of external and internal factors on all stakeholders should be considered (Freeman, 1984). For that purpose, CSR can be used strategically to match different stakeholders' interests in order to maximize profits. Strategic use of CSR, to maximize profits, has been addressed by many scholars who propose that the companies engage in CSR since they expect to gain benefits by reputation enhancement, the ability to charge a premium price, creation of trust among customers or by recruiting high quality employees (Baron, 2001; Pivato et al., 2008). These studies endorse the “doing well by doing good” approach, in which, the main concern of scholars is the direct relationship between CSR performance and financial performance of a company (Orlitzky et al., 2003).


Helping Students Understand the Implications of Electronic Technologies on Managerial Communication Practices

Dr. Thomas Clark, Xavier University, Cincinnati, OH

Julie Stewart, University of Cincinnati, Cincinnati, OH



 This article describes a sequence of assignments that are designed to help students in a business communication class achieve four goals:  1) to explore the impact of “slow time” and “fast time” technologies on their academic and interpersonal goals, 2) to learn to use the Toulmin model to construct a logically complete argument, 3) to teach fellow students to learn how to use effectively tap into information resources, available on-line and through the University’s Learning Resources Center, and 4) to present their findings orally using electronic technologies commonly used in modern organizations.  Today’s students have never known a world without electronic technologies. Perhaps of most significance, students may take it for granted that faster communication is better communication, so text messaging, Twitter updates, and email, as well as PowerPoint slides, YouTube videos, and Facebook photos, are privileged over longer messages, such as papers and public speeches that are composed over days and weeks rather than in minutes.  They and most knowledge workers participate in a world of perpetual contact and cognitive switching from one medium to another in a highly fragmented communication environment.  Recent research indicates some disturbing facts: In total, interruptions take up to 2.1 hours of an average knowledge worker’s day and costs the US economy $558 billion a year. Even more surprising, 45% of interruptions are self-initiated. The research also indicates it takes the average worker eight minutes to regain the focus needed to resume the work that was interrupted (Jackson, 2008).  This is a significant contrast to the learning environment that many teachers experienced as college students, where books and a library took center stage and thought was absorbed through reading and communicated on paper. Richard Lanham contrasts the written word which he describes as an “enormous act of simplification with no pictures, no color, strict order of left to right; no type changes; no interaction; no revision” with multisensory media which he describes as characterized by “novelty, interest, curiosity (1993, 33-34).”  As the report of the Committee on the Two-Year College Teacher-Scholar in the Two-Year College indicates, given that college may be the last place to inspire students to think deeply, as teachers, we have “a pressing need to examine course design, texts, and pedagogy” including “digital literacies” (TETYC, 2005, 12).  In particular, we have a responsibility to both help students see the benefits and limitations of fast and slow communication media, as well as ways to create arguments that are complete and logical, as well as interesting, persuasive, and well adapted to audiences’ success criteria. At the same time, to enter the student’s world and to improve their abilities to communicate in the organizational settings in which they will serve an interns and employees, we need to develop pedagogical approaches that employ the vastly richer, interactive media environments by which students are often engaged in internships and co-ops outside the classroom (Barker & Stowers, 2005).

Analysis of Financial Statements using Data Envelopment Analysis (DEA): A Case of Select Indian Pharmaceutical Companies

Prof. Mohammed Akbar Ali Khan, Osmania University, Hyderabad, Andhra Pradesh, India

Dr. Sudershan Kuntluru, Indian Institute of Management Kozhikode, Kerala, India

Sunil Kumar Parupati, ING Vysya Bank, Kareemnagar, Andhra Pradesh, India



 Financial ratios are used as analytical tools for evaluating the performance of a firm. It is easy to compute but their interpretation is problematic especially when two or more ratios provide conflicting signals.  In this regard, multi objective non–parametric methods like Data Envelopment Analysis (DEA) are being widely used for explanation and prediction of a firm's behavior based on using variable method assumption. In this paper, we demonstrated that DEA can augment the traditional ratio analysis as a tool for evaluating a firm's overall performance. DEA can provide a consistent and reliable measure of evaluating operational efficiency of a firm. This research tries to utilize the results of DEA applied to a large sample of pharmaceutical companies in India in order to demonstrate how useful DEA is useful for financial statement analysis.  Financial statement analysis (FSA) is principally based on the computation of ratios. The computerization of modern industrial systems has facilitated the collection and elaboration of data and has led to a rapid proliferation of such measures. Despite the disadvantages of ratio analysis listed in the literature it is still the major tool used in the evaluation and interpretation of the firm's behavior. The reason for this widespread use of ratio analysis dating from 19th century is not only the multiplicity of information offered, but also the lack of simple alternative techniques.  The more recently developed use of ratios is the explanation and prediction of various business phenomena. Thus, elaborate statistical models have been constructed to forecast the business's future, particularly with respect to bankruptcy risk. Multivariate models have also been applied to determine industry standards, useful for inter firm comparisons. However, the results of these studies are hardly utilized by the applied work in the field.  Multivariate models facilitated the collection and elaboration of data have also been applied to determine industry and has led to a rapid proliferation of such standards, useful for inter firm comparisons [Diakoulaki, 1991].  In the Coasian tradition of the theory of the firm and related transaction cost analysis, surviving firms indicate that there may be some firm-specific production or managerial efficiencies that are unlikely to be replicated by other firms in the same industry and the market, or those firms would not have survived in the first place. Earlier studies have demonstrated the general usefulness of Data Envelopment Analysis (DEA) in various decision contexts.


