The Business Review, Cambridge
Vol. 18 * Number 2 * December 2011
The Library of Congress, Washington, DC * ISSN 1553 - 5827
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The Classical Roots of Contemporary Business Policy and Strategy
Dr. Gordon W. Arbogast, Professor, Jacksonville University, Jacksonville, Florida
The 19th century, Prussian military strategist, Karl von Clausewitz, stated in his classic On War that “Rather than comparing war to art we could more accurately compare it to commerce [business]”. The purpose of this paper is to trace the roots of contemporary business strategy in classical military history. The earliest strategist to make a significant contribution was the Chinese Sun Tzu (circa 550 B.C.) He advocated several strategic concepts including: (1) “know yourself, know your enemies and you will win 100 battles”; (2) “the goal of strategy is to win”; and (3) “the best strategy is to win without fighting”. The first concept is covered in business strategy courses as SWOT (Strengths, Weaknesses, Opportunities and Threats). Shortly after Sun Tzu, the Greeks developed strategies to defeat the Persians. The Greek name for a General Officer was “Strategos”. The term strategy is directly derived from this title. Several Greek and Roman examples of strategic military concepts are discussed in the paper, along with the analogous corporate strategic tenets that are in use today. These include the master strategists: Alexander the Great, Hannibal and Julius Caesar. Lastly, the paper posits a variety of corporate analogs to classical military, strategic concepts. This is highlighted with a discussion of the five-step strategic management concept that is taught in most business strategy and policy classes. The linkages between early military strategic thought and their integration into modern corporate strategies are also addressed. The paper concludes with the view that there well may be a relationship between classical military and modern corporate strategy. The famed 19th century Prussian military strategist, Karl von Clausewitz, stated in his classic On War (Bassford, 1994), that “Rather than comparing war to art we could more accurately compare it to commerce [business]”. While warfare has been around for millenniums, incorporated businesses on the modern scale are relatively new human institutions. With a few exceptions, there have not been large commercial activities functioning until a couple of centuries ago. One exception would be Great Britain's East India Company. Where does modern corporate strategy derive its beginnings? War has long involved organizing, supplying, leading, and motivating large numbers of people. It has been estimated that over the past 4000 years, there have only been approximately 400 years that the planet has been free from warfare. (Polelle, 2008). Clausewitz offered profound insight into the parallels between warfare and commerce at a time when corporate activity was still fairly primitive. Adam Smith had just written his Wealth of Nations (Smith, 1776), a generation prior when the Industrial Revolution had barely begun. Modern businesses are faced with challenges that rival the complexity of organizing and fighting the large armies that were fielded in the classical age of Greece and Rome. War as a human social endeavor goes back several thousand years, but achieved a size and sophistication beginning with the Chinese at the time of the warring states (starting around the 5th century B.C.), and proceeding through the classical age of Greece and Rome. By contrast complex business institutions were much slower to develop. In the classical age (B.C.) most business involved simple trade and barter of agricultural goods. Virtually all products of any sophistication (such as weapons), were made by craftsmen. Economies of scale were quite small and the industrial revolution and the harnessing of power were many centuries in the future. However, in the last two centuries, commercial activity has matured and with it, the need to identify management techniques to support large corporate organizations. One place to look for the development of strategic thought is in ancient warfare. Military commanders and theoreticians developed warfare strategy and tactics over centuries of war. Numerous campaigns and battles have been conducted that provided a crucible of real-world experience to test the various established military strategy and tactics. The main thesis of this paper is that many of these strategies and tactics have had a direct impact on modern-day corporate strategy and tactics. The main purpose of the paper is to trace the evolution of modern-day business strategy and tactics back to its classical military roots. The earliest strategist that made a significant contribution was the Chinese Sun Tzu. Sun Tzu (circa 512 B.C.) was rediscovered in the 20th century in the West and is considered one of the most important strategists of all time.Someof his best known strategic thoughts are contained in his classic book The Art of War. Sun Tzu’s book contains at least three dictums with contemporary application. The first “Know yourself, know your enemies and you will win 100 battles” is analogous to today’s SWOT analysis. In a SWOT analysis organizational leaders are encouraged via a number of mechanisms to assess the Strengths, Weaknesses; Opportunities; and Threats facing their enterprises. The SWOT procedure is a hallmark of modern business education and is taught in a variety of classes at the graduate and undergraduate level. A second dictum is that “the object of war is to win”. The last of Sun Tzu’s dictums is closely related to this and is to “win without fighting”. This last principle is a corollary to the main idea that warfare takes many forms: trade, economics, psychological, political, international relations and the battlefield (the least desirable). Several other key strategic ideas of Sun Tzu include: (a) the use of deception; (b) paying your spies well; (c) attacking weakness; and (d) lastly, material things have value while time is free. (Sun Tzu, 1971).
Municipal Pension Accounting and Financial Reporting: An Empirical Analysis
Dr. Roberta J. Cable, Professor, Pace University, NY
Patricia Healy, Pace University, NY
Ashton Vines, Pace University, NY
The concern that state pensions are underfunded and may create substantial future economic burdens has been well documented. Municipalities across the U.S. are facing similar financial pressures as states. Our research focused on the discount rates and amortization periods used to report pension obligations of municipalities located in states we considered stable because they were solid performers in managing their finances, and in states we considered unstable because there were serious concerns in managing their finances. The relationship of these variables to recording municipal pension obligations has not been addressed. Our study determined if municipalities located in unstable states made less conservative choices. The sample in our empirical analysis consisted of two hundred randomly selected municipalities located in stable and unstable states with defined benefit pension systems. We found that the municipalities located in the most financially unstable states were using the least conservative discount rates to value their pension liabilities. Many of these municipalities were underreporting potentially huge long-term debt, and may not be able to be bailed out with state aid. For these municipalities, it may be a challenge to reflect the reality they may face because they promised overly generous benefits and failed to put adequate money aside. The only viable option may be declaring bankruptcy.The financial condition of state and local governments has been likened to a train wreck ready to happen. The Pew Center on States shows that states and local governments face a collective liability of more than $3.35 trillion for pensions and other post retirement benefits. However, they have put away only $2.35 trillion in assets to pay for these promises. This leaves a shortfall of approximately $1 trillion that state and local governments will have to pay in the next thirty years. (15) Pew concludes that there are competing priorities that tempt lawmakers to neglect this problem, and as a result, the bill coming due may be even larger. (45) A recent study by Joshua Rauch of Northwestern University predicts that many large state pension funds will run out of money within 10 to 20 years. (Rauch 1) Even if they managed to achieve an 8% annual return on assets (the usual state and municipal chosen discount rate), Illinois would run out in 2018, followed by Connecticut, New Jersey and Indiana in 2019. (Rauch 3) A study, released in April 2010 by Stanford's Institute for Economic Policy Research, finds a more than $500 billion unfunded liability for California's three biggest pension funds—Calpers, Calstrs and the University of California Retirement System. (Bornstein 2) This shortfall is nearly eight times greater than originally reported, and to put it in perspective, seven times more than the outstanding voter-approved general obligations bonds. (Wall Street Journal, April 13, 2010) Fortune Magazine reports that pension plans for public school teachers, which comprise about half of states' total pension liabilities, were underfunded by $933 billion in fiscal year 2008, almost three times the amount that the plans had reported. (Behunek 1) Moody and Warcholik state that nationally, using a more realistic lower discount rate, pension underfunding ranges from $1.31 trillion to a whopping $3.23 trillion. In Connecticut, the pension liability of $42.8 billion increases to somewhere in the range of $50.4 billion to $80.7 billion. (7) The Pew Center on States shows that states pension plans had $2.8 trillion in long-term liabilities. Unfortunately, total liabilities have increased $323 billion since 2006, outpacing asset growth by more than $87 billion and resulting in an actual shortfall in funding of $452 billion. (16) Municipalities across the United States are facing similar financial problems as states. Riordan and Rubalcava state, “Los Angeles is facing a terminal fiscal crisis. Between now and 2014, the city will likely declare bankruptcy.” This is, in part due, to the funding obligations of postretirement benefits. They continue, “According to the municipality’s own forecasts, the next four years’ annual pension and postretirement health care costs will increase by about $2.5 billion if no action is taken by the municipal government.” They suggest that part of this situation is due to using a projected 8% annualized return when the municipality’s two main pension funds assets grew at just 3.5% and 2.8%, annually, over the past decade. (19) In 2008, the North Bay city of Vallejo, CA officially filed for Chapter 9 bankruptcy protection. Jones states, “The city of 117,000 was hard hit by the weak housing market and rising public employee salaries and benefits.”(1) Schultz and Sandler state that Milwaukee County faces a pension contribution of some $80 million next year, a 60% increase over last year’s payment. Increased contributions have significantly added to overall budget pressures. (1) Chuck Reed, mayor of San Jose, California states, “City payments for retirement benefits have tripled over the last ten years even though our workforce has declined dramatically, and we have billions of dollars in unfunded liabilities that taxpayers must pay.” (The Economist Online, 1) Kerkstra states that Philadelphia, which has made significant spending cuts to close its $1 billion five year deficit, has done this exclusively through short term fixes. Unfortunately, the mayor has not paid attention to long-term budget liabilities such as pensions and health care. These benefits are projected to cost the city $6.36 billion over the next five years and consume more than 25% of spending over that period. (1) These liabilities will significantly impact Philadelphia’s financial health. Stalberg, Executive Director of the Committee of Severity, states, “Mayors over the years have privately complained about pension and health care costs, but in the end, most don’t want to take on the unions and risk a strike. (Kerkstra 2)
Australian and U.S. Perspectives of Nonprofit Executive Succession Planning
Dr. Joseph C. Santora, ENPC, School of International Management, Paris, France
Dr. James C. Sarros and Dr. Brian K. Cooper, Monash University, Caulfield, Victoria, Australia
