The Business Review, Cambridge

Vol. 23 * Number 1 * Summer. 2015

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

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Supply Chain Management Education Using ERP Software: A Simulation-Based Approach Using SAP ERP-Sim

Dr. Jonathan Davis, The University of Houston Downtown, TX

Dr. Peter DeVries, The University of Houston Downtown, TX



Supply chain management is an increasingly important factor in competing successfully in the marketplace. In this paper, the authors examine how an enterprise resource planning (ERP) simulation approach is useful in teaching supply chain management concepts. ERP-Sim is an SAP-based simulation tool designed by HEC Montreal. The tool simulates a business in great detail, allowing student teams to control day-by-day business decisions and see results in an accelerated manner. Each student team manages transactions with customers and suppliers by sending and receiving orders, delivering products, determining pricing strategy, and managing inventory and cash flows. Student understanding was gauged using a pre-test/post-test method to measure teaching effectiveness, the results of which support the ERP simulation approach for certain pedagogical purposes. Business schools prioritize the integration of real-life examples, case studies, and technology into business curricula, and simulations provide an opportunity to meet this growing educational need. According to Faria et al. (2009), business simulations provide for dynamic business decision making, where students formulate a strategy and then carry out a series of decisions to implement the strategy. Constant feedback received from the simulations enables them to quickly evaluate their strategy and change it if necessary.  This paper examines ERP-Sim, a simulation package developed by researchers at HEC Montreal to teach business process flow in ERP systems for business students. ERP-Sim is a team-based simulation that allows students to operate a business, make strategic decisions, forecast sales, and monitor market trends to determine pricing strategy. This paper discusses an approach for using ERP-Sim to simulate supply chain business scenarios, make situational decisions, and assess the impact of those decisions on the firm’s profitability through the analysis of performance reports. This paper has two important contributions to the existing literature. First, this paper explores the applicability of ERP-Sim for supply chain decision teaching and analysis. Second, this paper offers an approach to linking strategic decisions to supply chain outcomes. Innovative technology in business education allows students to integrate information in their decision-making processes and to learn skills more effectively than in typical lecture-based classes. Moreover, innovative technology as a learning tool helps students to define their goals, make decisions, and evaluate progress. The use of innovative technology makes students active recipients of information transmitted by a teacher, textbook, or seminar. Thus, the teacher's role changes from being the center of attention as the dispenser of information to a facilitator who sets learning goals and provides guidelines and resources (Stallings, 1997). SAP is a worldwide leader in Enterprise Resource Planning (ERP) software. Headquartered in Germany, SAP’s ERP systems are used by the majority of Fortune 500 companies to integrate business processes with information needs. SAP allows organizations to seamlessly integrate their operational and functional units and provides management the capability to monitor and control the operations on a real-time basis. One of the most important characteristics of SAP’s software is its ability to customize and integrate numerous business processes, allowing organizations to configure SAP to satisfy unique needs without major changes in the core system (Hejazi et al., 2003). The remainder of the paper is organized as follows: A literature review of previous studies related to innovative technology usage in business schools is presented. Then the ERP-Sim software is discussed. Next, the supply chain management decision analysis project using ERP-Sim is described. Then the students’ perceptions about ERP-Sim and the results of a pre- and post-testing are presented. Finally, some of the limitations of this research are provided and the paper is concluded. The literature related to ERP-Sim is somewhat limited since the software was only first introduced in 2006, and it was not until 2009 that it became widely used. However, numerous studies have addressed the use of technology in the classroom. For example, Anderson, Getz, and Siegfried (1997) stated that, if institutions of higher education do not adopt innovations in a timely manner, their productivity will stagnate. Based on a survey of 238 U.S. colleges and universities, they found that innovations in libraries and computing have occurred twice as rapidly as in other educational settings. They concluded that using innovative teaching tools is crucial to the strategic and economic growth of such institutions. Fuchs and Wobmann (2004) found a positive relation between using computers in education and student achievement. However, they did not distinguish between the types of “computer presence” as teaching tools: computer-based presentation and computer-based instruction. Computer-based presentation involves a multimedia presentation or using computers to enhance the conventional classroom delivery method and to make it more appealing; computer-based instruction diminishes the traditional role of the teacher in favor of the computer. Principe, Euliano, and Lefebvre (1998) maintained that computer-based presentation alone does not improve the learning environment but serves as a faster and more accurate way to present material. They asserted that this type of learning environment increases the distance between the professor and students by making students more passive, and thus hindering understanding and retention. Yet Diwan et al. (2001) found that exposure to Internet-based learning enhances the learning environment and increases student enjoyment.  In response to the need for innovative and engaging teaching methods, business schools have been implementing several pedagogical strategies, including capstone projects, integrated case studies, team teaching, information technologies and tools (Seethamraju, 2007) and have experimented with different learning environments such as workplace learning, experiential learning, experimental learning, collaborative learning, problem-based learning, blended learning and simulation games (van Baalen and Moratis, 2001).  Paskelian, DeVries, and Harun (2013) studied the effectiveness of SAP in finance classes and found that simulation, generally, and SAP, specifically, was a pedagogical method that finance students believed was valuable in the classroom. Bristow and Dunaway (2012) explored the benefits of deploying an ERP system within the organization. They find that ERP systems make information readily available for the proper users, all data is kept in a central repository, data redundancy is minimized, and there is a greater understanding of the overall business picture. Fuβ et al., (2007) compiled the benefits of ERP systems from numerous sources and found that ERP systems increase organizational flexibility, improve security and reduce costs. Also, ERP systems provide higher return on investment, and make the business processes more efficient with higher integration among the difference business processes. Finally, ERP systems provide better information transparency and quality and higher compliance with legal requirements and frameworks. Cronan et al. (2012) studied the impact of ERP systems on business organizations. They found that these systems offer opportunities for companies regarding the integration and functionality of information technology systems; thus providing them a competitive advantage that is necessary in today’s global companies. Furthermore, they also found that training for the incorporation and use of ERP systems is difficult and challenging. Therefore, they proposed that a good strategy for effective training include the use of business simulations. Seethamraju (2007) studied students’ perceived knowledge gain after incorporating SAP instructional materials into a business curriculum. His analysis revealed that students perceived that they had gained a significantly high level of knowledge using SAP software. Hodgkinson and Healy (2008) explored the importance of decision-making under time pressure and found that only an expertise in business administration is no longer sufficient for getting adequate jobs. They concluded that companies are looking for both methodological and social competencies from their candidates.


Countering Moral Muteness through Dialogue, Good Moral Conversation, and Conversational Learning

Dr. Ronald R. Sims, Professor, College of William and Mary, VA

Dr. William I. Sauser, Jr., Professor, Auburn University, AL



This paper takes a closer look at leaders’ responsibilities for building an organizational climate intended to proactively counter moral muteness.  The paper first briefly discusses the concept of moral muteness as described by Bird (1996), then highlights the importance of dialogue, good moral conversation, and conversational learning as opportunities for leaders to create and build organizational climates best positioned to counter moral muteness and unethical or immoral behavior.  The paper concludes with a brief summary of the role of the organizational leader in encouraging and supporting a new kind of conversation that catalyzes continuous dialogue and good moral conversation when it comes to business ethics and morality. “We have cast our own lot with learning, and learning will pull us through.  But this learning must be reimbued with the texture and feeling of human experiences shared and interpreted through dialogue with each other” (Kolb, 1984, p. 2).  Creating an organizational climate where employees feel safe to express their views on moral concerns is paramount to increasing the possibility of organizational leaders being able to counter moral muteness and unethical behavior.  Talking and learning about ethics evokes high anxiety and often fear in an organization’s most seasoned employees no matter their level or responsibility.  As a topic and organizational issue, ethics and morality have few equals in terms of uncertainty of outcome.  Awareness of the strong tone of beliefs and emotion generated when ethical issues are discussed leads to expressions of dismay at a trend that focuses on organizational values, beliefs, behavior and actions without attending to issues of process.  It has been our experience that it is very difficult to talk about ethics, values, beliefs, morals, virtue, integrity, etc. in a meaningful way without also talking and learning about values, beliefs, morals, virtue, integrity, etc.  The mere introduction to these and other ethically-related issues often generates in employees powerful emotional responses ranging from self-doubt and shame to frustration and confusion.  These emotional responses, if not openly addressed, can result in moral muteness or silence that can do nothing but increase the likelihood of unethical or immoral behavior on the part of employees. Feeling safe in the work environment takes on an added significance when one considers moral or ethical behavior.  Employees must feel supported and believe they can make choices or decisions related to ethical issues or dilemmas, especially when  they are venturing into what for many is uncharted territory.  In our view, a sense of security must be attained before employees can begin to consider the unfamiliar.  Trust is critical and enhanced by guidelines and organizational norms that encourage participation, risk taking, self-disclosure, mutual support, and dialogue (Schor, 1993). How do organizational leaders create an environment where employees are safe to think through the various factors involved and what they will need to do when confronted with ethical issues or dilemmas?  For example, will an employee be rewarded more for getting the job done on time no matter how she or he does it (even if it means not doing the right thing) or for taking the time to make the right (or ethical or moral) decision?  One would hope both factors would weigh equally into her or his thinking.  In the case of the organization’s leaders or the employee’s most immediate supervisor, is she or he giving the employee what is needed to be able to articulate the values which must be upheld and the organizational climate in which the employee feels safe enough to speak up in the face of potential wrong-doing?  Or is there the possibility that the pressure will be so great that the employee will cave and thus, not only bring about a risk to the organization, but also perpetuate what has become known as a culture of silence (Heineman, 2007) or moral muteness (Bird & Walters, 1989). There is first of all the issue of being unable to speak about issues of moral concern – issues which violate one’s conscience, as well as the organization’s values – because one does not have either the vocabulary or the comfort level to speak in such terms.  Secondly, there is the issue of not being able to speak out for fear of voicing a concern because one perceives the possibility of retaliation.  Organizational leaders need to create an honest and open culture where employees do feel safe to come forward when they see something going on that is illegal or counter to organizational policies and procedures or expressed organizational values, rather than remaining silent (Lennick & Kiel 2005; Mirvis & Googins, 2006).  One hopes that organizational leaders have ensured at a minimum that there are vehicles like “ethics hotlines” where employees are able to make early contact either anonymously with the “hotline” that functions as an ombudsperson or calling the ethics office with the assurance of confidentiality to at least inquire about whether or not situations could be illegal or unethical or whether potential decisions could lead to outcomes in violation of the organizational policy or organizational culture.  When people do not speak up, risks to the organization occur and dissatisfaction possibly results in a status quo that cannot be challenged.  Moral behavior and ethics cannot survive unless people speak their conscience. Conceptually, people are morally mute or silent when they fail to voice moral concern in situations which normally can be expected to evoke moral sentiments, as in a U.S. manager in Southeast Asia for example paying kickbacks to “guarantee” that the contract is obtained, adapting to the allegedly local “customs,” though illegal nonetheless (Li, 2003; Yadong, 2005; Tan & Snell, 2002; Verhezen, 2009).  Before turning to our discussion of dialogue we believe it is useful to highlight several key points offered by Bird (1996) in his book: “Many people hold moral convictions yet fail to verbalize them.  They remain silent out of deference to the judgments of others, out of fear that their comments will be ignored, or out of uncertainty that what they might have to say is really not that important… (…) People are morally mute when they fail to speak up about matters they know to be wrong… (…) People may be mute in other ways … They may fail to raise questions about activities that seem to call for further inquiry. (…) People are morally mute when they fail to defend their ideals and when they cave in too easily and do not bargain vigorously for positions they judge to be right…” (Bird, 1996, pp. 1-2) “Several forms of moral talk often exacerbate moral issues because they typically detract from organizational problem solving, … they often … give moral talk itself a bad reputation… [Such] expressions of moralistic talk probably reinforce the existing tendencies toward moral silence…” (Bird, 1996, pp. 3-4) Other important points and illustrations are nicely summarized in advance in what serves as a main thesis of Bird’s book:  “Many people in business fail to speak up about their moral convictions. They fail to do so in a number of different ways.  As a result many of the ethical issues and concerns facing business are not addressed as fully, as clearly, and as well as they would be if people voiced their concerns.  Moral silence is occasioned and reinforced by the correlative phenomena of moral blindness and moral deafness (as well as the quite opposite and contrary practice of giving voice to moralistic concerns)…” (Bird, 1996, p. 4; our italics) As is Bird, we are mainly concerned with attitude-behavior gaps, or in his words, with the “inconsistencies” between moral sensitivity, observations and convictions on the one hand and not speaking up or not voicing them, not acting in accordance with them on the other.  For a better understanding of moral concerns and of voicing such concerns, not the least for investigating the inconsistencies between one’s existing concerns and not voicing them (or gaps between them, or barriers to voicing them), Bird identifies and elaborates on a large number of relevant dimensions and factors. 