Asset Prices Boom & Bust Cycles: Methodology and Key Features

Dr. Ana Rimac Smiljanic, University of Split, Croatia



 Boom and bust cycles in asset prices are often accompanied by credit cycles. These movements can sometimes lead to the periods of financial instability. Moreover, the current global financial crisis can be accounted among the crisis largely connected with the asset markets. There are a large number of empirical researches that explain the connection between the cycles in asset price and credit and financial stability. In this paper we present a new methodology for determining the cycles in asset prices. By this methodology we have defined the cycles in asset prices in the United States and analyzed the specifics of the proposed method of determining the cycle compared to previously used methods. Analysing the events in previous cycles in asset prices, we find the rationale for the proposed method of determining the cycle in order to preserve financial stability.  Until the end of the twentieth century, the economic literature did not pay a significant attention to the cycles in asset prices. What the episodes of financial instability, which occurred in the late twentieth century, had in common was a large fluctuation in asset prices. The bubbles in real estate and stock prices, that occurred in conditions of low inflation and high levels of external funding, deflated in the crisis, causing stagnation in the economy. Therefore, economic scientists started researches on the effects of large cycles in asset markets and the associated credit cycles on the economy. A large number of researchers began doing studies to answer the question whether the movements in asset prices can serve as an indicator of financial instability, i.e. what is the role of asset prices in the credit cycles. The analysis of the connection between asset prices, credit booms and financial stability is related to the literature on business cycle models that incorporate financial accelerator effect first explained by Bernanke and Gertler, 1995. Due to this effect, significant shocks to asset prices, relative to the prices of goods and services, change the net value of a potential debtor, which determines the possibility and cost of external financing. The level of asset prices influences the quality of the balance sheets of potential debtors. Having a more valuable stock and real estate in their portfolios, the creditors consider them to be higher quality debtors and they can obtain loans from financial intermediates more easily. That effect of asset prices movements on the balance sheets, and consequently on the aggregate demand, creates a broad credit channel of monetary transmission mechanism. With the increased level of internal financing or with a more valuable asset in the property, the debtor pays lower premium of external financing and thereby has a lower financing cost for spending or investment. Opposite movements in asset prices can cause balance sheet devastation and instability in the financial system, dependent on the initial condition of balance sheets of debtors and financial institutions. A number of empirical researches confirm this effect in developed countries (Bernanke and Gertler, 1989; Bernanke, Gertler and Gilchrist, 1999; Kiyotaki and Moore, 1997; Gertler and Lown, 2000; Mody and Taylor, 2003; Kakes and Ullersma, 2003, 2005; Drian and Shin, 2008. etc.). Further analysis of disconnection of asset prices movements and credit from real activity is presented in Borio and Lowe (2002, 2004). Mendoza and Torrones (2008) analyze the micro and macro aspects of credit cycles on a sample of 49 countries. They conclude that financial crises are almost always connected with a sharp increase of asset prices and credit before the crisis. The opposite trend occurs in their movement after the problem in financial system becomes visible.


The Applications of Fiscal Policy in Centrally Planned Economies

Dr. Hasan Bulent Kantarci, Kocaeli University, Kocaeli, Turkey



 This paper studies the applications of fiscal policy in centrally planned economies. The applications of fiscal policy on economic growth, income distribution, and stability in the centrally planned economies are presented. The economic transformation experiences to date do not show that either approach to reform, radicalism or gradualism, is unconditionally better than the other. Rather, by comparing the initial economic and social situations and special economic structures, each approach may be a “constrained optimum” that reflects what is politically acceptable and economically feasible in each case. However, vested interests can very easily thwart these policies and result in causing these policies to fail. The results of this paper provide a better understanding of fiscal policy applications in the centrally planned economies.  The goals of fiscal policy are the following: economic growth, income distribution, and stability.  In centrally planned economics, these goals are achieved by central planning. If fiscal policy is successful in directing total spending in the economy, then a high degree of stability, growth and income distribution are achieved. Government fiscal policy is a conscious attempt to direct the economic activities of the government toward the accomplishment of these goals. This is how central planning resolves these basic tasks.  If the economic activity of a country is to be planned, some fundamental steps are needed. First of all, a plan has to be executed that specifies the goals (or objectives) to be reached within a specified time frame. Then, there must be an organizational mechanism for managing the plan. In other words, there must be an incentive system to harmonize the behavior of agents with the achievement of goals. Lastly, there must be a method to evaluate outcomes and, where they differ from targets, to ensure appropriate feedback to adjust the direction of economic activity.  All kinds of forces can dictate the structure of centrally planned economies through state controls and ownership arrangements. Thus, the state dictates sectoral expansion and, within sectors, the arrangements for production. The central planning board decides what to produce, how to produce it, who is to get the product and how to provide for the future. Operating plans are given to each firm (or enterprise) within the economy. These plans provide the enterprise’s output targets and the allocation of inputs - labor, capital, and intermediate goods - to produce the output. Typically, socialist economic systems are accompanied by a strong central state, which along with state ownership of resources allows considerable state influence over what will be produced. The output mix favors public goods, especially defense goods and expenditures on outer space, as opposed to the production of private consumer goods.