The aim of this exploratory study was to gather initial data to determine the extent to which Australian and U.S. nonprofit organizations plan for executive succession. We collected data on succession planning from Australian and U.S. nonprofits, and present comparative analyses on nine succession planning indicators. Our findings indicate that relatively few of the organizations in our study had a formal succession plan and the role of executive directors in succession planning governance issues is indeed limited. Recommendations for future studies are included. When it comes to the issue of executive succession in nonprofit organizations three themes tend to dominate much of the literature: first, most nonprofits have historically failed to develop a succession plan (Watson & Abzug, 2005). Within the last two decades researchers have reported similar findings. For example, Sinclair (1996) reported that only 69% of the 750 nonprofits surveyed did not plan for succession. Santora and Sarros (2001) have found that 66% of the organizations they surveyed did not have a succession plan. Bell, Moyers, and Wolfred (2006) reported that approximately 71% of the organizations they surveyed did not have a succession plan. Santora, Caro, and Sarros (2007) found 90% of the respondents to their survey did not have a succession plan. Froelich, McKee, and Rathge (2009) found that slightly more than 80% of their respondents did not have a succession plan. Cornelius, Moyers, and Bell (2011) found that 87% of the organizations they surveyed did not have a succession plan. All told, most nonprofit organizations do not plan for succession. The outcome: without a succession plan nonprofits may very well face some serious challenges to their survival (Bear & Fitzgibbon, 2004; Metelsky, 2004). Second, nonprofits are ill-prepared for succession (Coltoff, 2010; Pynes, 2009) and for the associated leadership transitions. For example, Allison (2002) found a triple threat to succession transitions by nonprofit boards of directors in 28 nonprofit organizations: 1) poor succession selections, 2) lack of readiness to deal with the succession experience, and 3) failure to capitalize on the executive transition. Writing several years later, Wolfred (2008) echoed the general view that nonprofits are not ready to deal with executive succession issues. Third, there is a major dramatic leadership crisis in nonprofit organizations (Eisenberg, 2000; Toupin & Plewes, 2007; Tierney (2006). Boland, Jensen, and Meyers (2005) found that “36% (of the Alberta, Canada nonprofit executive respondents in their survey) will depart within the next two years and 82% within five years anticipate leaving their current positions. This suggests that for the next two years every single day four executive directors in Alberta will leave their organizations (5).” Bell, Moyers, and Wolfred (2006) reported that 75% of U.S. nonprofit directors will depart from their organizations within the next five years for voluntary and other reasons (See Gibelman & Gelman, 2002 for examples of departures in nonprofits). And Cornelius, Moyers, and Bell (2011), updating Bell et al (2006), found a projected departure rate of 67% among U.S. nonprofit executive directors, slightly down (8%) from the Bell et al (2006) study, but nonetheless a significant number of executive departures for the nonprofit sector and a serious concern for them. If Tierney (2006) is correct in his projection that nonprofits will need more than 600,000+ executive replacements, then indeed these statistics are alarming. A very compelling question arises: who will replace these executives? Thus the three closely intertwined phenomena (i.e., the lack of a succession plan, ill-prepared nonprofits, and the dramatic projected nonprofit leadership crisis) create an underprepared state of readiness for one of the most important events in the life of a nonprofit organization—executive succession. It would seem that a perfect storm is brewing for these organizations. The aim of this exploratory study was to gather initial data to determine the extent to which Australian and U.S. nonprofit organizations plan for executive succession. Our research adds to the literature, extends some of our earlier work (e.g, Santora & Sarros, 2001; Santora, Caro, & Sarros, 2007), and offers a cross-cultural dimension to executive succession planning in nonprofits. As such our paper represents an opportunity for us to break through the U.S. based-research by offering a cross cultural (Australian and U.S.) perspectives of nonprofit executive succession issues. At the moment, we are unaware of any similar cross-cultural research. In particular, we present comparative analyses on nine succession planning indicators ranging from having a succession plan (Indicator 1) to CEO involvement with the board in selection (Indicator 9).
The Acceptability of ProctorU to Insure Online Testing Integrity
Dr. Marian C. Schultz, The University of West Florida, FL
Dr. James T. Schultz, Embry-Riddle Aeronautical University, FL
Dr. Eugene Round, Embry-Riddle Aeronautical University, FL
Joshua J. Schultz, Spring Hill College
Testing integrity consists in part of the measures taken by college administrations to ensure that, “all students are given the same opportunity to demonstrate their abilities and to prevent any student from gaining an unfair advantage over another because of testing irregularities or improper conduct” (Exam Security, 2011). Testing integrity includes the establishment of rules, policies and procedures that all testing participants must adhere to during the administration of the test. Prior to a test being administered, participants need to agree to the code of permissible conduct, and what actions would constitute improper conduct. Testing integrity is achieved when the rules and procedures for test taking are clearly communicated to the test participants, and effectively enforced and utilized during the testing practice. Testing integrity is a critical aspect of a test since the strength of a test score is directly related to the test’s integrity. “Unless test scores reflect the actual skills and competencies of those tested, the tests cannot properly perform their vital educational functions” (Caveon Education, 2011). Tests are instruments developed to evaluate the abilities and competencies of a group of people on a particular body of knowledge. The test scores provide a measure by which test participants can be evaluated against the test and one another. Consistency among participants in the testing process is necessary in order for test scores to be viewed as valid measures of knowledge of the subject matter. Testing integrity also ensures consistency among test participants. Without strong testing integrity, the reliability of the testing method and experience cannot be verified, and the test scores could be flawed due to a lack of data integrity and uncertainty. Another purpose of testing integrity is to ensure that all tests are actually completed by the student to whom the work is credited. This is especially important in online classes. As the number of students taking online courses continues to increase, validating the testing integrity of students is a substantial concern for universities and colleges to manage and control. Ten years ago not many colleges offered a single online class let alone entire online degree programs. A study conducted by Allen and Seaman (2009) showed that in the fall term of 2008 over 4.6 million students were enrolled in at least one online course. In the previous year, the total student population increased 1.2% while online enrollment increased 17%. The online students totaled 25% of all college enrollments that year (Allen & Seaman). The number of students taking online courses is growing and it is imperative to the quality of education that all students are being monitored in some way to prevent cheating. In terms of test integrity, cheating concerns can be broadly placed into three categories: individual authentication, test compromise and cheating during the testing period. Individual authentication violations occur when an individual poses as someone else for an examination. Test compromise can occur in various ways. Some student’s test results could be released before other students have taken the exam, or the answer/scoring sheet could be leaked. Finally, students can receive unauthorized assistance during a test. This could come in the form of help from other people or resources not allowed during the examination. In order for a school’s solution for online cheating to be acceptable, it must address all three security/integrity concerns. The rapid growth of online learning/education has resulted in new challenges for educational institutions in the area of testing integrity. According to a study by the National Center for Education Statistics (NCES), the number of students enrolled in at least one online class increased by 11.1 million from 2002 to 2006, and the NCES predicts that by 2014 students taking all of their courses online will reach 3.55 million (“Online Education”, 2011). Online test proctor programs are being adopted by educational institutions to provide online courses with strong testing integrity. The programs offered by online test proctor programs are specifically aimed at testing integrity. “The number of college students taking courses online is surging, creating a tough dilemma for educators who want to prevent cheating” (Pope, 2007).
Utilizing an Intelligent Tutoring System In Lieu of Teaching to the Fat Part of the Curve
Dr. Leonard Presby, William Paterson University, Wayne, New Jersey
This paper presents findings from a study with the purpose of exploring the effectiveness of using an online intelligent tutoring system in learning business math principles. Incorporating a traditional course delivery approach, two different classes were exposed to an adaptive learning method with regard to learning and reviewing basic math required for business studies. Three compelling tools of Placement, Prep and Course were utilized. Students demonstrated more motivation using this method. The results show a remarkable increase of learning using this system. All the students preferred this manner of learning compared to the traditional one. Results of this study have strong implications to help independent learning, reduce the problem of students dropping courses and the cycle of repeated failure. Education is more essential than ever to an individual’s economic future. Unfortunately, many students are beginning their post-secondary studies unable and unequipped to succeed, especially in quantitative type courses. In a typical business curriculum, students are expected to enter a course such as business statistics, managerial economics, financial accounting, and corporate finance having some math under their belt. According to a study by the National Assessment of Educational Progress, less than twenty five percent of high school seniors are considered proficient in mathematics. Unfortunately, early failure in math is often a predictor of failure in other disciplines. This crisis of student readiness poses enormous challenges for higher education institutions (1). Almost fifty percent of all college students take at least one remedial course. More than half of students who take remedial math courses fail to graduate. There is a crises of student readiness in higher education, instructional costs are soaring while student learning outcomes are declining. The Commission on the Future of Higher education recently recommended that institutions develop new pedagogies, curricula and technology to improve learning particularly in the area of science and mathematics. Typically, instructors whose focus is to teach students material for the present course do not have adequate time in or out of class to help each student with review material. Today’s students live in a hyper-networked world of user centered technologies. Subjects such as math and accounting have been traditionally taught in a linear manner – in a start to finish sequence. Needed is a product that is learner-centered and its assignments and feedback are uniquely customized to each student, both whether a fast or slow learner. This learner-centered approach is expected to appeal to today’s students. No longer will the content delivery be geared to only the fat part of the normal curve. All students will gain. To implement this, a combination of traditional teaching and software adoption is used. A student first logs onto software that will help them master the course content. The learning system I chose was ALEKS*. It provides an ongoing student learning experience. When a student first logs on to ALEKS.com, a brief tutorial shows her how to use some basic answer input tools. The student then begins an Assessment. In about 45 minutes the student's current course knowledge is assessed by asking her thirty questions. Each question is chosen on the basis of her answers to all the previous questions. Each student, and therefore each set of assessment questions, is unique. It is impossible to predict the questions that will be asked. A precise picture of her knowledge of the course, knowing which topics she has mastered and which topics she hasn't, is developed by the program. The weak math skills are determined and ALEKS then guides them through individualized learning paths. Thus, ALEKS utilizes an approach for placement of the student ( hence the name PLACEMENT). The student's knowledge is represented by a multicolor pie chart (see figure 1).The pie chart is also the student's entry into the Learning Mode where she is offered a choice of topics that she is ready to learn. ALEKS was not developed around the idea of using technology to maximize high-end graphics. Students tend to like it, not for the visuals, but for the fact it enables them to learn and excel. There, she is offered a choice of topics that she is ready to learn designed such that students need to master all prerequisite knowledge in order to learn any new topic topics.