Would You Bet Your Savings on Today’s Best Analyst? A Re-examination of Analysts’ Earnings Forecast Accuracy Persistence

Dr. Andreas Simon, Pepperdine University, Malibu, CA



Investors can track, to a hundreds of a percentage point, how individual Wall Street analyst’s stock picks perform. But they are largely powerless in determining the degree to which an analyst’s results are a function of skill – and how much they are attributable to just plain luck. This paper investigates whether we can identify, in advance, analysts who will issue accurate earnings forecasts next year. In other words, we are interested whether it is possible for individual investors to identify analysts who are truly skilled and not just lucky. The results suggest that there is some persistence in analysts’ forecast accuracy. However, the difference in forecast accuracy is low, and analysts seem not to be immune to behavioral biases affecting average investors. Thus, investors would be better advised to go with index funds and not try to pick the best analyst. A potential explanation for our finding of very low persistence in the forecast accuracy is related to the findings in Groysberg, Healy, and Maber (2011) that earnings forecast accuracy is not related to analyst compensation. A general notion among investors, the media, and academia is that substantial differences exist in the earnings forecasting ability of Wall Street equity analysts.1 In this article, we examine whether those differences are consistent. Exploration of whether analysts use consistent techniques to derive company earnings estimates is of benefit to market participants, who rely on the investment advice and research conducted by market professionals. In particular, are the substantial resources allocated to equity research within the major investment banks actually leading to the identification of mispriced securities and the investment potential of listed firms? Practically, it would be rational for investors to consider the earnings estimates of accurate forecasters more than the estimates of inaccurate forecasters (Sinha et al., 1997). Moreover, better inputs (accurate future earnings) into asset pricing models (e.g., capital asset pricing model, consumption CAPM) should improve firm valuation reliability, of which the implications are widespread, from industry regulation pricing, capital raising opportunities, and debt issuance (lower risk through reduced earnings variability). In addition, further research into the determinants of ex ante forecast accuracy may assist the equity research industry to improve their own forecasting techniques and resource allocation. However, there is growing evidence in the finance and accounting literature that analysts’ earnings forecast are affected by behavioral biases such as market sentiment and rounding. Given the difficulty of forecasting future earnings and the possibility that analysts do not have sufficiently strong incentives to spend the additional time and effort required to rigorously forecast them (Bradshaw 2010), it is possible that an analyst may reduce effort by making a number of simplifying assumptions about the future earnings of the firm. In this scenario, we would then expect an earnings forecast to be a noisy measure of actual earnings, reflecting aspects of the analyst’s estimate of the earnings being influenced by behavioral biases. This interpretation is consistent with theories in the behavioral literature that shows that behavioral biases (i.e. anchoring) arise in situations that require more judgment. Earnings forecasting requires a multitude of judgments, which may lead analyst to suffer from behavioral errors and make irrational forecasting decisions (Tversky and Kahneman, 1974).We hypothesize, therefore, that failure to control for cross-sectional differences in the extent to which analysts’ earnings forecasts are influenced by behavioral biases, which we refer to as forecasting behavior, may lead to spurious persistence in forecast accuracy.  To test this hypothesis we control for forecasting behavior by estimating each analyst’s forecast error for a particular firm through a Tobit model. We find that after controlling for forecasting behavior, the conditional probability that the current period’s most accurate analysts continue to be the most accurate analysts in the subsequent period is 28.9%.  The corresponding persistence probability for the 2nd, 3rd, 4th, and 5th quintiles are 28.3%, 28.5%, 30.5%, and 31.9%, respectively.  These probabilities suggest a significant, yet weak persistence, only slightly higher than the unconditional probability of 20%. Our finding contrasts the relatively high probability of forecast accuracy persisting found in prior research (e.g. Clement 1999; Sinha et a. 1997). As such, our measure of forecasting behavior plays an important role in separating the persistence in individual forecasting skill from pure luck in forecasting. Our study contributes to the literature in several important respects.  We shed light on the magnitude of the persistence in forecast accuracy, and show that this persistence is relatively weak.  Moreover, it is worthwhile to better understand under what circumstances analyst forecast accuracy persists. The investment community and popular press’ interest in the selection of “All Star” analysts, and their reliance on analyst rankings and on information provided by analysts suggest that analysts have value for investment decisions. However, the difference in forecast accuracy is low. This is an important finding. Analysts are considered sophisticated market participants that influence stock prices. The argument goes: if they cannot process financial information rationally, what chances do small investors have to make successful investment decisions. While prior research shows that analysts have an edge in processing quantitative information (Simon and Curtis 2011), negative returns following analysts’ stock price recommendations also suggest that they suffer from behavioral errors. Thus, investors would be better advised to go with index funds and not try to pick the best analyst. There are three papers on this topic from which we can place our research question in context. First, Loh and Mian (2006) form portfolios according to the recommendations of accurate and inaccurate forecasters, with accuracy measured in the same year as portfolio formation. Importantly, Loh and Mian treat each analyst-firm as an individual observation in each year. This means that an analyst can be classified as accurate with respect to one firm and inaccurate with respect to another firm. Loh and Mian report monthly abnormal returns of 1.27 per cent for the most accurate analysts, suggesting that investors who follow the investment advice of the most accurate earnings forecasters can make money in the stock market. However, the portfolio formation strategy cannot be implemented because we do not know, in advance, which analysts will make accurate forecasts. Second, Hall and Tacon (2010) form portfolios according to the accuracy of analysts in the previous year, thereby testing whether investors can earn abnormal returns by following the recommendations of analysts who were most accurate in the prior year. Again, the unit of analysis is the analyst-firm in each year. They find that abnormal returns from this strategy are insignificantly different from zero. This finding holds even when analysts are partitioned on the basis of both prior forecast accuracy and recommendation profitability. Third, Simon (2014) examines the persistence in the relative earnings forecast accuracy of financial analysts over time and whether it is related to contemporaneous and future stock recommendation profitability. He finds that the persistence in the relative forecast accuracy is weak.  In particular, when he controls for forecasting complexity (i.e. standard deviation of analyst forecasts). The results suggest that the analysts who deliver superior earnings forecasts in one period have low probability to provide superior forecasts in the subsequent period. However, Simon shows that this reduced persistence measures true forecasting ability.  When he forms portfolios using recommendations of analysts identified as superior in two consecutive periods, controlling for forecasting complexity, Simon finds significant abnormal returns after adjusting for the Fama-French and Momentum factors. The approach by Simon has a practical justification. From the perspective of forming an analyst research team, the firm would consider the forecast accuracy of the analyst across all stocks covered. The authors allude to the distinction between firm-level and analyst-level accuracy in footnote 6, in which they raise the question, “given an analyst delivers superior advice for a specific firm, what weight should be assigned to that analyst’s advice for his broader portfolio?” However, from the perspective of a portfolio manager taking advice from analysts, there is every reason to think that managers consider analysts to have better insights into specific stocks than others. As a simple example, the manager talks to one analyst about the prospects of Microsoft and another analyst about the prospects of Apple. So there is also a practical justification for considering the analyst-firm as the unit of analysis – the focus of this study. A second justification for performing analysis at the analyst-firm level is that this is a more powerful test of whether ex ante forecast accuracy is associated with behavioral factors.


The Effect of Gender and Attachment on Forms of Workplace Bullying

Dr. Jacqueline N. Hood, Chair and Creative Enterprise Endowed Professor, University of New Mexico, NM