I’ll Take Ten Employees, and a Large Order of Fries… To Go Please.  A Look at Hiring Pools and Their Dangers

Dr. T. J. Robertson and Dr. Laura Sullivan, Sam Houston State University



 In this dynamic economy many companies are changing the way they do business.  It is becoming increasingly important to have a flexible workforce which allows an employer to have necessary personnel ready to work on short notice.  While many companies are turning to a temporary workforce there are other options.  One option employers might consider is the development of a hiring pool.  These hiring pools are groups of prequalified workers an employer may call on to begin work on short notice.  There are many hazards associated with creation of a hiring pool such as job qualifications and their impacts on protected employees.  This paper takes a look at hiring pools, the process used to create them, and pitfalls an employer should be aware of.  Can an employer require applicants for a hiring pool to have a high school diploma (or equivalent), a driver’s license, and that they undergo academic testing if the company already employs workers in similar jobs who do not meet those requirements?  Hiring criteria like those proposed by a company are governed by the Equal Employment Opportunity Commission’s Uniform Guidelines on Employee Selection Procedures.  While these guidelines are not laws per se, they are entitled to great deference.  Griggs v. Duke Power Co., 401 U.S. 424, 91 S.Ct. 849 (1971).  Any employment test which is discriminatory, even if just in effect and not intent, is prohibited unless the employer can show that the requirements are directly and significantly related to the employment being offered.  Moody v. Albemarle Paper Co., 422 U.S. 405, 95 S.Ct. 2362, 2375 (1975); citing Griggs v. Duke Power Co., 401 U.S. at 432.  Even an absolute lack of discriminatory intent is not enough to protect an employer from a discrimination suit.  Griggs v. Duke Power Co., 91 S.Ct. at 854.  In Griggs the employer had gone to great efforts to help the undereducated employees with a plan offering company financing of two-thirds the cost of high school training.  Id.  The focus in these matters will be on the consequences of the employment practices, not the motivations of the employer. Id. There are two ways in which employment requirements can be deemed discriminatory.  The requirements are improper if they are shown to involve disparate treatment, or if they simply have an adverse or disparate impact. In order to prove disparate treatment, a plaintiff must prove not only a discriminatory effect, but an actual discriminatory intent.   International Brotherhood of Teamsters v. United States, 431 U.S. 324, 97 S.Ct. 1843, 1854 n.15 (1977).  The plaintiff would also have to establish that there was more than “the mere occurrence of isolated or accidental or sporadic discriminatory acts”.  Id. at 1855 n.16.  A complaining party would then have to show that such discrimination was the employer’s standard operating procedure rather than unusual practice.  Id.  Normally the plaintiff’s burden in such a case is to prove discriminatory intent by a preponderance of the evidence, and statistical evidence showing a gross disparity may be enough to establish a prima facie case of disparate treatment.  Id. at 1856.  The elements required to show disparate treatment typically include showing the employer’s continued solicitation of applicants with qualifications equal to the plaintiff’s.  McDonnell Douglas Corp. v. Green, 411 U.S. 792, 802 (1973).  Since a company would seek to reject all applicants not meeting the proposed requirements, and the intent of the requirements is to improve the quality of the employment pool rather than to discriminate against minority applicants, we must then look at adverse impact rather than disparate treatment.


How Much is Polish Companies’ Earnings Predictability Mean-Reverting

Dr. Jacek Welc, Wroclaw University of Economics, Poland



 Corporate financial results (measured by e.g. sales growth, profitability, earnings growth, leverage) are characterized by the long-term reversion toward the levels average for the whole economy. Empirical research also shows that the Beta coefficients (reflecting investment risk) of public companies are strongly mean-reverting. Because Beta coefficients are at least partially correlated with variability and predictability of corporate sales and earnings, the long-term mean-reversion of Beta coefficients suggests the possibility of the mean-reversion of the variability and predictability of firms’ sales and earnings. In our previous research we confirmed the strong tendency of mean-reversion of net sales predictability in the case of companies listed on the Warsaw Stock Exchange in the period of 2000-2009. In this paper we explore the reversion toward the mean of net earnings predictability. The research confirmed the strong tendency of net earnings predictability to revert toward the mean.  Forecasting corporate earnings constitutes an essential element of most models of corporate financial analysis and valuation [Moyer, McGuigan, Kretlow 1995; Penman 2007; DePamphilis 2008]. Analysts, when making forecasts, usually exploit a wide range of available information concerning the company under investigation. The second approach to forecasting earnings is based solely on corporate historical financial results and the predictions are made with the use of mechanical methods. However, the empirical research finds generally high inaccuracy of earnings predictions made by professional analysts as well as obtained from the extrapolative models [O’Brien 1988; Brown 1996; Dreman 1998; Malkiel 2007; Rothovius 2008]. It’s also not unequivocally clear whether detailed forecasting approaches are superior to the simpler ones or vice-versa.  Abundant research shows that the characteristic feature of corporate financial results (measured by e.g. sales growth or profitability) is a long-term reversion of those results toward the economy-wide average levels [Fama, French 1999; Keil, Smith, Smith 2004; Bajaj, Denis, Sarin 2005; Murstein 2003]. However, despite its importance and strong evidence, reversion toward the mean seems to be neglected or even unknown by most financial analysts, resulting in over-extrapolation of the historical earnings trends. One research found that the consequence of this neglect is the fact that the most optimistic and most pessimistic earnings forecasts are usually too optimistic and too pessimistic and the forecasts’ accuracy can be improved by shrinking them toward the mean [Keil, Smith, Smith 2004].  High unpredictability of earnings makes investors appreciate companies characterized by relatively high (as compared to other companies) earnings predictability. According to the valuation models based on discounted cash flows the relatively high / low earnings predictability should has positive / negative impact on market valuation of stocks. This is so because market belief in high / low predictability of profits of a given company (which often results from the observation of historical earnings behavior) implies relatively low / high perceived investment risk, decreasing / increasing the discount rate. However, because investors tend to over-extrapolate the historical earnings trends it seems probable that they also over-extrapolate the scope of historical earnings predictability. If they do this and if the earnings predictability is mean-reverting, the result is the overvaluation / undervaluation of the companies showing relatively high / low earnings predictability (due to the understatement / overstatement of the expected risk associated with earnings predictability on the basis of the observation of the historical earnings predictability).