Social Media: More Available Marketing Tools
Dr. Stacy M. P. Schmidt, California State University, Bakersfield, CA
Dr. David L. Ralph, Pepperdine University, CA
Networking is not new to the world or to business. Networking just has a new medium. Social media has created more opportunities to connect and network with friends, family, and customers. This means that marketing has new tools as well. Four types of social medias are: 1. Social Networks or Online Communties: 2. Blogs 3. MicroBlogs; 4. RSS – Really Simple Syndication Companies can use Blogs, Microblogs like Twitter, Social Networks like Facebook, MySpace, Bebo, and LinkedIn, and RSS – Really Simple Syndication to market products, services, and companies. These new tools require new skills as well as different approaches. They have not changed the basic question of when and how to use it to be effective, efficient, and successful. Companies also need to be able to determine which of the different social media the company should or should not use in marketing their products, services, and/or company. One of the most important uses of social media sites is data collection. It not only provides companies with the ability to obtain massive amounts of information from a wide range of places about their products, services, and company, it also gives them valuable information about their competitors. Social media can be used by a variety of companies and people. Anyone in a company can use social media for a various reasons and purposes. The size and type of the company does not prevent the use of social media as a marketing tool. Companies need to be careful that it is used properly and effectively. Marketing tools have changed and advanced over the years as new technologies have made it possible to reach the market in new innovative ways. Networking is not new to the world or to business. Networking just has a new medium. Social media has created more opportunities to connect and network with friends, family, and customers. This means that marketing has new tools as well. The technology of social media that has emerged has created new tools and opportunities for marketing.
Corporate Social Responsibility and Ethics in the Tourism Industry: Using a Survey of Managers
Dr. Jung Eun Kim, University of Florida, Gainesville, FL
Dr. Lori Pennington-Gray, University of Florida, Gainesville, FL
This study was a starting point to examine tourism managers’ ethical attitudes and sense of corporate social responsibility. Guided by marketing theory, this study revealed that an organization’s environment, such as corporate ethical values, affects the tourism professionals’ ethical decision-making. The results suggest tourism practitioners’ attitudes toward corporate social responsibility of tourism companies were influenced by the corporate ethical values and perceived importance of ethics and social responsibility. This study implies that tourism managers are more sensitive to socially responsible and ethical issues when the organization sets clear ethical standards and values. Thus, this study suggests that by providing a clear set of goals and standards, an organization may improve their ethical and socially responsible perceptions of employees, and ultimately lead to better ethical behaviors and socially responsible performance. Tourism is recognized as one of the world’s largest industries. The World Travel and Tourism Council (WTTC) has estimated that tourism industry generated 9.1% of the global Gross Domestic Product (GDP) directly or indirectly and 258 million jobs in 2011 (WTTC, 2011). This growth in tourism development has led to many changes made by host societies (Brunt & Courtney, 1999). Some of these changes are positive, such as improved income, education, employment opportunities, and local infrastructure and services (Lankford, 1994), while others are negative, such as changes in social and family values, the emergence of economically powerful groups, and cultural practices adapted to suit the demands of tourists (Ap & Crompton, 1993; Johnson, Snepenger, & Akis, 1994). With the recognition of these impacts, stakeholders have increased interests that ethical aspects and corporate social responsibility (CSR) of tourism business to mitigate the negative aspects of tourism (Dodds & Joppe, 2005). As Jucan (2011) argued, stakeholders do not bear company’s growth without consideration of the negative effects. Corporate social responsibility (CSR) is defined as “actions that appear to further some social good, beyond the interests of the firm as well as those which are required by law” (McWilliams & Siegel, 2001, p. 117). CSR is an activity not only for the firm’s sake but also for the sake of various stakeholders, such as shareholders, employees, customers, community, and the like (Carroll, 1979).
Queuing in Supermarkets: Satisfying Customers at the Point-of-Sale
Dr. Jim Mirabella, Jacksonville University, FL
In 1998, Roger Bennett conducted a study in the UK to determine customer attitudes toward waiting in lines at local grocery stores. His research found that income level, total purchases, and personality type were significant factors in determining a customer’s willingness to wait in line. With the advent of self-checkout lines aided by scanners, customer options have evolved in the last 13 years, and grocery stores have been manipulating the checkout processes to get the right formula for success. Some stores are adding technology while others are removing technology, and still others are just rearranging lines, all in the hope of garnering market share and keeping customers happy. This study looks at the difference in the tolerance for queuing and the difference in willingness to use a self-checkout line, looking at spending level, income, gender and age as factors. Findings showed that those in higher income areas were less tolerant of lines and more willing to use self-checkout lines, and those with larger purchases were understandably more tolerant of waiting in line, and less willing to self-checkout. While gender didn’t prove to be a factor, age showed itself as important, as older customers were more tolerant of lines but less willing to use self-checkout technology. Open-ended opinions about the scanners were diverse, with some customers anxious to use them, others oblivious to them, and others with very negative feelings toward them. With grocers learning so much about the psychology of waiting lines, and realizing that the point-of-sale is a point of contention, future research should focus on how customer loyalty is truly impacted by the checkout process.
Socially-Influenced Consumption and Savings: An Agent-based Approach
Dr. Daniel Farhat, University of Otago, Dunedin, New Zealand
In this study, an agent-based model is created in which consumption and savings decisions made by virtual households are determined within a socio-economic environment. Using a shopping algorithm first described by Becker (1962), consumer choices exhibit both habit and capriciousness. Within this algorithm, exuberance for spending and saving is assumed to be socially-influenced. These virtual consumers are then placed within an economy similar in nature to the United States (1987 – 2007). Their consumption and savings decisions, which are a product of both the state of the economy and interactions they have with each other, are then assessed by inspecting single-runs of simulations with different parameter specifications. Local unemployment and bankruptcy rates are shown to generate improved dynamics of aggregate savings and bankruptcy rates. The model provides a starting point for future work on social influence and aggregate spending decisions. This paper explores the relationship between social influence and spending decisions. The approach considered here differs from that typically taken in standard macroeconomic theory. Usually, consumers are modeled as hyper-rational, self-oriented, identical entities. They are assumed to have well-defined preferences over consumption across their entire lifespan which is captured by specific utility functions. They have infinite memories and limitless computational capabilities. These restrictive and unrealistic assumptions play a vital role in generating tractable analytical solutions to Walrasian-type dynamic general equilibrium models (which can then be empirically tested to validate the model). While mainstream methods have yielded several crucial insights on the state of the economy and have provided macroeconomists with a concrete toolbox for economic analysis, they have serious drawbacks.
Experiencing IT Security in an Organizational Environment: Conceptualization and Measurement Development of an Individual Level IT Security Climate Construct
Dr. Janis Warner, Sam Houston State University, Huntsville, TX
With the increasing globalization of organizational systems and growing value of corporate data assets, never has it been more important to understand organizational environmental elements that influence user perceptions of IT security. A rigorously developed model providing a clear understanding of the environmental factors’ influences on IT security behavior has yet to be established in the literature. This study begins to address this gap through a preliminary phase of model development starting with the development of a facet specific, multidimensional, individual level construct, conceptualized as IT security psychological climate. Rapidly expanding technologies such as the Internet, cloud computing, social networking and wireless access have led to significant growth in IT vulnerabilities and related losses for organizations (McCafferty, 2010). Internal user practices and human factors focusing on end user perceptions and attitudes leading to behavior are identified as critical elements for understanding how to move forward with IT security (Dhillon & Backhouse, 2001). Recent IT security studies have demonstrated that human factors are critical (e.g. Dinev & Hu, 2007), however there is a lack of studies on the influence of organizational cues, such as signals from top management through policies and procedures, on internal user attitudes and behavior. To address this gap our study focuses on developing a measurement of users’ experience of the organizational cues in the environment regarding IT security, conceptualized as IT security climate. Organizational climate is one well documented view of the socio-organizational perspective of an organization which incorporates human factors through individuals’ observations and descriptions of how an organization is experienced (Rousseau, 1988; Reichers & Schneider, 1990). In order to link organizational climate with organizational outcomes a strategic focus, known as facet specific, has been used to investigate important themes such as customer service (Schneider, 1990) and safety (Zohar, 1980). Similarly, our study’s climate construct focus is IT security specific.
Who Holds the Pen? Strategies to Student Satisfaction Scores in Online Learning Environments
Dr. Debra Y. Hunter, Troy University
As more nontraditional students demand educational opportunities that consider professional and personal obligations, universities are faced with a remarkable challenge to offer courses in formats that meet the needs of professional learners. Most often, these courses are facilitated in cohorts that meet weekly, weekend intensive courses, hybrid (ground and online) or exclusively virtual formats. While the array of course formats provides flexibility to professional students seeking to continue their education, the teaching methods, interaction with instructor and collaboration with peers will vary according to the course delivery platform. Consequentially, the student satisfaction levels may vary based on the experiences that one encounters with each platform. In most traditional classroom settings, the level of interaction is greatest because students have face-to-face contact with the instructor. In such case, the instructor can establish a rapport with the students and such relationships can enhance the overall student experience. On the other hand, students in exclusively online settings share different experiences due to the challenging nature of the distance learning format. Based on a student’s expectations, a less than desirable experience may result in lower satisfaction scores and ultimately a loss in employment for the instructor in some cases. However, there are a variety of opportunities to increase interaction with online students, provide learning opportunities similar to live classes and establish rapport necessary to exceed student expectations. Discussions with practitioners provide the basis for this analysis that addresses best practices to increase student satisfaction in virtual learning environments. The growing popularity of business related programs among non-traditional students and those in other disciplines (such as the medical field) have led to the expansion of business programs and additional business courses in higher education. This growth in demand is highly attributed to non-traditional students returning to obtain a college degree, renew job skills, or merely learn new skill sets.