Elizabeth A. Hood, Brandeis University, MA

Dr. Kathryn J. L. Jacobson, University of New Mexico, NM



Bullying is becoming an increasingly important topic in the management literature as the negative consequences of bullying in the workplace become more understood. Although there has been a large amount of research on the prevalence of workplace bullying, as well as the individual and organizational consequences of bullying, little is known about the etiology of the bully. Further, although some research exists on gender differences in how workplace bullying is exhibited, overtly or covertly, there is a paucity of research on how attachment can impact bullying differently according to gender. This paper discusses two forms of workplace bullying and their relationship to attachment theory according to gender. Propositions for future research are provided. The current economic environment, along with organizational change initiatives (e.g., rightsizing, outsourcing, mergers), is stressful, with the individual employee experiencing heightened anxiety and fear. This anxiety and stress on managers and workers sometimes results in aggressive behavior towards others. When this aggressive behavior is targeted towards an individual or a group of individuals and is sustained over a period of time, it is referred to as bullying. Workplace bullying is becoming a topic of increasing importance for organizations attempting to cope with the high stress levels instigated by organizational changes as well as the global economic pressures. Managers need to ensure that they are creating a positive work environment in which they are able to retain the most productive employees. Workplace bullying can drive good employees out and decrease the productivity of those remaining in the organization.  Workplace bullying is defined as repeated, malicious, and health-endangering mistreatment of one or more individuals that are unwanted by the target(s) and cause humiliation, distress, or harm to that individual or group (Jennifer, Cowie, & Ananiadou, 2003; Einarsen, 1999; Namie & Namie, 2000). It is a form of aggression and violence in which the target of workplace bullying does not invite or welcome such behavior, and the behaviors by the bully are intentional (Keashly & Neuman, 2005). Bullying behavior can take many forms, including emotional and physical abuse or harm to the individual or group (Brodsky, 1976; Einarsen, 1999). Bullying behaviors can include threat to professional status (e.g., public humiliation), threat to personal standing (e.g., name calling), isolation (e.g., withholding of needed information), overwork (e.g., impossible deadlines), and destabilization (e.g., given meaningless tasks) (Rayner & Hoel, 1997).  The intent of the bully is of less importance than the outcomes or effects of the bullying. The motivation or intent of the bully is not always obvious or apparent, and it has been argued that bullies will sometimes engage in aggressive behavior that allows them to conceal any hostile intentions (Einarsen, Mattiesen, & Skogstad, 1998).  Attachment theory is a well-accepted theory that analyzes the nature of the parent-child bond (Bowlby, 1958; Hazan & Shaver, 1994). Securely attached individuals in comparison with insecurely attached individuals have been found to exhibit higher levels of self-confidence, competency and socially skilled behaviors (Elicker, Englund, & Sroufe, 1992). The theory has been applied to relationship behavior into adulthood (Hazan & Shaver, 1994; Little, Nelson, Wallace & Johnson, 2011; Mikulincer, Florian, Cowan & Cowan, 2002). Aggressive behavior may be triggered when the insecurely attached individual feels threatened, possibly resulting in bullying in the workplace (Hood, Hood, & Jacobson, 2014). Although much has been written on bullying and attachment as separate constructs, little has been written on their interrelationship.  In addition, there is a paucity of research on how men and women may differ in their bullying behavior.  Further, gender has not been considered in terms of the relationship of bullying and attachment. This paper will explore the influence of gender on attachment and resulting bullying behavior. Propositions for future study will be presented. Studies in the U.S. indicate that workplace bullying affects 10 percent of the workplace population at any one time, with 25-30 percent of workers being subject to bullying at some time in their careers (Keashley & Neuman, 2005; Lutgen-Sandvik, Tracy & Albert, 2007). Such bullying has been found to be related to heightened levels of anxiety, depression, burnout, frustration, and helplessness, and to negative emotions such as anger, resentment, and fear (Keashley & Neuman, 2005). Individuals subject to workplace bullying have difficulty concentrating at work, with lowered self-esteem and self-efficacy as a result (Keashley & Neuman, 2005). Victims of bullying have been found to exhibit a number of negative outcomes, including psychosomatic illness (Djurkovic, McCormack, & Casimir, 2004), reduced productivity (Hoel, Einarsen, & Cooper, 2003), alcohol abuse (Richman, Flaherty, & Rospenda, 1996), post-traumatic stress disorder (Jennifer, Cowie, & Ananiadou, 2003; Vartia, 2001, 2003), and decreased job satisfaction, reduced organizational commitment, and greater intention to leave (Tepper, 2000). Workplace bullying is aggressive behavior towards others at work. Aggressive behavior in the workplace can consist of both physical aggression and emotional aggression. A significant amount of aggressive behavior in the workplace consists of nonphysical, indirect, and passive actions (Neuman & Baron, 1998). Although physical abuse is an obvious bullying behavior, emotional abuse can also be clearly evidenced in instances of bullying. Emotional abuse involves “repeated hostile verbal and nonverbal, often nonphysical behaviors directed at a person(s) such that the target's sense of him/herself as a competent worker and person is negatively affected” (Keashly & Jagatic, 2003). In a study of the United States Department of Veterans Affairs, Neuman and Keashly (2004) found the top ten hostile behaviors in the workplace included the following: Emotional abuse is clearly evidenced in instances of bullying.  Emotional abuse involves “repeated hostile verbal and nonverbal, often nonphysical behaviors directed at a person(s) such that the target’s sense of him/herself as a competent worker and person is negatively affected” (Keashly & Jagatic, 2003).  Neuman and Keashly (2004) found the top ten hostile behaviors in the workplace included the following:  glared at in a hostile manner, treated in a rude/disrespectful manner, interfered with work activities, given the silent treatment, given little or no feedback about performance, not given praise to which felt entitled, failed to give information needed, delayed actions on matters of importance, lied to, and prevented from expressing self.  Thus, the hostile behaviors are not always, but can be subtle, not easily observable by others, and often involve the withholding of information, recognition, or acknowledgement from the other person.  The repeated and prolonged exposure to these behaviors that devalue the individual can be perceived as attempts to remove the targeted individual from effective participation in the workplace (Keashly & Neuman, 2005).  The aggression literature frequently designates aggressive acts as either direct or indirect; active or passive; verbal or physical (Atlas & Pepler, 1998; Buss, 1961; Crothers, Lipinski, & Minutolo, 2009). Einarsen, Matthiesen, and Skogstad (1998) contend that the motivation of the bully is not always obvious or apparent and that bullies will sometimes engage in aggressive behavior that allows them to conceal any hostile intentions.  Bullying behavior in organizations implies interpersonal aggression; all bullying is indicative of aggressive behavior, but not all aggressive behavior is bullying. As noted by Logsdon, Hood, and Detry (2007), hostile behaviors are often subtle, not easily observable by others, and often involve the withholding of information, recognition, or acknowledgement from the other person. The repeated and prolonged exposure to these behaviors that devalue the individual can be perceived as attempts to remove the individual from effective participation in the workplace (Keashly & Neuman, 2005). Additionally, bullying can also be classified as either overt or covert (Hood, Jacobson, & Van Buren, 2011). Harvey, Heames, Richey, & Leonard (2009), for example, supplied categories of bullying at work that were overt (e.g., name calling in public, sexual harassment) and covert (e.g., using a scapegoat, increasing work pressure beyond competency level). Overt bullying is visible to others while covert bullying is more hidden from public view. Some studies have indicated that the majority of bullying behaviors in the workplace consist of nonphysical, indirect, and passive actions (Neuman & Baron, 1998).


Cost-Volume-Profit Analysis Using Different Probability Distributions

Dr. Hassan A. Said, Austin Peay State University, TN



For several decades stochastic cost-volume-profit (CVP) analysis has received ample attention in the accounting and finance literature, and still is fruitful not only because CVP analysis is itself an important accounting and finance issue, but also because methods developed in these area are often transferable to stochastic applications of other important accounting, finance and decision science problems. The CVP model delivers managers with the benefit of being able to answer specific pragmatic questions needed in today’s strategic business decisions. Because CVP analysis is based on statistical models, decisions can be broken down into probabilities that help with the decision-making objectives. This study investigates, explores, and applies the CVP model for the purpose of examining and comparing its applications to four different statistical distributions namely; Normal, Lognormal, Beta-PERT, and Kumaraswamy. Even though CVP analysis is based on specific information and requires tremendous attention to details, the best that it can do is provide approximate answers to questions, rather than ones that are mathematically exact. At the initial discovery stage, the CVP’s assumptions represent sacrifices in of the model's realism and accuracy, however, advancement in software technologies has made cost, effort, and computer time inexpensive and estimations of the random variables of the CVP model stochastically more feasible.  Clearly, a "perfect" solution to an unrealistic model has very little analytic or practical value. The "powerful" enough approach is to handle diverse probability distributions and dependency concerns that fit the CVP model’s assumptions. Ultimately, management’s judgments have to be made after careful investigation and deliberation and not just be trusted solely on statistics. The use of cost-volume-profit (CVP) analysis has application not only in the manufacturing sector but also for financial services entities (Basu et al. 1994). Despite a considerable research literature progress on CVP analysis, that has accumulated since the seminal contribution of Jaedicke and Robichek (1964), this advancement has been almost entirely unheeded by textbooks authors of accounting and finance. Like all financial models, CVP, is based on a set of simplifying assumptions that reduce the complexity of input and output variables to make decision making more tractable. To understand a financial model and its usefulness, its assumptions and their role in a decision must be understood. According to Horngren and Foster (2010), the basic CVP model is subject to ten essential assumptions and liming conditions: behavior of costs and revenues is linear, selling prices are constant, prices of production inputs are constant, all costs can be categorized into their fixed and variable elements, total fixed costs remain constant, total variable costs are proportional to volume, efficiency and productivity are constant, the model involves a constant sales mix or a single product, revenues and costs are being compared over a unit-volume base, and volume is the only driver of costs. Learning the basic deterministic CVP model is fortunate for students, but an understanding of the generalization of the model to uncertainty situations and relaxing some of its limiting conditions is an added improvement. A CVP model that incorporated uncertainty would hence provide a good entry point into the essential but challenging topic of decision-making under uncertainty. Virtually all real-world business decisions take place under conditions of uncertainty, and that at least some modest degree of familiarity with analytical approaches to decision-making under uncertainty could well benefit the future business leaders. The seminal application of uncertainty to the CVP model was first introduced by Jaedicke and Robichek using the basic CVP equation: Z = Q (P-V) - F  (1)   Where Z = Profit, Q = Unit Sales, P = Price/Unit, V =Variable Cost/unit, F= Total Fixed Cost.  Various statistical distributions has been investigated perilously such as normal (Jaedicke and Robichek, here after JR, (1964)), log normal (Hilliard and Leitch (1975)) and several distribution-free methods such as the Tchebycheff  Inequality (Buzby (1974)), model sampling (Liao (1975), and  Kottas and Lau (1978)), and additional improvements are examined to the CVP model such as multiproduct (Johnson and Simik (1971), and cost of capital and degree of operating leverage (Guidry, Horrigan and Craycraft (1998)), all  have been employed by these and other  authors (Shih (1979), and Yunker and Yunker (2003) and  Banker, Dyzalov, and Plehn-Dujowich (2014)) to analyze the demand uncertainty, cost behavior and the random behavior of profits. The application of these works was largely confined to the assessment of probability distribution of profit and the calculations of their central tendency (mean) and spread (variance) to identify the "best"' choice among alternative measures of profit.  Thus far, this extensive literature has been virtually ignored by managerial and cost accounting authors, e.g., Garrison, Noreen, and Brewer (2011), Zimmerman (2013), Warren, Reeve, and Duchac (2014), and their reluctance to undertake CVP models under uncertainty may be attributed to the diversity and complexity of the research literature, i.e., multi-product, multiple uncertainty sources, the assumption that demand exceeds, equals, or less than production sales, use of the basic accounting CVP model versus “economic” demand relating quantity sold to price and/or unit cost functions. The CVP analysis is expected to be complicated, connecting as it does to various concepts from economics and mathematical statistics. However, Bhimani, et al. (2008) cautioned that, in situations where revenue and cost are not adequately represented by the simplifying assumption of CVP analysis, managers should consider more sophisticated approaches to their analysis. Notwithstanding, it is the belief here that the CVP model provides an excellent context for introducing these analytical approaches. The extreme simplicity of the basic deterministic CVP model enables a clearer perception of the elements added by generalizing the model to a stochastic one. While the full mathematical derivations and statistics shown herein are probably too complicated for most undergraduates, the results themselves are fairly straightforward, and they facilitate a precise focus on such fundamental concepts in decision-making under uncertainty as the tradeoff between expected profits and breakeven probability. There is tradeoff between the comprehensiveness and accuracy of a model that tends to generate mathematical complexity and its applicability and ease-of-use to which it can readily provide convincing answers to particular questions. The purpose of this research is an attempt to strike an appropriate balance between these two competing criteria. Statistics is the branch of applied mathematics concerned with the collection and interpretation of quantitative data and the use of probability theory to estimate parameters that find use in science, engineering, business, computer science, and industry. Its importance is given to definitions of concepts, derivation of formulas and proofs of lemmas and theorems. In business, emphasis is placed on the concepts, use of formulas without their derivations and practical applications in all areas of business. Technology and economics appeared to be driving (or trying to drive) decisions about business and academic software applications, functionality or, in the case of academic software, pedagogy. According to Nolan and Lang (2009) approaches to the teaching of statistics for business have changed dramatically. The advancement in use of computer technologies in the class room made it easy to use the formulas and computer software that give various kinds of probabilities, random samples estimations, confidence intervals, descriptive information that are be able to test hypotheses make fitting distributions instantly (Madgett,1998). The American Institute of Certified Public Accountants (2005) states that “technology is pervasive in the accounting profession,” stressing that leveraging technology to develop and enhance functional competencies though appropriate use of electronic spreadsheets and other software to build models and simulations. Therefore, what the business students and future professionals should learn, with the help of computer technologies, is to understand statistical concepts and use them in analyzing practical data and make appropriate conclusions. This paper sets forth to analyze and applies CVP models intended specifically for pedagogical use in managerial and financial accounting progressions as a gateway to decision-making under uncertainty with applications to four different distributions: Normal, Lognormal, PERT, and Kumaraswamy. Section 2 will portray the basic concepts of CVP model under uncertainty and distribution fitting. In section 3 will detail the uncertainty in CVP and applying the four distributions above using the same example, and finally, section 4 briefly summarizes and evaluates the contribution to business professionals and pedagogy.


Does Increases in Leadership Expenditures Influence Native Hawaiian Public School Completion?