Challenges of Relationship Management with Customers in Business Environment

Dr. Maja Djurica, Gordana Tomic, and Mile Samardzic

Belgrade Business School, Higher Education Institution For Applied Studies, Belgrade



 Customer Relationship Management is a business strategy used to develop and maintain mutually beneficial long-term relationship between buyers and suppliers. This strategy is based on identifying, attracting and retaining the most valuable (strategically important) customers in order to improve profitability and increasing customer services. The main instruments used for implementation of customer relationship management are loyalty programs. They are used in all sectors of the economy, especially in the sphere of retail trade through special credit cards and other loyalty cards.  The primary goal of customer relationship management is to build and maintain a database of loyal customers that are profitable for the organization. Both sides in relation “buyer - company “ can benefit from the retention. This is not just in the interest of companies, but also in the interest of customers who benefit from the long-term cooperation with the firm.  In case they have a choice, customers will remain loyal to the company if they get more value compared to expected value from competing companies. To the buyer this value represents compromise between "giving" and "taking." Customers are likely to remain in the relationship in which they get (quality, satisfaction, specific benefits) more than they give (financial and non-cash expenses). If companies are able to consistently deliver value to customers, then it is clear that the customers will benefit, and be stimulated to stay in the same relationship with the company.  Empirical research shows that human nature is such that most buyers would rather not have changed suppliers of products or services, especially in their relationship a lot invested. Cost changes are often high in terms of monetary costs of switching operations and the accompanying psychological and time costs. Many customers are continually looking for balance and simplifying decision-making to improve the quality of your life. If they can maintain the relationship with the company, they "liberate" the time for other priorities.  Over time, customers develop a sense of familiarity, as well as certain social relationships with the company. These relationships between companies and customers reduce the likelihood of customers to change their company, even if they find out that the competition offers better quality for lower cost. Close personal and business relationships between the company and the customer often become solid base for customer loyalty. Company that provides special treatment of the buyer will reduce the possibility of its doubt in the company.


Outsourcing and Downsizing As Modern Organizational Trends in Croatian Companies

Dr. Lovorka Galetic, Ana Aleksic, and Maja Klindzic, University of Zagreb, Croatia



 This paper gives a theoretical and empirical overview of modern organizational trends in design with a special accent given to outsourcing and downsizing. Outsourcing and downsizing have been seen as an instrument that can help organizations to deal with new business environment and as such they are becoming one of the basic issues and modern trends of organizational design. In order to investigate the state and perspectives of those modern organizational trends in Croatian companies, a research was undertaken. Results of the research show the dynamic of outsourcing activities in different types of ownership and different types if industries, as well as the relationship between application of modern organizational trends and different aspects of companies competitive position. Organizational structures as well as overall organizational design play a crucial role in defining and enhancing organizational performance. Results of a surveys conducted among managers of major corporations show that appropriate organizational design is valued as one of the four key criteria for business successes in the twenty-first century (Nikolenko and Kleiner, 1996). Still, there are no set of principles or a model that would be unique for all organizations and all business environments. In recent time, due to global business trends and development of information technology, new trends in organizational design have emerged. There was a shift from traditional forms and principles to modern, organic forms. These forms are characterized by more flexible and autonomous units, lack of hierarchy, with a strong focus on teamwork, lateral communication, organizational learning and orientation on core business and activities.  Large-scale downsizing, vertical disaggregation, outsourcing and elimination of management levels have been characteristic of large multidivisional organizations of the 20th century (Schilling and Steensma, 2001). They will continue to be a characteristic of future modern companies which are trying to react to uncertain environment and to find fit between them and their business environment. Outsourcing and downsizing have been seen as an instrument that can help organizations to deal with new business environment and as such they are becoming one of the basic issues and modern trends of organizational design. Research shows that by undertaking outsourcing and downsizing activities organizations could achieve higher levels of performance in the long run. So this paper will examine theoretically and empirically the importance of outsourcing and downsizing in modern organizations. Empirical part of the paper examines presence of outsourcing and downsizing among Croatian companies. The aim is to analyze if Croatian companies have recognized the importance of outsourcing and downsizing and how successful are they in implementing them.