Systematical Accounting and Evaluation of Energy Consumption and Carbon Emission of Urban Production
Dr. Xi Ji, School of Economics, Peking University, P.R. China
Dr. Yan Qin, Director of China-India Economics Research Center, U.S.A.
Dr. Zhu Li, Personal Banking Division, Bank of China
Dr. Zhanming Chen, College of Engineering, Peking University, P.R. China
Cities are the main material carriers of industrialization. The development of urban production based on fossil fuel is the major contributor to the rise of greenhouse gas density and global warming. The idea of low carbon cities is a new approach to both urban sustainable development and global climate issues as well. The development of low carbon production is the key to low carbon cities. Quantitative accounting and evaluation of energy consumption and carbon emission of urban production is critical to identify problems in this regard and find out potentials in energy-saving and emission-reduction. Conventional indicators of “energy consumption per unit output value” and “emission per unit output value” are concerned only with immediate consumptions and emissions while the indirect consumptions and emissions during the production processes are ignored, which does not serve the optimization of the overall urban production system. This paper first discusses the disadvantages of conventional evaluation system, and then constructs the new indicators based of the concepts of "embodied energy" and "embodied carbon emission" for systematical evaluation of urban production. Taking Beijing as a case, this paper compares the calculations based on conventional and newly constructed indicators, and the results show energy consumption and emissions of urban sectors can be better reflected by the new indicators, which provide useful information to build low carbon cities. Since the Industrial Revolution, the industry civilization based on fossil fuel has fundamentally changed agricultural mode of production lasting for the past thousands of years, and has generated huge impacts on world economic and ecological structures. The intertwined industrialization and urbanization is gradually becoming the theme of global economic development and evolution. With the continuing industrialization and globalization, the density of greenhouse gases, mainly CO2, is constantly increasing, and it is widely accepted that global warming has come into being. The mainstream of climate change research believe the rising ground average temperature is primarily caused by greenhouse gases emissions in the past 50 years that in turn mainly results from the use of fossil fuel since the Industrial Revolution.
An Examination of the Extent of Influence of the Post 2007: Global Economy on the Determination of Global Marketing Strategy
Dr. Mary Werner, Dr. Mohamad Sepehri, and Dr. Richard Murphy
Jacksonville University, Jacksonville, Florida
This is an examination of the status of work available to aid in the determination of global marketing strategy in this post 2007 global economy and how the post global 2007 financial crisis has affected the determination of global marketing strategy. An examination of the relationship between global business, global marketing and the economy in general illustrates that there is concern expressed over the recent developments with respect to the post 2007 global economy and the importance of the impact on business and marketing as a result of the situation in the post 2007 global economy. Then this study narrows its’ focus concerning the examination of global marketing strategy issues and information post 2007 global financial crisis available to aid in the determination of global marketing strategy in the post 2007 economy. The global marketing mix areas of product, price, place/distribution and promotion are examined individually. Although there could be more research done in the price area, overall the amount of work done on this topic of global marketing strategy post 2007 given the short period of time since the 2007 global financial crisis, is impressive and does appear to provide good information to businesses interested in engaging in marketing post 2007. It is felt research with respect to this topic should continue in an aggressive manner since it appears the global financial crisis will continue for some period of time. The global economy has undergone some dramatic changes in the past several years. The presumption is that the economic situation, particularly as fluid as it is in present day, is always taken closely into account with respect to planning and determining global marketing strategy or engaging in any business practice. It would seem this would be especially important today given the unique and varied types of situations that the economies of the many countries around the world have recently experienced. An important link between monetary policy and the exchange rate and the implication for the approach businesses should take with respect to global marketing strategy has been described in 2007 (Sepehri, Werner and Narkiewicz, 2007). This indicated the importance of economic considerations just prior to the global recession given the article was written before the recession began. So the need for emphasis on economic considerations with respect to global marketing strategy even prior to the occurrence of the worldwide recession was indicated.
The Financial Crisis 2008 – 2010; Winners & Losers. U.S.A., Canada, France, Mexico and India´s Perspective
Dr. Hyun Sook Lee, National Autonomous University of Mexico, Mexico
Dr. Beverlee B. Anderson, California State University, San Marcos, CA
Dr. Eric Viardot, EADA, Spain
Dr. R. K. Srivastava, University of Mumbai, India
Professor Raymond Ilson, Dalhousie University, Canada
In this paper, the authors compare the impact of the financial crisis of 2008 – 2010 in selected countries; three developed countries (Canada, France and U.S.A); two developing economies (India and Mexico). Most of the selected countries showed lower GDP growth rate, although results and trends were mixed. However, there were also winners, which included countries/states as well as individual firms. Among Fortune global 500 companies (2007 - 2008), the U.S.A. laid claim to the largest global companies, in significant numbers, followed by Japan, France, Germany and China as Table 1 depicts.. During 2009 – 2010, the U.S.A. again led the world economies, albeit with fewer numbers of companies. China ranked number 3 while France and Germany remained at four and five respectively. In terms of GDP per capita, which is the common criterion for understanding economic activity levels, China is at a level about ten times lower than other advanced countries such as U.S., Japan, France, Germany and Canada; and even less than half that of Mexico. Financial and underlying social issues in many countries, including the U.S.A. since 2007, are still unresolved and threaten to be an ongoing drag on the recovery. The financial crisis of Europe started in Greece during 2009/2010 and has spread steadily. The euro-zone crisis has focused on Spain and Italy, but other countries, at both ends of the size spectrum, keep coming into view. Cyprus, a midget within the monetary union, has been pushed to the brink of a bail-out. France is still in the rescuers' camp, but it, too, is starting to attract attention (Bird, 2010; The brewing storm …, 2011; Finance …, 2011). The seesawing stock markets, investor flight from Italian and Spanish bonds, the credit downgrade for the U.S. government and fears of a similar downgrade for France and the U.K. - all were fueled by a lack of consensus by policy makers about actions to take (Walker, Paletta & Blackstone, 2011). Based on PROSPECTS 2011 (2011), the EU area's economic performance will continue to be powered by Germany.
Is An Asset and Liabitity Approach to Revenue Recognition Suitable for IFRS and US GAAP Convergence Purpose?
Dr. Hana Bohusova and Dr. Danuse Nerudova, Mendel University, Brno, Czech Republic
Revenue is a crucial number to users of financial statements in assessing a company performance and prospects. Revenue recognition requirements in the US GAAP differ from the IFRS revenue recognition principles, and both sets of requirements need to improve. The FASB and the IASB have been working on the development of the common standard on revenue. The common revenue recognition standard should help to eliminate weaknesses of current revenue recognition and recording treatments. The paper is concerned with an evaluation of approach to revenue recognition which is intended to replace current approaches under the IFRS and the US GAAP. The main world's accounting standards-setters the International Accounting Standards Board (IASB) and the U.S. Financial Accounting Standards Board (FASB) have been working on convergence of the U.S. Generally Accepted Accounting Principles (U.S. GAAP) and the International Financial Reporting Standards (IFRS) since 2002. In September 2002 the IASB and the FASB agreed to work together to remove the differences between IFRS and US GAAP. This decision was embodied in the Memorandum of Understanding (MoU) between the boards known as the Norwalk Agreement. The specific milestones to be reached by 2008 were set in the document known as “A roadmap for convergence 2006-2008”. It identified priorities and milestones to complete the remaining major joint projects by 2011, emphasising the goal of joint projects to produce common, principle-based standards. In June 2010 the IASB and the FASB announced a modification to their convergence strategy, responding to concerns from some stakeholders regarding the volume of draft standards due for publication in close proximity. The strategy retained the June 2011 target date to complete those projects for which the need for improvement of the IFRSs and the US GAAP is the most urgent. The IASB and the FASB published an accounting standard convergence progress report on April 14, 2010.
Inter-organizational Relationships in Enhancing Information Sharing: The Role of Trust and Commitment
Ipek Kocoglu, Dr. Salih Zeki İmamoğlu, and Dr. Huseyin Ince
Gebze Institute of Technology, Turkey
Prior research on supply chain management (SCM) suggests that information sharing (IS) has become a major driver of competitive advantage. The accelerating trend of new manufacturing paradigms forcing SCs to be agile (Cousins and Menguc, 2006), adaptable and aligned to meet the needs of cooperative, mutually beneficial SC partnerships in the value networks (Flynn et al., 2010), lead firms to refocus on forming tighter and deeper relationships (Yeung et al., 2009). Little attention has; however, been paid to the effect of trust and commitment on IS. This study focuses on the influence of these two relationship management mechanisms on IS and supply chain performance (SCP) and the role of IS in shaping SCP. The conceptual model comprises of 3 research hypotheses with 4 main constructs; trust, commitment, IS and SCP. Yet we categorize the four types of IS as; IS with customers, IS with suppliers, inter-functional IS, and intra-organizational IS, and the 4 constructs of SCP as; expenses of costs, asset utilization, supply chain reliability, and supply chain flexibility and responsiveness. The constructs are measured by well-supported measures in the literature. The hypotheses are tested via an empirical study in which data are collected from 158 manufacturing firms in Turkey mainly Marmara Region, that are among the top 500 Turkish manufacturing firms of 2010 listed by Istanbul Chamber of Commerce. The results suggest that the roles played by trust and commitment is critical in IS process as it reinforces connectedness, coordination and collaboration among SC members. Moreover the findings of the study provide useful insights on how organizations should benefit from IS so as to improve their SCP. In today’s hyper-competitive environment which intensifies and globalizes markets, organizations began to realize that delivering the best customer value at the lowest cost at the right time to the right place is not only related to the activities functions and processes within the organization itself, but to the whole of the supply chain (SC) (Barratt and Barratt, 2011). The continuously evolving dynamic structure of the SC requires the adoption of a systems approach for the successful identification analysis, coordination and collaboration of the relationship based interactions among the partners (Sahin and Robinson, 2002). A unified system and centralized control over decentralized SC members can be achieved through IS which is the key ingredient of SCM. There is a growing consensus in the literature regarding the advantages IS provides for the SC partners (Bowersox and Closs, 1996; Barratt and Barratt, 2011; Huang, 2003; Lambert, 2008; Li and Lin , 2006; Yu et al., 2010; Zhou and Benton, 2007). Researchers suggest that closer information-based linkages become a prevalent way of effectively managing SCs which seek improved performance through effective use of resources and capabilities (Ding et al., 2011).