Dr. Larson Ng, University of Hawai‘i at Mānoa, Honolulu, Hawai‘i



The following study attempted to analyze whether higher numbers of public high school completers can alone be achieved through increases of instruction expenditures among Native Hawaiians students. Using the high schools that comprise the predominately populated Native Hawaiian Leeward District, a correlation and bivariate regression procedure were employed to determine the nature and econometric relationship between leadership expenditures and high school completion from 2000 to 2007. Although leadership expenditures had predominately increased for all high schools, increases in completion were not observed for all schools. Moreover, with the exception of Waipahu High School, there was no conclusive econometric evidence to substantiate the idea that more expenditure in leadership leads to higher levels of high school completion during 2000 to 2007. Educational leadership, other than instruction, is a critically important factor that contributes to high school completion, where it is school administrators that set the goals and strategic direction for teachers to accomplish this task (Heck & Hallinger, 2010; Jarrett, Wasonga, & Murphy, 2010; Riley & Mulford, 2007). Accountability to the parents whose children attend public school is one of the major keys in sustaining quality education (Crum & Sherman, 2008; Jantzen, 2008). In the case of Native Hawaiian education, although Hawaii’s Department of Education (DOE) has historically allocated millions of dollars to further the advancement of Native Hawaiian students, Native Hawaiian’s are still the least likely ethnic group to graduate high school (Kanaiaupuni, Malone, & Ishibashi, 2005). Given the population density of Native Hawaiians living on the Leeward Coast of Hawaii’s Island of Oahu (Hawaii Department of Business, n.d.), this study will attempt to test whether increases in educational leadership result in higher numbers of high school completion by analyzing the DOE’s high school leadership expenditures (i.e., school management, program/operations management, and overall management) and its econometric relationship with Native Hawaiian high school completers (Hawaii Department of Education, n.d.a). With this research, it is hoped that the results will provide a current snapshot of whether increased leadership funding will improve public high school completion among Native Hawaiian students. The following section will go over the high school leadership expenditures, size of its graduation classes, and high school completers for all of the high schools that comprise the DOE’s Leeward District from 2000 to 2007.  Based on Table A1, leadership expenditures have been increasing on an average of 2.3% with a standard deviation of $174,536 per year, respectively. Graduating classes has seen steady of growth during this period and had an overall average growth rate of 1.8% with a standard deviation of 39 students per year, respectively. Completers also experienced a similar trend during this time frame with an average growth rate of 3.3% and a standard deviation of 41 students per year, respectively.  Based on Table A2, leadership expenditures have been increasing on an average of 17.6% with a standard deviation of $263,193 per year, respectively. Graduating classes has seen much growth during this period and had an average growth rate of 8.4% with a standard deviation of 219 students per year, respectively. Completers also experienced similar growth during this time frame with an average growth rate of 8.0% and a standard deviation of 51 students per year, respectively. Based on Table A3, leadership expenditures have been increasing on an average of 3.1% with a standard deviation of $200,789 per year, respectively. Graduating classes has seen marginal growth during this period and had an average growth rate of 0.4% with a standard deviation of 12 students per year, respectively. Completers conversely experienced similar negative marginal decline during this time frame with a negative average growth rate of -0.4% and a standard deviation of 16 students per year, respectively. Based on Table A4, leadership expenditures have been increasing on an average of 0.1% with a standard deviation of $186,302 per year, respectively. Graduating classes has seen a decline in growth during this period and had a low negative average growth rate of -1.5% with a standard deviation of 30 students per year, respectively. Completers, also experienced a similar decline in growth during this time frame with a low average growth rate of -1.0% and a standard deviation of 29 students per year, respectively. Based on Table A5, leadership expenditures have been increasing on an average of 2.0% with a standard deviation of $192,747 per year, respectively. Graduating classes has been in decline during this period and had a low average negative growth rate of -1.4% with a standard deviation of 27 students per year, respectively. Completers also experienced slightly worse decline during this time frame with a low average negative growth rate of -2.2% and a standard deviation of 32 students per year, respectively. Based on Table A6, leadership expenditures have been decreasing on an average of -1.6% with a standard deviation of $242,052 per year, respectively. Graduating classes has seen much marginally increasing during this period and had a low average growth rate of 0.5% with a standard deviation of 18 students per year, respectively. Completers also experienced a slightly better growth during this time frame with a low average growth rate of 1.4% and a standard deviation of 42 students per year, respectively.  In order to investigate the econometric relationship of high school leadership expenditures towards high school completion among the high schools in the DOE’s Leeward District, this research employed the following methodology. The study initially acquired the DOE’s high school leadership expenditures and completer data from 2000 to 2007. Upon separating the data by high school and adjusting leadership expenditures for inflation (i.e., Base Year = 2000), econometric techniques consisting of both correlation and linear regression with natural logarithmic transformations were utilized and key statistics recorded. The study then analyzed the statistical relationship between high school leadership expenditures and completers. Data used for these analyses were acquired from Hawaii’s DOE websites and the study’s econometric results were generated with the use of SPSS Statistical Desktop, Version 22.0 for Mac. The following will present the econometric results of both the correlation and linear regression analyses that were utilized to ascertain the statistical relationship of the DOE’s high school leadership expenditures towards completers among the high schools in the Leeward District.  Based on Table A7, the Pearson correlation coefficient was -0.164. This figure suggests that there was a very weak negative correlation between leadership expenditures and completers from 2000 to 2007. In looking at the results of the linear regression, an R² of 0.027, ANOVA significance value of 0.699, and an unstandardized coefficient of -0.090 were reported (See Table A7). Hence, the results of the linear regression revealed the existence of a statistically significant negative relationship between leadership expenditures and completers during 2000 to 2007. Consequently, increases in high school leadership expenditures at Campbell High School have an econometrically negative effect towards completers during this period. Based on Table A7, the Pearson correlation coefficient was -0.110. This figure suggests that there was a very weak negative correlation between leadership expenditures and completers from 2000 to 2007. In looking at the results of the linear regression, an R² of 0.012, ANOVA significance value of 0.890, and an unstandardized coefficient of -0.055 were reported (See Table A7). Hence, there was a statistically significant negative relationship between high school leadership expenditures and completers during 2000 to 2007. Consequently, increases in high school leadership expenditures at Kapolei High School had an econometrically negative effect towards completers during this period.


Factors Affecting the SMEs in Agribusiness in the Northeastern Region of Thailand

Dr. Sutana Boonlua, Mahasarakham University, Thailand



This research used a quantitative research methodology. There are three aims to determine the affecting factors for SMEs in agribusiness in the Northeastern region of Thailand: (1) to investigate the effects of the five factors (Government, Organization, Production, Market, and International) of the SMEs in agribusiness in the Northeastern region of Thailand and (2) to provide policy implications from the findings. The respondents consisted of 106 SMEs entrepreneurs in agribusiness in the Northeastern region of Thailand. There are five hypotheses were conducted with data collected during April and May, 2013. There are 22 variables (after 2 variables were extracted from factor analysis) of which divided into five factors. The results show all hypotheses are supported at the 1% level of significance. Based on research finding, recommendations were made to the relevant government, producer, and entrepreneurs for the formulation of encouraging climate to increase the SMEs in agribusiness performance in the region. The agribusiness plays a significant role in Thailand and South-east Asian countries economy. Agribusiness is a critical export engine and continues to dominate those countries’ merchandise exports despite significant government initiatives to enhance the development of new industries. Successful agribusiness underwrites the provision of manufacturing and private and public service provision in rural areas. Scrimgeour et al. (2006) stated that the key features of agribusiness have been debated in the literature. However, it is appropriate to note that agribusiness is characterized by its links to biological production systems and the associated variability. Likewise it is appropriate to note that in many instances it is characterized by long chains, with an hourglass shape, including primary, secondary and tertiary business activity that are distant from the market place. Thailand is divided into four regions which are Central, Northern, Northeastern, and Southern. The Northeastern region is generally arid and very dry, characterized by rolling surfaces and undulating hills.  In 2013, the population in Thailand was 67.45 million (The National Statistically Statistical Office of Thailand, 2013), 64% of which was located in the rural areas. Approximately 90% of the rural population, or almost 10 million families, earned living subsistence farming, particularly rice cultivation, field crops, fruits trees and perennial crop production (Nualvatna, 2003). In 2013, there are 39.38 million persons in the labor force and about 15.41 million persons are in agriculture sector (BOT, 2014). Most farming families in the Northeastern region of Thailand grow single crops such as rice, maize, sugar cane, cassava, and rubber trees. Thailand covers an area of 513,120 or 321 million rai (2.5 rai = 1 acre) of which some 41.5% is farmland. There are only 9% for the land used for permanent crops with arable land of 32.5% (CIA, 2013).  Among of all crops of economic significance, rice is the most important and is grown in all regions with about half of Thailand total cultivated area (Nualvatna, 2003). The Office of Agricultural Economics (OAE) had shown the growth rate of Thai agricultural economy in 2014 that the crop sector was increased 3.7% compared with 2013. The agricultural products that have increased including major rice, rubber, sugar cane, cassava, pineapple, and maize (OAE, 2014). The growth rates of the agricultural gross domestic product in 2013 and 2014 are shown in Table 1. Agribusiness is the business of farming and the use of manmade inputs to take control of the growth of cultivation, and humans began to consume food and fiber produced by other humans. Agribusiness includes production, processing, and supply of agricultural goods.  Agribusiness also covers farming equipment, machinery, chemical, suppliers, and personnel (Nualvatna, 2003).  This research is conducted among the small and medium size agribusiness firm in the Northeastern region of Thailand. The total number of agribusiness firm, especially in the Northeastern region of Thailand has been increasing every year, in 2011 there are approximately 32,114 agribusiness firms (see Table 2) (Department of Industrial Work, 2011). Therefore, this research tried to examine the important success factors that affect the SMEs agribusiness firm performance.  This research focused on the perceptions of success factors among small and medium size (SMEs) agribusiness firms in the Northeastern region of Thailand. The differences in business environmental resources and economic development between these two areas of research were used to compare the results. The aims of the research are: 1. to investigate the effects of the five factors (Government, Organization, Production, Market, and International) of the SMEs in agribusiness in the Northeastern region of Thailand; and 2. to provide policy implications from the findings. The agribusiness success depends on the environment in which they operate and also the choices of agribusiness firms and organizations. It is carefully identify and characterize the trends which have affected agribusiness. Four factors have been identified by Scrimgeour et al. (2006) are as follows: 1) Government Factor: Economic and political changes have substantial impacts for positive and negative to the agribusiness. Changes in international economic conditions: incomes, exchanges rates, energy price, as well as political changes such as trade rules, terrorism and counter-terrorism policies, monetary and fiscal policies, are all significant to the firm performance. Boddewyn (1988) used politics and government condition as an involved factor to emphasize particular ways of relating to targets located in the non-market environment for organizations. The non-market environment refers to any factors that support or do not support the economic transactions through authority permission and other positive or negative non-economic sanctions such as the granting or withdrawal of legitimacy, government institutions (Boddewyn, 1988; Thanyakhan, 2008). Some studies found positive relationships between governments with investment or trade policies and firms (Vernon, 2001; Binh and Haughton, 2002). However, Reis (2001) argued that producers in the country will no longer be able to invest in the R&D sector after the opening of the economy to trade, which has a negative effect on national income and profits. Boddewyn (1988) focused on government as the target of political behavior by including the political element in its consideration of firm-specific, location, and internalization advantages in his model. Boddewyn’s results conclude that market imperfections may be enacted through political behavior in order to raise the transaction costs of competitors and to exploit various rents arising from these imperfections. The firms include government policies that create market imperfections, which make firms an economically reasonable strategic alternative. For example, Brewer (1993) examined the effects of government policies on market imperfections that government policies are significant determinants of the sizes and growth rates for markets of all goods and services in the economy. Vernon (2001) focused on government regulation and how government can reshape the policy in a global economy for the firms. The area of firm and government policies has become more popular in the later studies.  The above literature suggests several preliminary conclusions about the role of government policies in firm. There is recognition that government policies are important factors of firm. Agribusiness sector must be aware of changing views on overall government policies which affect to the economy such as tax, exchange rate, interest rate regulations as they all impact agribusiness success or failure.