The Job Redesigning Process: A Study of Medical Representatives using the Job Characteristics Model

Dr. Maria P. Michailidis and Nicolina Dracou, University of Nicosia, Nicosia, Cyprus



 An examination of the levels of job satisfaction of Medical Representatives was conducted using the Job Characteristics Model (JCM) and the Job Diagnostic Survey (Short Form), Hackman and Oldham, (1980).  The study indicated the immediate need for job redesign in order to increase the general satisfaction levels. It seems that the current job design is not proportionally aligned with the skills and expectations of the majority of the workforce, and does not fulfill employees’ needs for achievement, recognition and growth. The least satisfied demographic category of Medical Representatives in Cyprus, and the category that seeks immediate job redesign is the Graduate degree holders; also those belonging to the age group of under 28 years old, and those working in the industry for 2-5 years demonstrated low general satisfaction levels.  As far as the differences between genders in terms of satisfaction levels, no significant differences were shown.  Furthermore, it was shown that the profession needs to be redesigned in a manner that would match and moreover exceed the employee’s needs in all of the five job characteristics of: Skill Variety, Task Identity, Task Significance, Autonomy and Feedback, thus adding value to the profession and to the pharmaceutical industry.  Dhanjal (2006) refers to medical representatives as the bridges between the pharmaceutical industry and the medical profession (Dhanjal 2006).  According to recent international data there are approximately 1,500,000 professional medical representatives worldwide, from which the three hundred and forty three are working in Cyprus according to the Cyprus Association of Medical Representatives (   The everyday work activities of medical reps are very stressful, demanding and require high energy and self-motivation as it is a profession dealing with everyday sales which depend on whether the customers/doctors feel convinced about the quality of the products (  Medical reps have similar job related stress issues as salespeople dealing with non-pharmaceutical products (Anderson and Onyemah 2006).  In the past the particular profession in Cyprus was open for everybody, but in 2003 the medical representatives’ profession was established by law to be performed only by university graduates in the science field ( As a result, the “new-blood” of professionals has higher expectations as far as the job design and definitely higher job satisfaction standards than their “old-school” colleagues. The gap between employees’ expectations and the job design offerings is causing moderately high turnover rates.  A few attempts have been made by certain large pharmaceutical companies, in order to redesign the job description of a medical representative and retain the “talents” of the organization as well as attain “talents” of the market however there is still room for improvement.  


The Future of Regional and Multilateral Trade Agreements

Jenifer Varzaly, The University of Adelaide, SA, Australia



 In the modern era of international trade, international institutions such as the World Trade Organization (WTO) have encouraged liberalism at the multilateral level, at the same time as having regard to the national sovereignty of individual states. The ultimate objective of the WTO was established as free trade between nations, and this was viewed as best being achieved through multilateral agreements which would apply to all WTO members.  Multilateral agreements are trade agreements between all WTO member countries that are required to satisfy the most favored nation (MFN) principle, requiring market access benefits to be made on a non-discriminatory basis. Regional and bilateral agreements comprise trade agreements in which a number or group of countries form preferential trade agreements that give a discriminatory concessions to member countries. For the purpose of this paper, regional trade agreements (RTAs) will refer to all forms of interstate cooperation falling under GATT Article XXIV, including bilateral, preferential trade and free trade agreements. Hence, RTAs constitute an exception to the MFN principle.  RTAs have increased markedly in number over the last 15 years and have become a very prominent aspect of the multilateral trading system. For example, from 1995 to 2005, the WTO was notified of more than 130 new RTAs, which was more than the previous 46 years combined.  As of December 2008 around 421 RTAs had been notified to the WTO, and around 400 of these are scheduled to be implemented by 2011. The proliferation of RTAs over the past 15 years certainly raises the pertinent issue as to whether these are positive developments in international trade, or whether they serve to undermine the multilateral trading system.  This paper examines this issue from a macro perspective, looking broadly at whether RTAs support or hinder the multilateral trading framework, and comments on future directions for international trade law. International trade law has been predominantly comprised of multilateral agreements acceded to by the WTO member states. These all-encompassing agreements are then added to and supported by formal trade negotiation rounds. Islam (2006).  Trade negotiation rounds have been described as being characterized by conflicts of interest and policy disagreements which must be resolved by diplomatic efforts and political concessions. At the international level, the trade order can be viewed as an amalgamation of international relations, legal considerations, economics, political agendas, and diplomacy. Islam (2006).