Investors’ Exposure to Currency Risk in Central and Eastern Europe: are Turbulent Times Different?
Dr. Alexandra Horobet, Dan Gabriel Dumitrescu, and Adriana Sofia Dumitrescu (Raileanu)
Academy of Economic Studies Bucharest, Romania
The paper investigates the impact of exchange rate risk on the risk-return profile of investments in emerging countries. The emerging countries under scrutiny are Czech Republic, Hungary, Poland, Romania, Russia and Turkey, all from Central and Eastern Europe. We examine the importance of currency risk from the perspective of a US dollar based investor, by looking at the contribution of changes in exchange rates of these countries’ currencies against the US dollar to the total risk of investments in these markets, on one hand, and to the correlation between these markets’ returns and the US market return. Our analysis spans over an interval between January 2000 and August 2010, thereby taking into account the exchange rate risk contribution in normal versus turbulent times. We find that exchange rate volatility is an additional factor for the volatility of CEE markets when returns are denominated in US dollars. In general, exchange rate risk is a positive contributor to the risk of an investment in CEE markets, and that in more turbulent times, as the ones after September 2007, the impact of exchange rate risk is higher than in normal times. Moreover, a US investor in the CEE area should have been also about the positive and increasing contribution of currency risk to the correlation between any of the CEE markets and the US market. In a framework of increasing international portfolio investments and of business opportunities diversification at the global level, but also of higher capital market integration, investors critically evaluate the exchange rate risk, particularly when investments are made in emerging markets. These markets are acknowledged of having higher levels of instability, compared to developed markets, and the crises that affected emerging countries in the 1990s, but also the current financial turmoil, have demonstrated that the negative impact of exchange rate fluctuations is seriously felt by international investors.
Tax On Dividend Distribution, Agency Problem And Firm Value – Unique Indian Perspective
Dr. Santanu K. Ganguli, Professor, Institute of Management Technology, Ghaziabad
Due to provision of income tax on distribution of corporate profit by way of cash dividend, India presents an unique opportunity to examine stock price reaction to dividend payout decision in the backdrop of signaling and agency cost of free cash flow literature. India’s dividend payout is quite low – one of the major reasons might be payout is costly as it invites tax on dividend distribution favouring retention of corporate profit to be capitalized that attracts lower or no tax on capital gain. Most of the listed companies in India that earn profit on a sustained basis pay cash dividend to the shareholders (investors). Way back in 1961, Miller and Modigliani (MM)- in their seminal theoretical paper - advocated dividend irrelevance hypothesis according to which in a well functioning capital market, in absence of transaction cost and tax, dividend does not matter. When dividend is paid there should be corresponding reduction in value of shares to the extent of dividend paid. Hence, dividend is irrelevant as it is nothing but distribution of value rather than creation of the same. Barring some tax havens, MM’s world of no tax hardly exists. In most of the countries, when a company pays dividend the shareholders receiving dividend is required to pay tax on the dividend income. If a company earns profit from operation and dividend is not paid, the profit gets capitalised in share price, the shareholders selling the shares are to pay tax on capital gains that arises from sale of shares. Therefore, tax provision and rates of taxes on dividend and capital gain of a country should play an important role in dividend payment decision. In US context Black (1976) questions why do the companies pay dividend at all if dividend is taxed at a higher rate than the capital gain? This leads to signaling hypothesis by Bhattacharya (1979) who posits that dividend removes information asymmetry and signals positive earning potential of a company – but it is costly – because of tax impact on dividend.
Hotel Services as Experiential Products and the Influences on Purchase Decisions
Sandra Heiden, University of Latvia and University of Applied Sciences Kufstein, Austria
The hotel industry offers services to customers who are characterized by a certain degree of uncertainty. The reason behind this uncertainty is that customers have to experience the service first to be able to evaluate the quality and the degree of satisfaction. Hence, every first stay in a hotel is linked to a decision under uncertainty, which leads to the assumption that hotel services can be regarded as experiential products. The purpose of this paper is to find out if hotel customers tend to spend less during their first stay than following stays, due to risk aversion. To accomplish this aim, data of different leisure hotels within Western Europe were gathered and examined. The data were analyzed with regards to the spending behavior of guests as well as the length-of-stay patterns. Especially in the last years, it is quite difficult for companies in the hospitality industry to increase or stabilize their market share. There are various reasons, including rising international competition, slow or decreasing economic growth rates, decreasing population growth and often oversupplied and mature markets (Tepeci, 1999). To stabilize economic success, hotels should go one step further and start understanding their customers and customer behavior. Only if a company understands why and how their customers make purchase decisions, they will be able to influence these judgments. Understanding guests’ needs and having a clear picture about the guests will be a prerequisite for hoteliers in the future, and only then is it possible to survive and prosper (Yavas and Babakus, 2005). Hence, marketing of the future should choose the customers’ perspective. Within the service industry, marketing can be regarded as a tool that tries to make customers confident to a greater extent about the services they are going to buy.
The Osaka Model: New Methods of Joint Development Promotion in Japan
Dr. Nobuhiro Takahashi, Osaka City University, Japan
Dr. Mita Takahashi, Osaka University of Economics and Law, Japan
This study examines new methods for locating business partners for joint development of manufactured products in Japan. These methods, collectively called the Osaka Model, enable a company with outstanding technology capabilities to locate a need for those capabilities in a new company partnership. In other words, a company that needs outstanding technology capabilities locates a business partner with whom the company solves high-level technological issues. This model promotes new partnerships using open inter-business relationships. Joint development has attracted the attention of firms, central and local governments, and many other organizations in Japan. For example, the central government began the Industrial Cluster Project in 2001. In this project, the government conducts seminars, parties, and matching sessions for companies to encourage the development of new products and start-up companies. Local governments, chambers of commerce and industry, and other organizations also conduct matching sessions for companies to encourage the development of new products and transactions. However, these partnerships—along with their potential new developments—occur sporadically. This experience indicates that creating opportunities for encounters among firms is insufficient; methods must match companies effectively. Therefore, this paper addresses five new methods for approaching joint development in Japan. These methods create opportunities for a company with excellent technology to find an appropriate business partner that needs technology. This means that innovative technology with the potential to develop into a product is matched with a need for that technology. In other words, a company that needs outstanding technology capabilities locates a business partner with whom it can solve high-level technological issues.
Relationship Between Personality Traits And Readiness for Organizational Change: A Case From Croatia
Dr. Mislav Ante Omazic, Rebeka Danijela Vlahov, and Marino Basic, University of Zagreb, Croatia
Since the environment in which organizations operate today is changing faster than ever before, only those that effectively and efficiently implement organizational change can survive. The emphasis is no longer on whether they will do it or not, but on when and how will they do it. However, as much as change is needed in the organization, it can bring adverse effects to its employees as it changes the way they had been working, thus making them resist to change. Therefore, the understanding of resistance nature, the ability to predict how employees will react and the application of appropriate means for implementing organizational changes are all necessary for successful change implementation. The research in this paper strives to comprehend the relationship between personality traits and readiness for organizational change. The subject of the research is the need to analyze the relationship between personality traits and readiness for organizational change among Croatian professionals, as well as the perception of these relationships and the efficiency of implementing organizational changes in an organization. Therefore, the main goal is to analyze a possible correlation between personality traits of employees and their readiness for organizational change, starting from the assumption that sources of specific employee behaviors should be found in his/her personality, stable over time and in different situations, and that personality traits determine whether the employee is resisting change or accepting it. The theoretical framework which was chosen for this research is the Big Five personality factors model with the following dimensions: extraversion, agreeableness, conscientiousness, emotional stability and intellect. The authors tested the correlation between personality traits and readiness for organizational change. During the research process, 83 questionnaires were collected among postgraduate students on the Faculty of Economics and Business in Zagreb. The candidates were asked to fill in the IPIP-100 questionnaire measuring the five personality traits and a questionnaire specially designed for this research.