Sub-Prime and Global Origins of Euro Sovereign Crisis

Dr. Sebastjan Strasek, Professor, University of Maribor, Slovenia

Bor Bricelj, University of Maribor, Slovenia



The paper researches the sub-prime and global crisis origins of the Eurozone sovereign crisis. We place the analysis of the European financial crisis in the context of both previous crises and find some striking similarities. The reasons leading up to the crisis were different for each country, but some of the factors were common: lax credit standards, property bubble funded by banks, highly exposed banking sector, contagion impacts through the financial market channel and through a generalized increase in global economic risk aversion. We suggest that the solution is not to add regulation, but to get rid of practices that come from being able to dump private loses on the public balance sheet. The euro crisis, triggered by the 2008-09 global financial crisis exposed external and internal imbalances in member countries. Unlike the U. S., where financial crisis is fundamentally about the bursting of the bubble in housing prices and over borrowing, in Europe, the current financial and debt problems have different economic roots, which had been built since euro launch in 1999. Two main views have emerged about euro-zone crisis. The first, so called German view (Allesandrini et al., 2012), prescribes the necessity of fiscal austerity in the south of the euro-zone to lessen the risk that the south many be forced to abandon the euro, the second, called Keynesian view (Merler and Pisani–Ferry 2012) which treat euro-zone sovereign debt crisis as being balance-of-payment crisis, with the euro-zone north benefiting from surpluses and the euro-zone south suffering from deficits. This interpretation argues that the current emphasis on fiscal austerity being counterproductive, given its negative impact on expected long-term growth rates (DeLong and Summers 2012). Stylized facts and empirical evidence (Alessandrini et al. 2012, Sanches and Varoudakis, 2013) suggest however that both the fiscal fragility of the south, and the north-south divide of external imbalances, contribute to the ongoing Eurozone crisis. Although every crisis has its own specific causes, some sources of vulnerability are common to most recent crises. These common sources include the following (Roubini, Setser, 2004 ): large macroeconomic imbalances (fiscal deficits, current account deficit), financing these deficits in ways that made countries vulnerable to liquidity runs and the increased risk of a fall in the exchange rate, doubts about the credibility of country’s commitment to take the policy steps to assume its long – term creditworthiness, fixed or semi – fixed exchange rates, microeconomic distortions (poor banking regulation, implicit and/or explicit government guarantees), political shocks, external shocks (terms of trade shocks, interest rate changes, sudden changes in investors behavior). As we see, countries are exposed to a wide range of potential sources of financial difficulties. Empirical analyses and recent academic literature on financial crises recognize that although there are enormous differences among different crises, there are some crucial components in the origins of the subprime meltdown fundamental for the destabilization of the Eurozone. We discuss some of them to spot sub-prime and global origins of recent crisis. Recent years has witnessed remarkable process of globalization and integration of security markets: the flows of funds and of capital across international borders. This process was accompanied by a number of international financial crises, i.e. crises with international implications. Empirical facts confirm the prevailing view among economists that global economic factors including commodity prices and center – country interest rates, play a major role in precipitating financial crises – financial crises are becoming increasingly international. International roots of Euro crisis go back to the 2007-2008 sub-prime crisis, which was followed by global crisis.  Rather than focus exclusively United States as a generator of a crisis, there is a need to shift our view first to global imbalances-meaning imbalances between saving and investment in the major world economies, which are reflected in large and growing current account imbalances. We believe, they indeed play a major role in creating the global crisis. Substantial imbalances in saving and investment emerged after 2000, where the saving glut in developing countries (emerging East-Asia, oil-exporting countries of Middle East, Figure 1) gave rise to sizable net flows of capital to advanced countries, produced reduction of world interest rates and finally contributed to scramble for high-yielding assets and financial excesses. The cycle of expanded credit availability to feed sustain consumption and housing boom was opened. The time of turmoil in world financial market seemed to be a matter of time. The global crisis 2007 had both financial and real sector roots. This crisis was unique in the sense that financial and real roots were completely intertwined. Although debate is still raging over the relative weight of the factors that ultimately unleashed the crisis in the U.S., we can identify a list of factors that explain the decline of economic fundamentals. The crisis started in the U.S. with the collapse of the subprime mortgage market in early 2007 and the end of major housing boom. The housing boom was triggered by a long period of abnormally low interest rates, attributed to loose monetary policy from 2001 to 2004. Fed fuelled high levels of liquidity in the financial system and this discouraged aversion to risk among US and international investors, leading to high leverage of households and firms. The negative shock to highly leveraged firms or households causes losses in the financial system with the consequence that highly leveraged banks risk becoming insolvent. After 1980, each U.S. business cycle has seen successively higher debt/income ratio at end of expansions, and the economy has become increasingly dependent on asset price inflation to spur the growth of aggregate demand.  Table 1 shows the rising household debt service ratio, measured as the ratio of debt service and financial obligations to disposable personal income. That this ratio trended upward despite declining nominal interest rates is evidence of the massively increased reliance on debt by households.  The most unusual nature of this crisis was the disproportion of the shock – relatively small size of bad loans compared with the total assets of the banks – and its widespread systemic consequences. There is ample evidence that national markets have become more inter-connected with one another with respect to cross-border trade and capital flows during the past few decades. There linkages have increased the likelihood for shocks in country to be transmitted internationally.  Angkinand et al. (2009) find an increasing degree of interdependence between markets and spillover effects from U. S. a shock to the advanced economies. Investigation of the influence of the global crisis on the spillover between industrial stock markets of Europe and the US (Choundry and Jayasekeia, 2014) indicate an increase in both means and volatility spillover from the pre-crisis to the crisis period. They find that return and volatility transmission mechanisms between the major economies and the smaller EU countries are asymmetric during the crisis period. During the crisis the level and amount of spillover from the major economies increase. But there is also clear evidence of spillover from smaller EU economies to the major economies. Spillovers are also known as fundamental-based contagion and include macroeconomics shocks transmitted through trade links, financial and competitive devaluations. Contagion is one of the mechanisms by which financial instability becomes widespread that a crisis reaches systemic dimensions. The other two mechanisms are the unwinding of financial imbalances and the occurrence of severe macro shocks. Constancio (2011) argue that contagion phenomena play a crucial role in exacerbating the sovereign debt problems in the euro area. The evidence from the ongoing debt crisis concentrate on two cases: (i) sovereign-sovereign contagion and (ii) sovereign-bank contagion.


Strategic Managerial Accounting Capability for Sustainable Goal Achievement: Empirical Evidence from ISO9001 Manufacturing Firms in Thailand

Chonthicha Thammavinyu, Mahasarakham University, Thailand

Dr. Phaprukbaramee Ussahawanitchakit, Mahasarakham University, Thailand

Dr. Sutana Boonlua, Mahasarakham University, Thailand



This research aims to investigating the relationship between strategic managerial accounting capability and sustainable goal achievement. The conceptual model is proposed by drawing on the resource-advantage theory and the contingency theory. The data were collected from 283 ISO9001 manufacturing firms in Thailand. The effective response rate was 27.26%. The results demonstrate that strategic managerial accounting capability positively impacts operational planning efficiency, internal control quality, and information value increase. Then, operational planning efficiency, internal control quality, and information value increase have a positive relationship with decision-making success and business excellence outstanding. Furthermore, decision-making success has positive relationships with business excellence outstanding. Decision-making success and business excellence outstanding also have positive relationships with sustainable goal achievement. For the influences of the antecedents, this research found that top management long-term vision, accounting system quality, technology pressure, stakeholder force, and competitive turbulence affect strategic managerial accounting capability. For the moderating effect, organizational learning capability is factor that encourages the relationships between performance evaluation justice awareness and sustainable goal achievement. This research provides the directions and suggestions for managers to identify and justify key components of strategic managerial accounting capability that may be critical in the operation of a business that affects the sustainable goal achievement. Therefore, the firm should promote and encourage strategic managerial accounting capability in ways that generate more benefits for both firm and stakeholders. In addition, future research should confirm the benefits of this scale by applying in different population to widen the generalizability of its findings.  World globalization provides the opportunity for emerging countries in Asia and Latin America to participate in world competition and borderless business (Jaruga and Ho, 2002). Thus, emerging countries are attempting to develop their countries’ infrastructure for encourage globalization strategy, while a number firms endeavor to develop organizational infrastructure for competitive advantage and sustainability. Accounting information, especially managerial accounting information, is important for firms to reach optimal strategic decision. The main drawback is that managerial accounting reporting has no regulation. It is internally-generated information (Morton and Hu,2008) and managerial accounting literature still lacks empirical evidence for investigating the relationship between the antecedents and the consequents of strategic managerial accounting.  The main purpose of this research is to investigate the relationship between strategic managerial accounting capability and sustainable goal achievement. The key research question is “How does strategic managerial accounting capability have an impact on sustainable goal achievement?” This research proposes four contributions to the literature on strategic managerial accounting.  Firstly, it proposes a new way to investigate the effects of strategic managerial accounting. Secondly, it proposes new dimensions of strategic managerial accounting capability that are different from those articulated by prior research. Thirdly, it proposes the consequents of strategic managerial accounting capability by focusing on sustainable goal achievement under the contingency environment which only a few researchers have investigated. Finally, it proposes that the concepts of the resource-advantage theory and the contingency theory can be adopted to explain the impact of endogenous and exogenous factors on the review of strategic managerial accounting capability, thereby leading to sustainable goal achievement in the single model.  This research implements the resource-advantage theory as the main theory to define the meaning of strategic managerial accounting capability. The contingency theory is included to clearly explain the connection between strategic managerial accounting capability and its antecedents. The resource-advantage theory are proposed to describe a situation where some firms are more likely to sustain superior performance, whereas others are not. The key to the resource based view approach to strategy formulation is to understand the relationship between resources, capabilities, competitive advantage, and profitability of the firms; and to understand the mechanisms through which competitive advantage can be sustained over time.The contingency theory explains that there is no best way to organize a corporation, to lead a company, or to make decisions so that an organization which is effective in some situations may not be successful in others (Otley, 1980). These theories illustrate the relationships of strategic managerial accounting capability and its antecedents and consequents as shown in Figure 1. The next section elaborates on a review of the literature and the hypotheses of strategic managerial accounting capability. Strategic managerial accounting capability is defined as the ability of an organization to perform tasks utilizing strategic managerial accounting data about a business and its competition for achieving the goals(Bromwich and Bhimani, 1989; Helfat and Peterraf, 2003).  The five dimensions consist of cost management orientation, resource utilization focus, performance evaluation justice awareness, information mining effectiveness, and business process linkage interest which are combined. The first component of strategic managerial accounting capability that supports firm strategy to sustainable goal achievement is cost management orientation. Cost management orientation is defined as the focus on using modern and appropriate management accounting or cost techniques to obtain cost information. This cost information provides for accurate, complete, timely, and relevant decision-making, including decisions about product design, product pricing, product mix, and customer profitability to enhance competitive advantage (Anderson and Lanen, 1999; Kaneko, Ussahawanitchakit, and Muenthaisong, 2013; Nicolaou, 2002; Swenson, 1995). Prior research reveals that the higher levels of cost system sophistication are positively associated with the importance of cost information (Al-Omiri and Drury, 2007).The level of cost information has a positive influence on firm performance (Anderson, Asdemir, and Tripathy, 2013). Abdel-Al and McLellan (2013) have shown that organizational performance depends on the fit between organizational context and structure.If an organization has good alignment between management accounting practices and employed strategy, this fit has both a positive and significant effect on operational performance. Hence, cost management orientation has the potential to positively affect operational planning efficiency, internal control quality, information value increase, decision-making success, business excellence outstanding, and sustainable goal achievement. The hypotheses are proposed as follows.  Hypothesis 1: The higher the cost management orientation is, the more likely that firms will gain greater a) operational planning efficiency, b) internal control quality, c) information value increase, d) decision-making success, e) business excellence outstanding, and f) sustainable goal achievement. Resource utilization focus is defined as the emphasis on the resource allocation process, the ability to react to stress, and the use of resources for maximizing benefits. Firms can analyze exact resource requirements, allocating adequate necessary resources, and use resources efficiently (Abernethy and Brownell, 1999; Balkin, Markman, and Gomez-Mejia, 2000; Hanpuwadol and Ussahawanitchakit, 2010). The prior research suggests that firms should have an ability to appraise resource usage toward minimizing the resources on economizing (Balkin et al., 2000). The level of resource allocation or investment has a positive impact on firm performance (Chen and Hsu, 2010), and resource utilization efficiency directly improves performance within an organization (Chaikambang, Ussahawanitchakit, and Boonlua, 2012). Based on the previous literature, the related hypotheses are postulated as follows. Hypothesis 2: The higher the resource utilization focus is, the more likely that firms will gain greater a) operational planning efficiency, b) internal control quality, c) information value increase, d) decision-making success, e) business excellence outstanding, and f) sustainable goal achievement.