Networking in Business Training Community

Dr. Zsolt Csapo, Dr. Laszlo Karpati, and Dr. Andras Nabradi

University of Debrecen, Debrecen, Hungary



 The European MBA Network started 14 year ago as a successful Tempus project with the participation of universities in Warsaw (Poland) and Prague (Czech Republic). University of Debrecen (Hungary) joined quite soon to the Network. Since that time the Network has developed into an efficient way of upgrading the management knowledge of young managers mainly in Central and Eastern Europe. However, the main message of this paper is that the MBA is not only a way of improving the business skills of the students, but also an effective way of intensifying the participating teaching staff’s contacts (personal and web based) within the Network. At the University of Debrecen also a new business education form started recently: the Team Academy, as a part of a Team Academy network headed by University of Jyvaskyla, Finland. This type of training is also emphasizes networking and learning by doing principles that leads the future businessmen to the situation that they do not acquire knowledge, but also create new knowledge as a result of the networking process.  AGRIMBA is an international Network of academics and professionals from universities and related institutions dealing with education and research in agribusiness. At the moment the Network has participant institutions from Europe (Poland, the Netherlands, Ukraine, Hungary, Portugal, United Kingdom, Czech Republic, Germany, Ireland, Croatia and Serbia) and one partner from the United States and is active mainly in Central and Eastern Europe. The main objective of the Network is to set standards for the programmes overseen by the Network based on the best practices and accredit them on the basis of these standards. The International MBA Network was established in 1995.  The idea of Team Academy, as a new way of learning entrepreneurship started in 1993, in Jyvaskyla Finland, based on the idea of the founder Mr. Johannes Partanen [3]. Learning is based on team companies, with a program taking three and half years, leading to Bachelor degree in Business Administration. Team companies are owned by the students, managed and controlled Limited Liability Companies, where students work and learn together through real-life customer projects. Team Academy and its method now is spreading in all over Europe, there are units outside Finland in The Netherlands, United Kingdom, Spain, France and now in Hungary, Debrecen.  E-learning has a well developed approach to the creation and sequencing of content-based, individual learner, self-paced learning objects. While definitions of e-learning vary, the main elements tend to include greater focus on context dimension of e-learning, a more activity based view of e-learning, and greater recognition of the role of multi-learner environment [4].  AGRIMBA won EU Leonardo funding in 2004. The proposal was to develop teaching and learning materials in the programme to a common approved standard. Flexible learning materials including subject workbooks, case studies, exercises and other teaching materials are placed on the Website to be accessible by both academic staff at the various institutions and participating students. In order to improve the quality of teaching a set of commonly approved, standardized teaching materials has been developed. Specifically the project was designed to develop:


Mean-Reversion of Sales Growth as Investment Strategy on the Warsaw Stock Exchange

Dr. Jacek Welc, Wroclaw University of Economics, Poland



 Abundant empirical research found that corporate sales growth and profitability are strongly mean-reverting. At the same time the stock market investors and analysts seem to neglect this mean-reversion. The result is over-extrapolation of historical earnings trends and the presence of significant over-optimism in the most optimistic earnings forecasts and significant over-pessimism in the most pessimistic earnings forecasts. This creates investment opportunities for those market participants who are aware of the mean-reversion phenomenon. In this paper we compared profitability of strategies based on corporate sales growth on the Polish stock market in 1998-2010 years. The strategy of investing (with annual portfolio rebalancing) in 20% stocks with the lowest net sales’ growth generated above-average returns. The average annual nominal return of the lowest sales growth stocks in 1998-2010 period was 12,6% p.a. compared with 7,3% p.a. in the case of the highest sales growth stocks and compared to the average annual return of the market as a whole of 6,8% p.a.  Abundant research shows that the characteristic feature of corporate financial results (measured by e.g. sales growth, profitability, etc.) is a long-term reversion of those results toward the economy-wide average levels [Fama, French 1999; Keil, Smith, Smith 2004; Bajaj, Denis, Sarin 2005; Murstein 2003]. One research found that from 1960 through 1999 only 8 of the largest 150 companies on the “Fortune 500” list managed to increase their earnings by an annual average of at least 15% for two decades [Loomis 2001]. The other research, based on five decades of data, showed that only 10% of large U.S. companies had increased their earnings by 20% for at least five consecutive years, only 3% had grown by 20% for at least 10 years straight, and not a single one had done it for 15 years in a row [Zweig 2001]. This means that maintaining above-average pace of corporate earnings growth is extremely difficult in the long-run. This mean-reversion of earnings is at least partially caused by mean-reversion of sales growth. This means that the companies that in a given period show above-average (below-average) sales growth in the following periods express the tendency to show slower (faster) pace of this growth. Palepu, Healy and Bernard confirm this on the basis of the American data, stating that “sales growth rates tend to be mean-reverting: firms with above-average or below-average rates of sales growth tend to revert over time to a “normal” level (historically in the range of 7 to 9 percent for U.S. firms) within three to ten years” [Palepu, Healy, Bernard 2004]. In our previous studies we also confirmed the strong tendency of Polish public companies’ sales growth and net profitability to revert toward the mean [Welc 2010; Welc 2011].


Structural-Qualitative Characteristics of Environmental Elements on Romania’s Territory

Dr. Giani Gradinaru, Assoc. Prof., Academy of Economic Studies, Bucharest, Romania

Raducu Marian, Terra's Guardians NGO (Asociatia Gardienii Terrei), Bucharest, Romania



 Providing a safe and stable environment for present and future generations necessitates major governmental interventions that will have to be substantiated on comprehensive and high quality information regarding the structural-qualitative characteristics of environmental elements. The paper aims to contribute in this direction both theoretically and empirically. Thus, in the first part a critical analysis of several conceptual constructs on the organization and utilization of environmental information is conducted, while in the second part there are depicted the evolution patterns of selected environmental indicators on Romania’s territory for a ten years timeframe within the conceptual framework of the pressure-state-response model. The structural-qualitative characteristics of environmental elements recorded variations with different amplitudes and directions suggesting that there could be some environmental tradeoffs of the transition related economic restraining and of the European process in which Romania is engaged.  The rapid economic growth featuring the last period, world level development of the smoke pipe’s ecponomy affected in an unprecedented way almost everything that surround us. The attention was focused by a large number of individuals, able to analyze the issue (scientists, researchers, professors, engineers, economists, students) has concetrate their forces in order to find viable solutions that will staisfy the present needs without compormising the chance of future generations to satisfy thei needs. In a consequent way, in last years, there were specialized bodies which focused their activities on estimating the risk that influence the ecosystems, especially their losses.  Society is confronted with a number of major challenges at the threshold of the new millennium. Providing a safe and stable environment for present and future generations is one of these challenges and facing it will have essential implications in many aspects of social, economic and political life.  Increase of anthropogenic pressure, cumulated ecological effects and raised awareness regarding the importance of environment within the extremely dynamic social and economic development of the last decades have brought in discussion the intervention possibilities for harmonizing the human-environment relationship, in general, and of economy-environment relationship in particular. Interventions with environmental outcomes are of various types and scopes but according to Bran (2002) governmental involvement remains crucial in safeguarding environment and most importantly in incentivizing economy to react properly to environmental restrictions.   Governmental interventions necessitate comprehensive and high quality information regarding the structural-qualitative characteristics of environmental elements. The paper aims to contribute in this direction both theoretically and empirically. Thus, in the first part a critical analysis of several conceptual constructs on the organization and utilization of environmental information is conducted, while in the second part there are depicted the evolution patterns of selected environmental indicators on Romania’s territory for a ten years timeframe within the conceptual framework of the pressure-state-response model.