Harmonisation of the Croatian Company Law with Aquis Communitare of the European Union
Dr. Hana Horak and Kosjenka Dumancic, LL.M., University of Zagreb, Croatia
At the present time, the European Union company law is considered to be a domain in which numerous obligations and liabilities are introduced, particularly as regards data publication, in order to protect company members and creditors i.e. third persons themselves, as well as other interested parties (Preamble of the Directive 2009/101/EC of the European Parliament and of the Council of 16 September 2009 on coordination of safeguards which, for the protection of the interests of members and third parties, are required by Member States of companies within the meaning of the second paragraph of Article 48 of the Treaty, with a view to making such safeguards equivalent, OJ L 258, 1.10.2009, p. 11-19). Some of these obligations are considered to be too comprehensive or out-of-date. Therefore, they are continuously being analysed in the European Union with the intention to reduce, whenever possible, an administrative burden set on the companies and corporations. In addition, considering the increased cross-border activity of the corporations, it is essential to ensure as much corporate data availability as possible with the help of modern means of communication. In this respect, a number of regulatory activities are the result of such conduct. Numerous changes in Croatian legislation are the consequence of complying with the aquis communitare of the European Union, but in respect of the aforesaid, these changes are also the result of the need to modernize and reduce administrative barriers (Jurić, 2003). As regards Croatian company law, the Companies Act was amended numerous times (Official Gazette of the Republic of Croatia “Narodne Novine” of the Republic of Croatia Nos. 111/93, 34/99, 121/99, 52/00, 118/03, 107/07, 146/08, 137/09) as a consequence of a necessity to comply with the aquis communitare of the European Union. For that same reason the Court Register Act was also amended (Official Gazette of the Republic of Croatia “Narodne Novine” Nos. 1/95, 57/96, 1/98, 30/99, 45/99, 54/05, 40/07, 91/10).
Reseller-perceived Value of Digital Channel Marketing in IT Security Business
Dr. Mika Westerlund, Aalto University, Finland and University of California Berkeley, CA
Dr. Risto Rajala, Aalto University, Finland
The generation of superior customer value is at the base of a company’s competitive advantage. However, the determinants of reseller-perceived value (RPV) in supply chains remain unclear to many suppliers and are largely underexplored in academic research. As existing research focuses on the value of product/service offerings or the supplier-reseller relationship, more research is required on how supplier’s activities beyond the core attributes contribute to RPV. This study focuses on the RPV of supplier’s digital channel marketing (DCM) in the IT security business, because suppliers increasingly use DCM to promote their value propositions to resellers. Our empirical results show that the RPV of supplier’s DCM consists of relationship value, information value, and instrumental value. Together, they influence the reseller’s sales intentions and efforts. The reseller’s positive attitude and acceptance of digital marketing communication further strengthens the effect. Customer value has emerged as crucial for customer relationship management efforts and achieving organizational goals (Menon et al., 2005). Knowing where value resides from the customer’s perspective is important for companies (Ulaga and Chacour, 2001). According to Haksever et al. (2004), value is created for customers when the company provides them with superior quality products at competitive prices. However, Shaw and Ivens (2005) show that as many as 85 percent of senior business managers believe that differentiating solely on the core elements, such as price, product, and quality, is no longer a sustainable competitive advantage. Furthermore, Lindgreen and Wynstra (2005) argue that customer value analysis should go beyond traditional customer satisfaction measurement. The notions are remarkable, because these elements are traditionally considered key factors of value in buyer-seller relationships (Ulaga, 2003). The value concept is of utmost importance in analyzing industrial buyer-seller relationships (Ulaga and Chacour, 2001). In business-to-business (B2B) markets, where knowledge of value is considered critical and can be regarded as the cornerstone of business market management, it is important for organizations to comprehend how they can provide value to their customers (Lapierre, 2000). In addition, looking at customer value from the supply chain perspective, where suppliers sell their products and services through intermediaries such as value-added resellers, it is important to understand suppliers’ value drivers to resellers.
A Secondary Analysis in Team Performance to Determine Behavior in a Software Population
Andreas Michael Giesa, University of Riga, Latvia and University of Applied Sciences Kufstein, Austria
Human resources, the economy, and large organizations still facing dramatic changes based on the worldwide financial crisis and thus Behavioral Economics is becoming more and more a part of daily business in large organizations. Since the 1940s, teams have played an important role and today the use of formal developed teams in organizations continues to increase. As the interest in Team Performance rises, empirical and theoretical attention has been focused on varying themes such as conflict, social networking, and decision-making. The new drive of Behavioral Economics into the business environment has given rise to the idea to measure Team Performance including behavior. The paper presents an executive summary of how indicators and measurements could be designed and tested. It drives an approach to measure Team Performance, including the determination of behavior, in a brief and non-representative way, with the goal to determine a trend by using a secondary analysis research method. This paper is based on the fact that Behavioral Economics is entering the economic business area. It summarizes aspects of Team Performance & Behavioral Economics, outlines a way to measure behavior by Team Performance and presents a result of a detailed Secondary Analysis. The research into the field of Team Performance proposes a selection of Team Performance dimensions. A team should have a mix of competences, i.e., technical skills, problem solving, and interpersonal skills, with the goal to approach and accomplish a high level of team results. However, teams need to have an appropriate level of empowerment to deliver and manage their tasks, including  proper leadership support and  a significant environment with a rewards and recognition system. Furthermore,  a dimension of behavior should be included into the research to evaluate the significance of Behavioral Economics in the economic environment and Team Performance. Also included is a definition of each dimension used in and relevant to this study. This research has defined four clusters; one focuses on the new innovative behavioral aspect and the others are based on literature findings to measure Team Performance. In total, 12 dimensions are defined, but this publication will be focused on the Cluster Behavior:
Considering the Effect of Targeting the Energy Carrier Subsidy on Urban Families’ Food Expenses in Kerman
Dr. Mohsen Zayandheroody, Islamic Azad University-Kerman Branch, Kerman, I.R. of Iran
Targeting energy subsidy means removing the subsidy on the energy carrier price,
which can both increase economic efficiency (optimized balance between supply
and demand, increase in consumption efficiency
and changing its pattern) and fair income distribution. For this, first the
consumption patterns of urban families in Kerman were considered, by using the
Quadratic Almost Ideal Demand System and families’ income-expense data between
2002-2007, by income deciles. Then income and price elasticity were examined.
The relevant groups include food, energy, clothes, transportation,
communication, and other goods. For all income deciles, as was expected, the
price elasticity is less than zero and the income elasticity is more than zero.
Then the food support boundary of consumers in 2007 was defined and the effect
of targeting the energy
A Preliminary Study on the Efficient Marketing Strategy Applied by Mexican Companies During the Financial Crisis 2009 - 2010
Dr. Hyun Sook Lee, National Autonomous University of Mexico, Mexico City
This paper includes three hypotheses to test. Testing of Hypothesis 1 revealed that not all company respondents have indicated negative results because of the financial crisis of 2009 – 2010, but some report positive results. The result indicates a significant lesson - that managerial/directional ability may benefit a company regardless of the financial condition of the market. This effect cannot be classified by type of company but is apparent for individual ones. Hypothesis 2 tested the importance of a product quality improvement strategy accompanying a lower pricing strategy in order to survive under financial crisis conditions, without ignoring other factors such as promotion and distribution channel improvement strategies. Moreover, Hypothesis 3 confirmed the importance of efficient government (or national actions) in overcoming the financial crisis. While the overwhelming effects of the recession have affected every section of the apparel and textiles sector, they have also perhaps given rise to a reflection of business practices and, in some cases, an evaluation of traditional ways of working that are no longer viable (Seven macro trends …, 2009). Recently, there have been several financial crises in the world or in specific countries. Under each circumstance, enterprises had to survive through innovative strategies to avoid lowered sales or unexpected bankruptcy. This paper presents a brief background of the financial crisis of 2009 – 2010 in the world, the impacts of this crisis, a literature review, a field survey conducted in Mexico, and conclusions and recommendations. Secondary sources were utilized such as books, high academic level international and Mexican magazines, reliable Mexican financial newspapers such as El Financiero, El Economista,; and websites established as primary sources through a field survey. A recession in the U.S. economy began at the end of 2007. Concerns deepened as an epic financial crisis shattered business and consumer confidence. By the fall of 2008, the United States was in the midst of the worst recession since the 1930s, and major financial institutions were on the verge of bankruptcy. The financial crisis and recession spread around the world (Conklin & Cadieu, 2010).
Competitive Advantages and Limitations of the Serbian Agroeconomy Within the Global Context
Dr. Radovan Tomic, Professor and Dr. Dragica Tomic, Professor
Higher School of Professional Business Studies, Serbia
Gordana Tomic, Belgrade Business School, Serbia
Denis Bugar, Higher School of Professional Business Studies, Serbia
In this paper, the authors point to the importance of improving competitiveness based on an analysis of advantages and limitations which Serbian agroeconomy has in the global business. Main advantages of Serbian agroeconomy are: area of arable land, tradition and participation of the agricultural population in total population, the installed production capacity, while constraints include: the participation of a small percentage of large estates, the unused production capacity. This leads to low productivity which has the greatest impact on competitiveness products. SWOT analysis is used as a method of assessment of competitiveness. Based on the date of analysis we can conclude that agroeconomy in the economic system of Serbia achieves a surplus in foreign trade of agricultural and food products. Finally, authors provide suggestions and measures to be taken in order to achieve better competitiveness. Creating a global environment, the process of globalization are the key phenomenon that dominated the late twentieth century and early twenty-first century. Many authors point out that globalization, ie. striving to create a global environment, is not a new phenomenon, but occurs from the emergence of the modern state. Countries have always had the need for cooperation between countries. Today's globalization is especially actual due to the interaction between people which is much deeper and more intense. Globalization offers great opportunities for sustainable development on a permanent basis. The expansion of trade, introduction of new technologies, a greater inflow of foreign investment are the basis of dynamic economic growth and development, but opens up prospects for prosperity of the population. Globalization is associated with a risk of disrupting the natural environment, which threatens the whole world. For small countries, the only way to avoid isolation, and thereby preserve its values, is to use the positive and minimize negative effects of integration processes. Improving the competitiveness of national economy is an important prereguisite for the integration process in the future. In order for Serbia to achieve prosperous development, it has to increase its exports of goods and services that have high added value. In developmental terms, each country needs to strengthen its own capabilities of the development through the productive cooperation with the world, which includs the exposure to the strong influence of environment.