Assessing Innovation

Dr. Geoffrey A. Wright, Brigham Young University, College of Engineering and Technology, UT

Jacob Wheadon, University of Purdue, Engineering Education



This paper (and presentation) describes the development of an innovation test/assessment tool, including analysis of the content domain, identification of the learning outcomes, item creation, testing of the test, and initial validation that can be used in engineering and business education settings, or industry. The purpose of the project outlined in this paper was to develop an innovation test instrument and perform an initial validation. The test needed to cover a broader range of innovation skills defined by the Innovation Bootcamp curriculum and needed to evaluate individual students’ abilities at performing each of the tasks outlined therein.  In industry and education, there is an increasing push for organizations and individuals to be more innovative (Wagner, 2010; Fagerberg, 1999). Rapid technological change has created the need for organizations and individuals to adapt quickly (Christensen and Eyring, 2011).  Christensen (1997) described how disruptive innovations fundamentally change markets and require new ways of thinking for organizations to adapt and survive.  He described how individuals in organizations need to think differently in order to compete in today’s marketplace.  Because of the rapid rate of technological change that is occurring today, disruptive innovations are changing markets even faster than in the past.  This has led to a greater need for people to cultivate innovation skills. Innovation skills are also needed to create job growth.  Drucker (1985) showed that innovation has been the leading source of job creation in the United States over the last century.  He called for organizations and individuals to focus their efforts on creating new value in society, both for their own good, and for the good of society in general. These calls have been echoed by politicians (Obama, 2011), economists (Friedman and Mandelbaum, 2011), and educators (Wagner, 2010).  In order to keep up with the demand for innovation education, educators at a private university in the western United States have developed a course focused on teaching innovation.  The course, titled the Innovation Bootcamp teaches technology and engineering students many behaviors and processes of innovation that have been identified in past literature (Howell et al., 2011).  At the Innovation Bootcamp, students learn tools that help them work through the five parts of the innovation model (as defined by the Innovation Bootcamp curriculum):  idea finding, idea shaping, idea defining, idea refining, and idea communicating.  Using this model, educators have taught the Innovation Bootcamp since 2008.  They have performed preliminary studies (Howell et al., 2011; Wright et al., 2010) and feel confident that the course is having a positive impact on the innovation skills of the students, even though they did not have a test to evaluate the impact the course was having on students’ ability to innovate. Consequently, they, and other innovation educators, need an assessment of students’ innovation skills that can be used as a pre- and post- test to see if a student is more innovative as a result of participating in the Innovation Bootcamp.  Having an innovation test would be very useful for improving teaching in this particular course, and it is hoped that such a test will have value for anyone seeking to teach innovation.  In an attempt to address this need, Lewis (2011) reviewed existing innovation and creativity tests and relevant literature.  His study found that existing test instruments were lacking in two major areas.  The first is that existing tests do not cover the whole process of innovation – focusing only on either creativity or implementation.  He found that creativity-centric tests measure divergent thinking, while existing innovation tests focus primarily on convergent thinking.  Lewis states that this is problematic because innovation involves both divergent and convergent thinking.  He also suggested that the other issue of the innovation tests was that they only measured the performance of a product, team, or organization, and did not account for, or measure, the abilities of an individual.  This does not allow educators to see how their instruction changes a student’s ability to innovate.  In order to meet the needs of the Innovation Bootcamp and other innovation educators, a test that measures an individual’s ability to do activities across a greater part of the innovation process is needed. The purpose of this project was to develop an innovation test instrument and perform an initial validation.  The test needed to cover a broader range of innovation skills defined by the Innovation Bootcamp curriculum and needed to evaluate individual students’ abilities at performing each of the tasks outlined therein.  This paper describes the development of the test, including analysis of the content domain, identification of the learning outcomes, item creation, testing of the test, and initial validation. Because of the need to assess a person’s skill at specific parts of the innovation process, it is important to describe the innovation processes and models used by leading innovation educators and consultants.  Although the different practitioners use varying language to describe their processes, there were many common elements and similarities across the different processes.  These common elements are found in the Innovation Bootcamp model.  The five parts of the Innovation Bootcamp model (see Error! Reference source not found.1) are: Idea finding, idea shaping, idea defining, idea refining, and idea communicating.  Idea finding involves teaching students to see opportunities for innovation in the world around them.  Students in the Bootcamp are taught to take on the role of anthropologist as they observe people. They are taught to actively experience what others are experiencing as to find issues that can be improved upon.  Kelley (2005) suggests this approach to innovation and explains how it is used at IDEO.  This ties closely to the empathize step in the Stanford D-School innovation process (Stanford, 2010) and also to the behavior of observation described by Dyer et al. (2011).  When students actively observe the situations and people around them, they learn to identify opportunities for innovation.  The second part of the Innovation Bootcamp model is idea shaping.  In idea shaping, students refine their observations from the idea finding phase.  This relates to the define phase of the Stanford D-School model (Stanford, 2010).  Stanford describes this as a time to “develop a deep understanding of your users and the design space.”  The major behavior of this phase is questioning (Dyer et al., 2011) The goal of this phase is to develop a clear, actionable problem statement.  This problem statement guides the rest of the innovation process and gives focus to the participants. The first 2 parts of the Innovation Bootcamp model comprise what Runco (2006) calls problem-finding.  He says that there are multiple problem-finding skills, two of which are “problem discovery” and “problem definition.”  He cites Getzels’ (1975) claim that “the quality of a problem determines the quality of a solution.”  Problem finding is a critical part of innovation and creates a foundation for the rest of the process.Idea defining is the third part of the Innovation Bootcamp model.  This phase begins the creation of solutions to the problem defined in earlier phases.  In this phase, students learn about various methods of ideation and are encouraged to generate a large number of diverse ideas, which Runco (2006) calls fluency.  They are taught that they are more likely to have good ideas if they generate many ideas. 


Strategic Marketing Creativity and Marketing Profitability: Empirical Investigation from Information and Communication Technology Businesses in Thailand

Jaruporn Meesuptong, Mahasarakham University, Thailand

Dr. Prathanporn Jhundra-indra, Mahasarakham University, Thailand

Dr. Saranya Raksong, Mahasarakham University, Thailand



Enterprises confront the rapid change of competitive environments in the new economy. They are imperative to adopt strategic marketing creativity in order to maintain competitive advantage in the long term. Based on the perspectives of both Resource-Advantage and Dynamic Capability, they produce unique capability to allow better marketing profitability. The purpose of this study is to examine the relationship between strategic marketing creativity and marketing profitability. The six dimensions of strategic marketing creativity include new marketing idea generation, dynamic research and development orientation, marketing activity integration, value development originality, novel marketing concept, and useful marketing program implementation. The data were derived from a survey of 228 marketing executives in information and communication technology businesses in Thailand. Ordinary least square (OLS) regression analysis is conducted to examine all hypothesized relationships among variables. The results indicate that five dimensions of strategic marketing creativity have partially significant positive influences on all consequences. In particular, new marketing idea’s generation and useful marketing program implementation has strongly influenced on all consequences. Additionally, dynamic marketing learning as an antecedent of strategic marketing creativity strongly influences on strategic marketing creativity. Conclusions and suggestions for future research are also interesting to be discussed accordingly.  In the digital era, the globally competitive environments are rapidly changed and a high complexity because there are growing liberalization and worldwide trading systems that are integrated in the pervasive developments of networks of communications technology. This speed of change is manifested and centered on swift changes in technology causing enlarged global competition and motivating the shortening product life cycles (Lee and Habte-Giorgis, 2004; Sadi and Al-Dubaisi, 2008). The flow of market information is numerous through the proliferation of media, communicable channels and customer contact points. This became challenge for conducting organizational strategy (Day, 2011). Furthermore, marketing problem includes product obsolete, the competitors’ imitation, and price wars (Hansen 2004). Whereas, customers are unable to articulate their future needs, but they have the willingness to pay for a new technology (Tidd, Bessant, and Pavitt, 2001). These phenomena stimulate mechanism to play a significant role of organizational capability to seek, generate, and develop new ideas for potential solution in the marketing process. They have become challenges in how to do strategic marketing in order to achieve sustainable competitive advantage.  Organizational success is derived from two: the market-driven view is based on understanding and seeking to fulfill the needs and wants of each customer. Whilst, market-driving view uses a market-driven view in new-product development not only to strive to meet customer needs, but also to search for products that pioneer new markets in order to increase market growth (Beverland, Ewing, and Matanda, 2006; Tuominen, Rajala, and Möller, 2004). Meanwhile, customers are unable to articulate their future needs, but they have the willingness to pay for a new technology (Tidd, Bessant, and Pavitt, 2001). It is appropriate way when organizations can deploy both exploratory and exploitative learning, to produce unique product development in order to achieve better performance (Atuahene-gima and Murray, 2007).  Marketing creativity is a crucial role to play between a market-driven view and market-driving view which enhances the ability of organizations to continuous success for the innovation process (Amabile et al., 1996; Cumming and Oldham, 1997; Sadi and Al-Dubaisi, 2008; Iqbal, 2011). Since it is the source of novel ideas for value innovation or new method for solution, it can deal with the changing environment, create future business and maintain today's business (Hsiao and Chou, 2004; Hurst, Rush, and White, 1996). Several scholars indicated that organizations with creative marketing can build new value and also new methods which is effective and attractive by quality, cost, and flexibility to respond to market in all circumstances in order to increase customers’ satisfaction which leads to sustainable competitive advantage and superior performance (Atuahene-gima and Murray, 2007; Shalley and Perry-Smith, 2008; Woodman, Sawyer, and Griffin, 1993; Iqball, 2011, Parjanen, 2012).  Meanwhile, the existing literatures reveal that there is little empirical research on strategic marketing creativity. Several previous research have focused on the definition of creativity, the conceptualization of marketing creativity, and the consequences of marketing creativity which concern new product development and new marketing programs (Andrew and Smith, 1996; Im, and Workman, 2004; Im, Hussain, and Sengupta, 2008; Slater, Hult, and Olson, 2010; Woodman, Sawyer, and Griffin, 1993). There are few empirical investigations regarding the dimensions of strategic marketing creativity and relationships between strategic marketing creativity and other business factors, which guide the firm to gain a competitive advantage. Therefore, this study intends to replenish a gap that was acquired in the literature reviews. The relationships between internal and external factors affect strategic marketing creativity so that this proposes the antecedents and consequences of strategic marketing creativity. The purpose of this study is to examine the impacts of strategic marketing creativity on marketing profitability through the mediating influences of best marketing practice, value innovation, marketing effectiveness, market response success, and sustainable marketing advantage. Moreover, the influences of five antecedents, including, marketing long-term vision, marketing transformational capability, dynamic marketing learning, market uncertainty and technology change are also investigated.  The study is organized as follows. The first part represents the theoretical foundation that explains the relationship between strategic marketing creativity, its consequences, and its antecedents. The second part provides the significant literature review and hypothesis development. The third part describes the details of the research method, including sample selection and data collection procedures, the variable measurements of each construct, the instrumental verification, the statistics, and equations to test the hypotheses. The fourth part gives the results of the analysis and discussion. The final part provides theoretical, managerial implications, limitations, the suggestions for further research and the conclusion of the study.