Does the Origin of the Country Matter: The Effects of Country of Image Concept on Turkish Job Seekers

Cihangir Gumustas, Istanbul Technical University, Institute of Social Sciences, Istanbul, Turkey



 Globalized world and business exist in everywhere. Somehow, we tend to forget that before companies can manage a foreign workforce, they need to recruit it. The shortage of qualified workers leads organizations to face difficulties in attracting qualified applicants (Turban, 2001). Thus, organizations have started allocate relatively more resources to attracting and retaining qualified individuals. Leonard (1999) stated that many firms are increasing their budgets for recruitment and %31 of the HR budget is allocated to the recruitment and retention processes. Moreover, recruitment actions of talented people in foreign countries can be much more complicated task and different from what companies experience in their domestic markets. Multinational companies are operating overseas and they need to attract talented and skilled employees not only in their domestic country but also in overseas business markets. Organizations that achieve attracting highly qualified applicants will have a larger applicant pool that leads to a greater utility of the organization’s recruitment system and a potential competitive advantage (Turban & Greening, 1997). This study tries to explore the underlying reasons of why foreign companies are (not) attractive to local job seekers.  Because of the current labor shortage in some labor markets, the attractiveness of an organization has become more important (Lievens et al., 2001). Certainly, every organization prioritizes this issue and organizations lead to compete against each other to attract the most talented employees. Moreover, globalization and conducting business in overseas market have become an embedded fact of today’s business reality. As a normal consequence of this development, companies that operate in overseas markets started to implement fundamental HR activities at the country in which they operate. Recruitment of the local employees is one of the most important HR activities for these organizations. However, recruiting qualified employees is a critical issue, especially in a foreign country due to the interactions between foreignness and local country norms. Demographic, such as gender and race, is found to be related to attractiveness of a foreign organization (Newburry et al., 2006). Moreover, personal factors, such as money orientation or risk taking, are found to be important determinants for applicants’ choice of foreign companies. These factors are the mostly investigated factors and they are statistically significant; however, they explain a limited part of the variance of job applicants’ perceptions toward foreign companies (Froese et al., 2010). Recent studies have started to investigate the Country of Image concept in the context of foreign companies’ recruitment efforts in overseas labor markets. Originated from marketing literature, Country of Image concept is quite applicable to recruitment process in global setting. Clarifying that how foreignness and its consequences affect organizational attractiveness of a firm as a potential employer is an important issue. It is noted that perceptions of the future employees, as a stakeholder, might influence the organizational performance (Newburry et al., 2006).Hence, we will try to examine the Country of Image concept in Turkey. In sum, this study tries to examine the job applicants’ perceptions about German, Israeli and American companies, and to clarify perceived attractiveness of these companies in the minds of Turkish job seekers.


Volatility Spillover Effects between Credit Default Swap and Foreign Exchange Markets in Korea

Dr. Hong-bae Kim, Dongseo University, Pusan, South Korea



 This paper empirically investigated the shock and volatility spillover effects of counterparty risk on the deviations from covered interest parity (CIP) in the foreign exchange (FX) forward market of Korea. During the recent financial turmoil, there was significant shock and volatility transmission from the counterparty risk of the European credit default swap (CDS) market to the CIP deviations of FX market under investigation. In addition, the shock of counterparty risk for US corporations was transmitted more to the Korean FX market than that of Korean sovereign risk. FX forward deviations tended to depend more on investment-grade European and US corporations than on Korean sovereign ones. This finding is consistent with the view that the demand for dollar liquidity in the Korean FX market during the turmoil stemmed from mainly dollar London interbank offered rate (Libor) panel banks, such as European and US banks, than the financial institutions of emerging countries like Korea.  The origins of the US dollar shortage largely stemmed from a sharp growth in US dollar assets of European banks that outpaced the growth in their dollar deposits (McGuire and Von Peter, 2008, 2009). European banks were increasingly funded at very short maturities, which raised rollover risk (McAndews, Sarkar and Wang, 2008. On August 9, 2007, BNP Paribas announced the freeze of redemptions for three of its investment funds, citing an inability to value them. European financial institutions in particular demanded dollar funding from global financial institutions. As many of these institutions were in great distress of funding dollars in the unsecured money market, they took advantage of the collateralized FX swap market as a channel for funding dollars. However, the dollar shortage of European financial institutions led to a global dollar shortage, as Lehman Brothers failed on September 15, 2008, and the Federal Reserve Board (FRB) announced a bailout package for American Insurance Group (AIG). The US financial institutions also suffered from funding dollars in the money market and turned to the FX swap market. The increasing counterparty risk also heavily impacted US financial institutions due to the failure of Bear Sterns and Lehman Brothers. Thus, higher counterparty risk was also perceived for US banks after the Lehman failure. (1)  The Korean FX markets were not immune to the crisis. The turbulence in the FX spot markets spilled over into FX derivative markets. As a result, FX spot and swap prices began to reflect the counterparty risk, indicating that the concern about the counterparty risk for non-US financial institutions was an important driver behind the deviations from covered interest parity (CIP) in FX markets.