Adoption of IFRS for SMEs over the World
Dr. Hana Bohusova, Mendel University, Brno, Czech Republic
Small and medium sized companies (SMEs) have an important position in the economy, mainly in the area of employment. SMEs are crucial to most developed and developing economies as well. SMEs are a heterogeneous group, possessing different size, sector, or location. The IASB has published an International Financial Reporting Standard (IFRS) designed for use by SMEs. The aim of this paper is to evaluate the current approach to IFRS for SME implementation over the world, and to analyze the problems connected with a harmonization of financial reporting legislation used by SMEs all over the world. The survey of an adoption process in approximately 40 countries across the world was made. Conclusions of studies concerning the IFRS for SMEs implementation were used for comparison of the attitude to IFRS for SMEs implementation and benefits and problems identification. Small and medium sized companies have an important position in the economy, mainly in the area of employment. SMEs are crucial to most developed and developing economies.In the European Union, SMEs contribute to over 99% of all enterprises and 100 million jobs, representing 67,1% of private sector employment (IFAC, 2010). SMEs are a heterogeneous group, possessing different size, sector, or location. Their activities on the international markets are limited by a great deal of obstacles in comparison to large enterprises. Different national financial reporting and tax systems can be considered as the most important obstacles (European Commission, 2003). SMEs worldwide do however not necessarily engage in similar activities; for example UK SMEs are mainly involved in the agricultural, business and construction sectors; South African SMEs are prominent in community, social and personal services and the finance, real estate, wholesale and agriculture sectors; and in Kenya SMEs are mainly involved in agricultural activities (ACCA, 2000). In Europe, full International Financial Reporting Standards as a tool of financial reporting harmonization are required for about 7,000 listed companies while more than 7,000,000 unlisted companies (SMEs) mostly follow, thus not providing a satisfactory level of international comparability (Albu, Albu, Fekete, 2010). The IASB published an International Financial Reporting Standard (IFRS) designed for use by small and medium-sized entities on July, the 9th 2009. The IFRS for SME is designed to meet the financial reporting needs of entities that (a) do not have public accountability and (b) publish general purpose financial statements for external users. The IFRS for SMEs is a self-contained standard of about 230 pages tailored for the needs and capabilities of smaller businesses.
Obstacles to the Entrepreneurial Start-Up Process in Zimbabwe: A Dynamic Market Perspective
Dr. Alex J. Antonites, University of Pretoria, South Africa
Emmah M. Mungoni, Gordon Institute of Business Sciences (GIBS), University of Pretoria, South Africa
The current economic renaissance occurring in Sub-Saharan Africa encapsulates very unique emerging market trends, also popularly referred to as dynamic markets, where continuous socio-economic changes represent the rule. The case of Zimbabwe with its much alluded instability and political turmoil seeks immediate attention pertaining to economic revival and upliftment. The three main political parties in Zimbabwe signed a Global Political Agreement (GPA), the first of its kind in the history of the country, which seeks to bring political and social stability. The GPA, through the Government of National Unity (GNU) will seek to rebuild the economy of the country from the one with high inflation and negative growth and to a growth economy. Entrepreneurship is an identified area for growth opportunities in any economy and the Zimbabwean economy is no exception. This study seeks to empirically identify the obstacles to entrepreneurship in Zimbabwe, focusing on the start-up process. The study in addition endeavors to understand what these obstacles are. These assumed obstacles are unique to emerging or dynamic markets with blemishing socio-economic conditions. The study further seeks to understand the entrepreneurial skills and the enabling environment that allows the entrepreneurial start-up process to take place in Zimbabwe and hence give the opportunity for sustained growth. The blemishing state of the Zimbabwean economy calls for radical interventions to arrest the continued declining of the economy and to establish sustainable growth opportunities. As Zimbabwe attempts to rebuild the economy after signing the Global Political Agreement (15 September 2009), it is important that the country identifies the key areas for growth and implement policies that allow for that growth. Nieman and Nieuwenhuizen (2009) noted that entrepreneurship is one such area that allows for economic growth, creates employment and improves the social well being of those that engage in the process. The dominant feature of the Zimbabwean economy in the past 5 – 10 years has been its unprecedented high inflation rate. In July 2008 the annual year on year inflation reached record high of 231 million percent (Zimbabwe Statistical Office, August 2009), the highest the world has ever seen. At such high levels of inflation, the Zimbabwe dollar was no longer a viable currency (Reserve Bank of Zimbabwe, 2008). The current CPI stabilised at an alarming 98.2% (ZRB 2011).
Arrogance at the Top
Dr. Richard Murphy, Jacksonville University and Dr. Maja Zelihic, Jacksonville, FL
In the recent past, there has been a plethora of media reports citing corporate scandals. Mr. John Rigas, the founder of Adelphia Communications, the fifth largest cable operator in the United States, is one of the many corporate officers removed by Federal Authorities in handcuffs. The elderly Mr. Rigas, along with his sons, and other top leadership at Adelphia were indicated. This paper will center on the application of business ethics, and inappropriate decisions that Mr. Rigas may have made when he was at the helm of Adelphia Communications. This paper will also demonstrate examples of business practices that may not be illegal; however, they allow serious ethical concerns to remain when inaccurate financial reporting is not questioned in public companies. Ethics is "the study of general nature of morals and specifics moral choices an individual makes in relating members of a profession..." not only when making professional decisions but personal choices as well (Dictionary, 2011, p. 385). Researchers tie the concept of business ethics with a concept of constant struggle and pursuit of moral behavior which sometimes appears to be in a direct conflict with both business and human nature (Weaver, 2011). Sometimes it is hard to make the right choice, especially when pleasure is involved in choosing a behavior that seems to be good for us, but it may not be the right thing to do as it is described by the deontology theory "the good is defined independently of the right" meaning not everything that is good is right or vice-verse.
Technical Cooperation Flows to Sub-Saharan Africa: An Exploratory Analysis of Developmental Impact
Oluyele Akinkugbe, Professor, University of Namibia, Windhoek, Namibia
This paper examines the quantitative nature of the relationship between Human Development Index (HDI) in SSA and inflow of Technical assistance (TA or TC). Results from the analyses undertaken are inconclusive; positive but insignificant relationship in some cases. These suggest the need for more studies on the human development impact of aid, as opposed to the current practice of investigating the overall growth effect of aggregate aid. Output of these studies may provide empirical basis that support some of the aspects of the Paris Declaration on aid effectiveness (PD) and the Accra agenda for Action (AAA). The paper concludes by recommending that for technical assistance to be 'real', reform needs to be anchored in four underlying principles—putting recipient countries in the lead; giving them the freedom to choose their own development path; mutual accountability between donors and recipients; and country specificity. Theories and policy prescriptions for economic development have gone through a number of paradigms in the last four to five decades (see Adelman, 2003; Mavrotas et al, 2007 for surveys). One of these is based on the dual gap analysis of Chenery and Strout (1966), which perceives that for a typical developing county, the major obstacle to development is either capital or foreign exchange shortage. Another paradigm, focusing specifically on the private sector, contends that private sector entrepreneurial shortage constitutes the major obstacle to development (see Odedokun, 2004). Furthermore, and with strengthening of the bilateral and multilateral aid architecture and relations after World War II, the concept of “gap filling with aid flows” became formally enshrined in development theory, to such an extent that aid became synonymous with development (Odedokun, op cit). The implicit rationale of foreign financial aid, or official development assistance (ODA) flows, derives from these capital/foreign exchange obstacles and/or the need for ‘gap filling with aid’, to achieve sustainable development in developing countries.
Do Territorial Digital Patterns Matter?
Dr. Teresa Borges Tiago and Dr. Flavio Borges Tiago, University of the Azores, Portugal
This article discusses the relationship of digital patterns to knowledge management practices. It argues that some of the enablers and inhibitors come from firms’ regional and local environment. Understanding the factors that determine technology and knowledge management adoption is thus a highly relevant topic from the policy point of view. Considering the growing impact of e-business on regions, this research sets the background for the assessment of the relationship among ICT, knowledge management, and e-business practices. Since the 1990s, especially in developed countries, there has been a rapid diffusion of information and communication technology (henceforth, ICT) and Internet use. The Internet has introduced a wave of changes, not only on how to trade and do business (Barnes & Cumby, 2002; Brännback, 1997; M.T.B. Tiago, Couto, Tiago, & Cabral Vieira, 2007) but also to firms’ internal and external characteristics (Pires & Aisbett, 2001). Several research organizations and academic researchers have attempted to quantify the extent of national investment in ICT by deriving generalized indexes of IT or “e-readiness” (e.g. Colecchia & Schreyer, 2001). Three effects on economic growth and productivity driven from ICT are common to most of these studies. The first is the investment made in ICT and its contribution to capital deepening, thereby helping to increase labour productivity. Secondly, the rapid technological evolution in the production of ICT goods and services may also leverage the efficiency of capital and labour, or multifactor productivity (MFP), in the ICT-producing sector. The third aspect considers the greater adoption of ICT in all the economy domains which helps firms to increase their overall efficiency. These impacts can be analysed at several levels, based on macroeconomic data (Colecchia & Schreyer, 2002; Jorgenson, Ho, & Stiroh, 2005; Van Ark, Inklaar, & McGuckin, 2003), industry data (Eid, Trueman, & Ahmed, 2002; Pae, Kim, Han, & Yip, 2002; M T B Tiago, Couto, Tiago, & Vieira, 2007) or even individual firms’ data (Eder & Igbaria, 2001; Pae, et al., 2002; M T B Tiago, et al., 2007).