How to Analyse Automotive Industry Centres? - A Potential Methodological Model

David Fekete, Szechenyi Istvan University, Doctoral School of Regional and Economic Sciences,

Gyor, Hungary



Nowadays, the regional science and research programs about automotive industry are perhaps mostly connected in Gyor. This is due to the fact that the regional science is institutionalized in Győr for more than three decades ago, and the outstanding development of the city is depending on the automotive industry's performance.  On the base of the Széchenyi István University many scientific researches took place or are currently in progress in connection with automotive industry. I summarize in this study the structure, the methodology of the most important researches in connection with  automotive industry (“The Győr Region of the Automotive Industry, as the New Directions and Means of Regional Development” and “The Development of the Economic and Social Field of Activity of the Regional Innovation and Technological Knowledge Centre of the Automotive Industry at the Széchenyi István University.” titled research programmes) in order to sum up potential methodological principles of analyzing automotive industry centers. I show in the study the importance of connections between local authorities, automotive industry companies and tertiary education system and R&D institutions and I also suggest potential methodological tools. The institutionalised appearance of the regional science in Győr almost three decades ago and the significant development of the town mainly due to the achievement of the automotive industry together resulted in several finalised and presently in-progress research projects at the Széchenyi István University in the field of automotive industry and regions of automotive industry.  These research projects encouraged me to summarise the scientific work of this last period and provide methodological handholds and guidance for all those who with the aim of scientific perfection are interested in today’s leading industry of East-Central Europe, the automotive industry, and its regional and economic aspects.  In the (TÁMOP-4.2.1./B-09/KONV-2010-0003 „Mobility and Environment: Research in the Automotive Industry, Energetics and Environment in the Central and Western Transdanubian Region”) research project completed in 2012 the focus was on the location aspect of the automotive industry, seeking Hungarian and regional positions and analysed the characteristics of the supplier networks, their organisational and operational factors. The results inspired the research team to deal with the scientific question of how a district or region is formed around and upon the automotive industry, what economic, social and institutional network organising characteristics it has and how development could be influenced and changed by various means.  These scientific questions were elaborated in the research programme called TÁMOP-4.2.2.A-11/1/KONV-2012-0010 „The Győr Region of the Automotive Industry, as the New Directions and Means of Regional Development” (Rechnitzer 2013). Parallel to this an extensive collaboration began in Győr between the participants of the automotive industry (1) (automotive large, small and medium size companies, educational institutions, career centres, municipalities, institutes of higher education, business clusters etc. to get to know each others’ opinion, course of development and beyond networking, form a cooperation with a strong lobbying power. Several options arose for the practical frame of this cooperation, solutions not requiring institutionalised and organisational forms as well. As an answer to this a scientific research programme has been elaborated the aim of which is to process as a case study the regional cooperation model of several European automotive industry centres within the framework of the project TÁMOP-4.1.1.F-03/1-2013-0001„ The Development of the Economic and Social Field of Activity of the Regional Innovation and Technological Knowledge Centre of the Automotive Industry at the Széchenyi István University.” Hereinafter I shall to summarise the scientific research structure and methodology of the projects „The Győr Region of the Automotive Industry, as the New Directions and Means of Regional Development” and „The Development of the Economic and Social Field of Activity of the Regional Innovation and Technological Knowledge Centre of the Automotive Industry at the Széchenyi István University” in order to create a potentiel methodological basis of analysing of the automotive industry regions. The European Development Trends (Regional Agenda 2020), the domestic development tendencies (New Széchenyi Plan, Kálmán Széll Plan, Hungarian National Growth Plan) and the processes generated by the town and the region, together offered the possibility to explore, as basic research, the operation of an economic, automotive industry oriented development centre and the system of factors forming its spatial affects and development. The research offers new theoretical and practical approaches for the domestic and international development policy through the analysis of the automotive region which is presently successful, rich in function, developed in production base and divergent in connection.   The research is realised on two levels. On the theoretical level the aim is to thoroughly and professionally describe the theoretical model of the development centre, which is the industrial region, as a new development system shaping the region. This description should contain those characteristics that are valid for the Central European region, with special regard to the economic structure and the potentiality of the town network as well as the area and town development asset and institution system.  The research models, using the Hungarian town of Győr as an example, the possible directions and field of action of the automotive industry oriented development. With this it broadens the radius of development policy offering it new solutions and techniques. We have to mention here as a possible scientific result the introduction of the new institutional model of the regional collaboration - municipal governing, which can range from the organisation of public services, through the modern exploitation of regional resources to the institutional framework of the planning and development system.  The research elaborates several regional collaboration models which can help increase the efficiency of development – including area and town development, and encourage advantageous utilisation of fragmented resources and institutions.  The results of the empirical level of the research can be summarised in three dimensions. The first one is the industrial, automotive industrial region and the elaboration of the methodology of the developmental pole research relating to it. The second target is the exploration of the Győr Automotive Region itself, its scientific description, the evaluation of its resources, the definition of the towns’ and its regions’ system of relations, the marking of the organisational, institutional and financing limits and finally elaborating the corner points of a new type  - on the regional level – of planning and development system. The third aim is to test the regional level research and educational collaboration and based on this create its content and institutional framework. The research provides an opportunity for the participants of the region involved in research, higher education, municipal, economic, professional and scientific organisation to continuously communicate within and outside borders and initiate cooperation. Within the research, on the level of basic research five, on the level of empirical research eight subtopics were defined, which will be introduced hereinafter in detail. The aim of the first subtopic A1.Processing the theories of industrial regions and developmental poles is to survey the formation of the developmental poles known from regional sciences as the centre of regional development in countries showing different forms of development. It is also a significant goal to define and separate the types of industrial regions built upon or connected to these poles.  The subtopic works by analysing and processing literature and the method of organising and collecting good practices. The subtopic A2.The transformation of governmental roles and their effect on area structure sets out from the fact that within the framework of globalisation the attention of the developed countries focuses on how to make their town/urban regions (central regions) competitive. The European Union declared that the key participants of economic growth are the towns and cities in case of which one of the determinant methodologies for achieving competitiveness is co-operation and a new type of governance represented by it. That is, cooperation is meant on one hand between the town and its area or region in an organic space formed by economic processes, on the other hand co-operation embraces the widest range of participants involved in the economic development which makes borders between the governmental, economic and the non-profit sphere traversable. The aim of elaborating this subtopic is to evaluate what spatial contact, control and developmental models are applicable to these new functions and how these affect the developmental poles. In essence during a modified role conception of the government we strive to answer under what conditions will the Győr automotive region as a cross border town area be successfully governable. The subtopic works by methods of evaluating literature and looking at trends.


Human Resource Diversity Management Capability and Firm Survival: Empirical Evidence from Hotel Businesses in Thailand

Nutcha Caron, Mahasarakham University, Thailand

Dr. Karun Pratoom, Mahasarakham University, Thailand

Dr. Pakorn Sujchaphong, Mahasarakham University, Thailand



Human resource diversity management has emerged as an important workplace issue for businesses in the twenty-first century in the modern organization and has long been recognized as a key constraint leading employee attitudes and behaviors towards working and organization which in turn, creates a competitive advantage.  The research aims to examine the relationships among human resource diversity management capability, its consequences; organizational commitment effectiveness, organizational citizenship behavior, and organizational loyalty efficiency, as well as organizational outcomes; organizational creation outstanding, organizational innovation success, and firm survival.  In addition, internal and external environments as antecedents; long-term vision, flexibility orientation, resource readiness, organizational experience, and environmental uncertainty are also examined.  The results were derived from a survey of 202 four-to-five star hotel businesses in Thailand using ordinary least square (OLS) regression analysis to examine the relationships among variables in the model.  The results indicate that human resource diversity management capability is positively and significantly associated with all its consequences.  Organizational loyalty efficiency is an essential element for organizational citizenship behavior and firm outcomes.  For antecedents, most of the variables are important factors for building human resource diversity management capability, except resource readiness.  Moreover, theoretical and managerial contributions for a strategic perspective also suggest future directions for research in this vein which are discussed. Human capital is an invaluable and indispensable existing resource and of key importance for any organizational effectiveness and the source of the firm’s competitive advantage (Kumar and Shekhar, 2012).  Martensen and Grøholdt (2006) suggest that today’s customers demand not only the core product but also a wide range of values, attitudes and experiences.  Responding in these circumstances depends on the firm's ability to employ employees with the right competencies, motivation and commitment. Therefore, human resource practices have to analyze problems and adopt new and useful approaches in order to survive (Agarwala, 2003).  Nowadays, Increasing human resource diversity is one of the most important challenges that organizations face (Roberson & Park, 2007; Cook & Glass, 2009), especially in creative and innovative contexts (Bassett-Jones, 2005) which in turn are linked to firm survival (Kochan, Bezrukova, Ely, Jackson, Joshi, Jehn, Leonard, Levine, & Thomas, 2003).  Therefore, one important key issue for the organization to gain competitive advantage and survive is managing diversity in the workplace by human resource management which creates suitable policies and practices to manage that diversity (Shen, D’Netto, & Tang, 2010).  Those approaches have to foster and support the creation and maintenance of an internal labor market and high-level skills base, which in turn will reduce staff turnover, retain scarce talent and improve creativity and innovation. Diversity refers to the mixture of people with different cultural background group identities within the organization (Jauhari & Singh, 2013), who possesses different knowledge bases, sets of skills, experiences, cognition, and points of views (Shore, Chung-Herrera, Dean, Ehrhart, Jung, Randel, & Singh, 2009).  Thus, diversity management is defined as specific activities or planned programs which are designed for awareness and recognition of issues related to workforce diversity as a source of competitive advantage for the organization in creativity, complementarity and greater effectiveness (Cooke & Saini, 2010; Martín-Alcázar, Romero-Fernández, & Sánchez-Gardey, 2012; Wyatt-Nichol & Antwi-Boasiako, 2012).  Diversity management’s aim is to increase multicultural awareness; and develop an ability to perceive, accept, and value diversity in the workplace (Cox, 1993; Cooke & Saini, 2010).  Diversity management’s goal is to systematically change the organization into an open, welcoming and supportive environment for all employees in which all can gain benefits from maximizing inherent differences in employees (Mkono, 2010).  Thus, the benefits of managing diversity are:  a greater ability to manage employees, deal with market competition, and enhance the corporate reputation for the organization (Cooke & Saini, 2010; Jayne & Dipboye, 2004). A review of the existing literature finds that there are several gaps in motivating this research.  Firstly, although race is the most visible and salient of culture diversity dimensions.  An increasing number of racial minorities will enter the workforce, research specific to racial diversity within organizations has been largely omitted from organizational studies in recent years (Nkomo, 1992; Pitts, 2005; Richard, 2000), and has received little attention for research and guidance on racial dynamics, antecedents and outcomes of diversity (Richard, Murthi, & Ismail, 2007; Shore et al., 2009).  Secondly, diversity is not a new issue in research content in western countries such as the United States or the United Kingdom because these countries are fundamentally multicultural (Lorbiecki & Jack, 2000).  On the other hand, in some Asian counties, diversity has not been as frequently emphasized as a competitive resource (Magoshi & Chang, 2009).  Thirdly, previous research has received diminutive attention at the firm level of studies on the effects of diversity, but there have been a significant number at individual and group levels (Richard et al., 2007).  Many studies found that racial heterogeneity increased ability of creativity and implementation in groups (O’Reilly, Williams, & Barsade, 1997) which in turn, contributed to a competitive advantage for the organization (Richard, 2000).  Fourthly, a multicultural environment is important for the twenty-first century in the modern hotel businesses due to high levels of mobility between and across continents which impacts both upon work and society (Devine, Baum, Hearns, & Devine, 2007). Multi-culturally diverse workforces increase in the workplace when other nationalities are employed to meet labor shortages.  Mkono (2010) suggested that hotel businesses are becoming increasingly multi-cultural, multi-racial and multi-lingual because the trend toward more diverse workforce depends on diverse market, which is customers, but research on diversity management in a hospitality context is limited (Madera, Dawson, & Neal, 2013).  Therefore, to fill these gaps, this research concentrates on human resource racial diversity management capability at the firm level which focuses on workforce diversity in the hotel business that is an integrated activity and process associated with sharing, integration, linkage, evaluation, and identification which enhance relationships between employees in the same function and cross-function by which they co-operate, compete, communicate, plan, organize and are motivated in the organization (Horwitz, Bowmaker-Falconer, & Searll, 1996).  Likewise, this research develops and identifies important dimensions, measurements, conceptual models, and linkages of the theoretical back-up of racial diversity management capability which is based on a literature review and several conceptual frameworks relevant to diversity management, which focuses on the hotel business in Thailand.  However, this research proposed five dimensions of human resource diversity management capability.  These consist of knowledge sharing orientation, practice integration focus, functional linkage concentration, teamwork performance evaluation, and group talent identification.  Moreover, this research also investigates the relationships among human resource diversity management capability, the antecedents, and the consequences. To clearly verify the aforementioned relationships, the hotel businesses in Thailand are the sample for the research.  The changing composition of the hotel workforce throughout Thailand is of interest because The Asia-Pacific region has the highest growth rate for tourism as per United Nations World Tourism Organization (UNWTO) (2012).  For especially Thailand, in 2013, international tourist arrivals increased from 2012 to around 19.60% (Tourism Authority of Thailand, 2014).  Most tourists are from East Asia and Europe which increased from 2012 to 28.47% and 11.62% respectively.  Also, Thailand is part of the free trade agreement and a member of the Association of Southeast Asian Nations (ASEAN) and the ASEAN Economic Community (AEC) which is scheduled to kick off in 2015.  Being part of these economic groups, Thailand will be in competition with AEC groups concerning the issue of the free mobility of skilled labors by facilitating travel for individuals with respect to trade in goods, services, and investment; such as in the issuance of visas, and work permits for professionals and skilled labors (  Accordingly, agreements on mobility of professions within the ASEAN community recently have added hotel services and tourism professionals into the Mutual Recognition Arrangements (MRAs) through which Thailand will attract foreign workers who will move around within ASEAN community countries.  Although the increasing importance of workforce diversity and growth in Thailand's tourism industry has stimulated the demand for workers in tourism and hospitality, as well as international workers increasingly providing a solution to this labor shortage, very little empirical research has been done to assess the management of diversity in the hotel business in Thailand and has sought to understand the impact of diversity on organizational outcomes.  Likewise, previous research pays more attention to labor turnover in the hotel industries (e.g., Deery & Iverson, 1996; Robinson & Baron, 2007; Simons & Hinkin, 2001) due to labor intensity and high staff turnover (e.g., Guilding, Lamminmaki, & McManus, 2014; Yang, Narayanan, & Zahra, 2012).  Thus, the primary purpose of this research is to investigate the effects of human resource diversity management capability on firm survival.  In addition, the key research question is proposed as how human resource diversity management capability relates to firm survival.