Core-Self Evaluation: Predictor of Employee Engagement

Rania Shorbaji, Dr. Leila Messarra, and Dr. Silva Karkoulian

Lebanese American University, Lebanon



 This research aims to investigate whether a relationship exists between Core-self Evaluation and Employee Engagement. Employee engagement is a new notion in the work place environment that has only recently started to attract the attention of many scholars and researchers. Due to its significance in improving work performance and profitability, much interest has been given to understanding it as well as identifying its possible predictors. Core-self Evaluation is a higher order trait constituted from four personality traits: Locus of Control, Self-Esteem, Generalized Self-Efficacy, and Neuroticism. Earlier research has identified a relationship between each of the personality traits that constitute Core-self Evaluation and Employee Engagement. However, this study aims to verify the relationship between Core-self Evaluation as a whole and Employee Engagement. A total of 102 individuals employed in medium-sized organizations in the private sector in Lebanon participated in the study. Results showed a positive correlation between Core-self Evaluation and Employee Engagement, therefore supporting the idea of Core-self Evaluation as being a predictor of Employee Engagement.  Unfolding the secrets of success and profitability in organizations has been the long sought pursuit of many managers and business scholars. Recently, the concept of Employee Engagement (EE) has emerged as an important predictor of success and profitability in organizations (Ott, 2007). It is “an individual’s involvement with, satisfaction with, and enthusiasm for, the work he/she does” (Robbins and Judge, 2009, p.115).  Yet, how individuals appraise themselves as well as the world around them may, to a great extent, affect their perception and behavior. The concept of Core-self Evaluation (CSE) which is a stable personality trait refers to a subconscious belief that affects the way a person regards him/herself and the environment. It is mainly the deep inner appraisals individuals hold about themselves as well as the world around them (Judge  & Larsen, 2001). In general, people are not usually aware of how their Core-self Evaluations may influence them, yet research suggests that there indeed exists a relationship between CSE and people’s perceptions and behaviors (Judge et al., 1997). This concept is increasing in popularity due to the growing literature linking it to job satisfaction (Judge & Buno, 2001; Srivastava, et. al.,2002), job performance (Judge & Buno, 2001; Erez & Judge, 2001), as well as increased income levels at mid-life (Judge  & Hurst, 2007). The aim of this study is to investigate whether or not Core-self Evaluation is a powerful predictor of Employee Engagement.  Khan (1990) was the first to mention Employee Engagement in literature. He referred to it as the “behaviors by which people bring in or leave out their personal selves during work role performances” (Khan 1990, p. 694). He described engagement as being a construct having several dimensions. For example, employees could be engaged on several levels separately or collectively i.e. cognitively, emotionally, or physically.


Cross-cultural Leadership Challenges for Hospitality Immigrant Entrepreneurs in Texas

Dr. Yun-Hsi Chang and Dr. Yi-Fan Tsai, MingDao University, Taiwan, R.O.C.



 The purpose of this mix method study was to discover the influence of cross-cultural learning experiences through leadership practices for the Chinese immigrant entrepreneurs in south Texas hospitality industry. Eight Chinese immigrant entrepreneurs and 255 of their employees were participated in this study. Based on the findings, these Chinese entrepreneurs have certainly faced significant challenges in both cultural and leadership issues, such as facing cultural differences and dealing with human resource problems. In many cases, cultural issues and leadership challenges blended together as a greater challenge when they operated their hotels or motels. However, the participants value their acculturation experiences highly and it shows in the positive consequences, such as personal maturity and the successful careers of these immigrant entrepreneurs.  Globalization makes the world become smaller and more accessible, people have a greater opportunity to pick and choose where they want to live and where they want to work. For various reasons, immigrants move away from their home countries and arrive in the land of freedom –the United States. The entrepreneurial spirit of immigrants is a well-documented phenomenon. Attracted by reports of great economic, religious and political freedom, immigrants came from all around the world to the United States in early 19th century, seeking opportunities and a new life. Since then immigrant issues have been widely discussed. There is no doubt that the contribution from immigrant entrepreneurs in the U.S. is economically significantly. As a demographic group, immigrants have been more likely to be self-employed than native-born residents. According to Kauffman Index of Entrepreneurial Activity National Report, the immigrant entrepreneurship rate was 35% in 2005 compared with a 28% for native-born (Fairlie, 2006). Among the most populous states, Texas (480 per 100,000 adults) has a relatively high rate of entrepreneurial activity.  According to the U.S. Census Bureau (2007), the growth rate for the Asian population from the year 2000 to 2004 was 16.2%, making it the second faster growth minority in the U.S. The highest growth rate belonged to the Hispanic population which was 17%. 



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