The Free Market, Manifest of the Human Nature
Ligia Munteanu, Alexandru Ioan Cuza University, Iasi, Romania
As empirical studies prove the free market within the capitalistic era seems to be also the best way of achieving the wealth of nations and the main blamable factor for the great economic crisis. Not few are those who point the finger at the free market and call for intervention of governments in these unstable times. This paper underlines some contra arguments for this vision, counting on the moral values behind this libertarian economic practice. The origins of the institution of the free market stand out the interdependence with the human nature and form philosophical and economical arguments to sustain the fact that the free market is defined by the complexity of human nature, it depends on a natural, spontaneous order and it has been developed around human cooperation, that led to a civil society of today. Along history, the theme of economic development was the main subject of debate from media to scientific forums. Haw can societies have progress, growth, richness, was the question with such a variety of answers. In the end, this was what Adam Smith said to be the aim of any economist, which is to find the best way to form the "wealth of nations"; and not few were the ones who devoted their life to this dream. It is certain that progress relies on a strong economy and that the power of a developing state depends on the economic flow. But the way in which the economic life was understood, led to different models of policies, visions, concretized in many forms of government. After year 1989, the victory of capitalism was a reality. The "unique communist manual" was long gone and the barriers begin to fall. Nobody would wonder then that something else would stand in front of the economic liberty. But history does prove us again that we should learn from the past and faces us with a new crisis. The fast development of the economies all around the world suddenly stopped and as it was not enough, every statistic started to show more and more disaster.
Measuring Tax Effort for a Small Open Economy: The Case of Barbados
Chrystol Thomas and Tracy Maynard, Economist, Central Bank of Barbados
This paper attempts to calculate the tax effort for a small emerging economy during the period 1987 to 2009. The study adopts an econometric technique that gives more ‘unbiased’ results in measuring tax effort. Evidence from Kim (2007) found that the Kalman filter estimator is more accurate than other methods employed in the past. The results from this study are useful as it provides an indication of how a country is doing in terms of tax collection relative to what could be reasonably expected given its economic potential. Governments all over the world are faced with the challenge of generating sufficient revenue to meet rising expenditure levels. Given that some of these economies lack physical resources in which to derive revenue, statistics have shown that the majority of these countries have relied significantly on taxes as a means of reducing the fiscal deficit gap. Today, the world economy is undergoing various economic shocks, which are further threatening the sustainability of the fiscal position of economies, particularly small nations that are dependent on economic powerhouses such as the United States and the United Kingdom. As such, there has been greater pressure on governments to implement fiscal measures that would help contain this growing deficit. In Barbados, the fiscal deficit to GDP at the end of fiscal year 2009/10 was 7.9%, which is considered high when compared to internationally accepted standards or as recommended by the IMF. The government has therefore indicated a commitment, through a Medium Term Fiscal Strategy (MTFS), to reduce this deficit so that a fiscal surplus is achieved by 2015-16. The government has been able to cut its current expenditure, particularly transfers and subsidies, by 7.2% for the first five months of 2010 when compared to a similar period in 2009. Despite this improvement, revenue has been declining at an alarming rate (by 9.1% for first five months in 2010 over 2009).(1) As such, an in-depth analysis is necessary to determine how well Government has been able to collect tax revenues relative to the amount of tax that should be collected given the structural characteristics of the economy.
Sustainable Tourism as a Springboard for Sustainable Community Development: From Theory to Practice
Acha Anyi Paul Nkemngu, Tshwane University of Technology, Pretoria, South Africa
The purpose of this study is to test the applicability of sustainable tourism theory within the sustainable community development framework. Starting with a review of literature on sustainable tourism and sustainable development, the study focuses on a project called “Achas centre for sustainable community development” (ACSCD). Based in the tourist hot-spot of Buea in the South West region of Cameroon, ACSCD operates on a theoretical framework designed to orchestrate development in this mountainous (volcanic) town and the coastal city of Limbe. The research employs a practical case study approach by exploring the conceptual base of this project that seeks to develop tourism as a springboard for sustainable community development. The operating model of ACSCD reveals that the sustainable community development centre is complemented by the training centre “Achas Higher Institute of Sustainable tourism, hospitality and business. While the higher institute imparts the training that empowers community members with tourism and community development skills, the sustainable development centre channels these skills through identified focus areas into community development projects. The significance of this study lies not only in its conceptualisation of a new approach to sustainable community tourism development, but also its demonstration of the fact that sustainable community development is a result of both skills acquisition and the transmission of such skills into viable community development projects.
Physicians’ Technology Adoption: A Fad or a Must Have!
Dr. Maria Teresa Borges Tiago, Dr. Flavio Gomes Tiago, and Sandra Silva
University of the Azores, Portugal
This article tries to be both a review and an agenda-setting piece. It argues that Technological Acceptance Model suffers from conceptual end-users focus and oversimplification of its development processes. Nevertheless, there is a consensus in business and academia that the technology adoption process is a key component of success and allows firms to achieve and sustains competitive advantages independently of the sector of activity. In a digital era, these advantages arise from the potential of information and communication technology to improve healthcare firms’ daily activities. Thus, this research bridges the gap in the assessment of ICT acceptance from physicians’ point of view, using an extension of TAM. Technology has become a constant in the lives of millions of people around the world. To the young generations life without technology is classified almost as an absurd. The truth is information systems (IS) cannot be effective unless they are used. However, the way people adopt and exploit the technology takes very different patterns. Most of the users are dealing with information systems and technologies develop and implemented by others. This raise a question: what motivates users to adopt new technologies? Since the seventies, research on information systems has contribute to a better understanding of the advantages related to the use of IS and the facilitators factors of an ICT adoption process. The work of Davies technology acceptance model for empirically testing new end-user information systems: theory and results 1985publisher Massachusetts Institute of Technology(1985) brought some light to his matter, introducing a new framework of analysis – Technological Acceptance Model and since then several studies have been conducted analyzing the adoption of technologies by end users. On his model, Davis examines the mediating role of perceived ease of use and perceived usefulness in their relation between systems characteristics (external variables) and the probability of system use (an indicator of system success). An update version of his research -TAM2- has presented several years later and the overall results explain a great percentage of systems use. In both works the emphasis has been set on end users performance.
Women CPAs: From Retaining to Recruiting
Dennis C. Stovall, Grand Valley State University, Grand Rapids, MI
For the past decade, public accounting firms have focused their efforts on retaining talented female accountants currently employed at their firms. In the past, firms have recognized a strong trend among females who accept public accounting positions for the sole purpose of attaining their certification. Once certified, they leave the firm in search of better opportunities, including a more flexible schedule, to allow a balance between a family and a career. This article outlines a shift that may result from newly passed legislation, moving away from efforts to retain women toward efforts to recruit women. This will allow accountants to attain their certification through industry practice rather than practicing exclusively at public accounting firms. These public firms may encounter difficulty when recruiting up-and-coming talent who desire a better work-life balance, which public accounting does not always provide. On a positive note, public accounting firms may see a decline in the number of personnel who choose to “flee” their positions post-certification in search of other opportunities. This decline may occur when potential employees choose the field of public accounting to attain certification rather than working within a specific industry because of its unique demands and rewards.
An Examination of Structure of Executive Compensation in Private Sector
Dr. Maneesh Sharma, Indiana-Purdue University Fort Wayne, Fort Wayne, IN
Much has been written about the relationship between executive compensation and performance of firms. The results are surely mixed, with weak economic relationship structure between CEO pay and firm performance. The study of relationship between executive compensation and firm performance really took off after the publication of the seminal paper by Jensen and Meckling (1976), wherein they describe how interests of various stakeholders in a public firm can be addressed by proper incentive structure. In their paper they argue that if managers of corporations are compensated in a way that aligns their selfish interests with those of shareholders (Principals), then managers will perform in the interest of shareholders. This paradigm of course led to option and equity based compensation structure. Since the advent of the principal-agent relationship, there has been an explosion in executive compensation literature. Numerous (Coles, et. al (2006); Guay (1999); Murphy (1999)) studies have been published that examine the role of compensation and its relationship to firm performance. Some of the compensation structures have truly been outrageous, the likes of which we have never seen. For example, in 2005, Exxon-Mobil reported paying its CEO close to $400 million who had retired at the end of 2005. From years 1993 to 2005, the CEO of Exxon received a total compensation of $685 million. What is astonishing about a compensation structure like this is that most of the expansion in the company’s market valuation was an “industry” event. That is, that the expansion of Exxon’s market value was a reflection of an expanding economy, and the price of a commodity that had risen several folds during this time.
The Trade Balance Effects of Outward FDI: Evidence from Portugal
Miguel Fonseca, University of Porto
Antonio Mendonça and Jose Passos, Technical University of Lisbon
Given the increased internationalisation of the Portuguese economy through outward Foreign Direct Investment (FDI), particularly on the Portuguese-speaking countries, our main objective is to discuss the empirical relationship between this outward FDI and trade. We use panel data analysis within a framework of gravity equations for exports and imports, with a sample composed by EU-15, U.S.A., Brazil, Angola, Japan and China, for the period 1996-2007. Our main conclusion is that the empirical evidence for Portugal is consistent with a substitution hypothesis between direct investment abroad and trade, and consequently we detect a negative trade balance effect with the majority of countries in our sample, excepting Angola and, in a lesser extension, Spain. The main objective of this paper is to analyse the effect emanating from Portuguese outward Foreign Direct Investment (FDI) on exports and imports with its main economic partners, in the period between 1996 and 2007. This study seemed particularly relevant to us for two reasons. Firstly, we want to participate on the debate that has emerged in the last decade about what happens in home country when national firms become increasingly multinational. Before, the discussion on the effects of multinational firms tended to be focused on host countries, i.e. the countries where they operate. Secondly, we want to evaluate if the complementary relationship between foreign production and trade, shown in most studies for traditionally outward investor economies (the most developed nations) also holds for a country like Portugal, where outward FDI is a more recent phenomenon. The paper is structured as follows: section 2 presents the theoretical background of our research; section 3 briefly reviews the previous empirical studies regarding the question in analysis and section 4 contains the description of data and econometric methodology, jointly with the presentation of main empirical results. Finally, section 5 presents the conclusions and further research questions.
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