Measurement of Local Entrepreneur Sector’s Expectations Concerning Research Institutions

Katalin Czako, Regional and Economic Doctoral School, Szechenyi Istvan University, Gyor, Hungary



Sector of local entrepreneurs creates an informative field for activities aiming to reach regional development. As this sector is important part of development policies Lengyel, (2010), Zonneweld and Waterhout (2010), Horváth (2011), Rechnitzer (2014), there are several applicable research methods in which framework, local developers trying to call attention of other local characters. In my present paper the first results of a research in progress are going to be reported. The study summarizes what expectations an international multinational company has got concerning a local innovative knowledge Centre. The introduced results in the study were processed as part of a 18 months long research program which is realized in an East-Central European town and the surveys are still in progress. The overall aim of the research program is to elaborate and develop the inner structure and the economical-social function of a Regional Innovative and Technological Knowledge Centre. The operation of the knowledge Centre is based on industrial and higher educational cooperation. In the course of the elaboration of the economic and social functions, it is an important goal to reveal the demand for local industrial participants and, according to this, an efficient operation of a future research Centre is going to satisfy local needs. In the interest of its realization, an interview-like survey is being done with local business characters. In the first part of this study the method of the measurement is going to be introduced. After that, the theoretical background of the structure of the deep interview and the arrangement of the questions in the interview are going to be introduced. Finally, the paper analyses the results in case of a global enterprise, which is a significant local business character. Győr, with its 130.000 inhabitants, is a middle city in East Central Europe. On the account of its economical achievement, it is Hungary’s and the region’s most dynamically developing city, to which its automotive industry contributes a lot. The city of Győr, thanks to its geographical abilities and past, has got a central role. In the Roman times a castle was built up here with protection function and the Centre formed into a city. It became an important junction of Pannonia’s road system; the later important continental commercial roads were being traced out at this time. Those geographical factors were started to be used at that time, which raised Győr to the commercial Centre of the region. It also played an important defensive role as a strategic endpoint in the time of the Turkish occupation. The city was expanding and enriching continuously during the long timezones besides the defensive infrastructure. It also functioned as an active Baroque centre until the end of the 18th century, the signs of this period raise the beauty of the city centre. Considering its current commercial and economical functions, in the 19th century it got a strong industrial central role, which is still preserved. At that time, automotive industry started to be presented in the town. Due to the long and rich past as well, after the change of regime (1989) a significant foreign investor layer settled down in the area. Such ventures started successfully which had no traditions before. The area of Győr became suitable for new industries as well, mainly thanks to the later International Industrial Park of Győr. The foreign stock investor interest is still regular towards the established industrial environment (GYMJVÖ, 2008.) Based on this there is a strong, well-structured entrepreneurial sector, operating in Győr, which plays important role in local development processes Rechnitzer and Smahó, (2012). In Győr the strategic documents of the city also mark out an emphasized role for the automotive innovative activity, and they support the research developmental cooperation which is tight with economical participants and the university. In such cooperation the keeping up of the economic competitiveness and the continuous growth of the city is seen (Fekete 2014a). In some automotive Centers these participants put emphasis on the continuous developing of the economy and on reforming the economical milieu, which is often executed in organized form. Such functioning cooperation were revealed for example in Ingolstadt at the headquarters of AUDI AG, where the local government-owned economy-developing corporation (IFG Ingolstadt), the logistical park developed together with AUDI AG, and the system of AUDI institutions maintained by AUDI AG and the surrounding universities serve the further reformation of the regional-innovational ability of the area (Fekete 2014b). Considering its population, its industrial production and its average income level Győr is a city with high data in Hungarian directions. There are cooperating steps and interests presented from the side of university, local government and corporate level as well. As part of the 2014-15 research program, a survey and related evaluation of the labor market oriented situation of enterprising competences are going to take place in Győr and its agglomeration. The reason for this is the elaboration of the efficient operation of a future research center. In connection to this, on one hand, there is going to be a competence survey offered for labour market, represented by students. On the other hand, there is going to be a systematization and comparison of the competencies which are looked for at the labour market and which are preferred by the business sphere. In particular, the issue of the local business competencies gets a highlighted focus, which provides significant factors for local development directions Cuervo et al. (2007). The survey focuses on the continuous economic development in Győr and in particular, on the long term competitiveness of the local labour market, which is connected to the locally functioning Széchenyi István University. A highlighted part of the survey is going to compare and model the competency demand and supply (1. Chart) among the faculties, university students of Széchenyi István University of Győr and the local corporations representing determined business segments in order to establish an efficiently functioning inner structure of a future research center. The study introduces that part of the research which conducts the business surveys. The first reason of the actuality of the research is the importance of such measurements, where it is measured how much the priority regarded competencies according to the university students differ from the priority regarded competencies according to corporations. Which competencies are important according to the groups? Are there any which are the most important according to both groups? The theoretical background of the research is given by the different literature about labour market oriented general and business competencies. The so called ’Panorama Project’, a pilot survey, which has already been conducted, might be the background of the research. It explored the competencies which were thought to be important by the groups in point on the level of different countries. The project took the key competences (communicative skills, social competences, initiative skills, business competence, acquiring learning, digital competence, professional knowledge, objective knowledge, cultural consciousness and expressional ability) defined by the ’EU Skills Panorama’ (2014) project for its basis and evaluated those from the point of view of corporations, institutions of higher education and university students. On the basis of this, the research in Győr would on one hand examine these competences from a territorial aspect; on the other hand it would examine other competences which are thought to be important by the interviewed people. The study contains the first results of the surveys connected to the corporations. The competencies searched by the corporations and the measurement of corporations’ human resources plans can be done in the research area, through the corporations which function in the most important industry. The competence measuring of the university students aims the students of Széchenyi István University of Győr. The methodology of this part of the research requires involving students of other institutions of higher education. According to research methodology the measurement of the demanded competences on the labour market and the connected conclusion are done with interviews and organizing statistical data at corporations belonging to certain industry. The (supplied) competencies represented by university students happen with online questionnaires. The further parts of the study focus on the composition of the survey conducted among local entrepreneurs and on the consequences from its first results.


Strategic Audit Professional Commitment and Audit Survival: An Empirical Research of Certified Public Accountants (CPAs) in Thailand

Nakarn Buaphuean, Mahasarakham University, Thailand

Dr. Supparak Janjarasjit, Mahasarakham University, Thailand

Dr. Phaprukebaramee Ussahawanitchakit, Mahasarakham University, Thailand



This study aims at investigating the influences of strategic audit professional commitment on audit survival through professional citizenship behavior, best audit practice, and professional loyalty awareness. The mediator variables that are audit quality, audit success, and audit survival are depedent on variables that moderate the variables of certified public accountants (CPAs) in Thailand. In this study 405 certified public accountants (CPAs) from Thailand are the sample of the study. Strategic audit professional commitment is a hypothesis that is to have direct and indirect effects on audit survival. Also, professional citizenship behavior, best audit practice and professional loyalty awareness are proposed to become keys mediators of the relationships among strategic audit professional commitment and audit survival. For the relationships among strategic audit professional commitment and its consequences can explain by the Self-Determination Theory (SDT). Future research is suggestion to seek other consequence variables of strategic audit professional commitment for literature review. Higher strategic audit professional commitment was associated with a higher level of professional citizenship behavior, best audit practice, professional loyalty, audit quality, audit success and audit survival. Theoretical and managerial contributions are explicitly provided. Conclusion and suggestions and directions of the future research are included. Over the past more than two decades of internal accounting in countries around the world, regulators have focused more on the quality of financial reporting. The most important measure is to provide a system to oversee the auditors to provide strict confidence and prevent errors in the future. At that time, the Securities and Exchange Commission in the United States (SEC: US) announced upgrades to monitor the work of auditors and to focus the auditor to perform the statutory accounts and the stock market according to a changing environment (Kwon and Banks, 2004).  It was also found that in 2014, Asian countries such as Japan faced problems such as banks seeking compensation for the damage caused by financial mistakes by filing a lawsuit worth 273 million dollars against Olympus Bank between financial statements 2000 and the first quarter of 2011 because of damage caused by financial mistakes. The news agency Reuters said it was the largest accounting scandal in the history of Japan and as a result, the three executives of Olympus went to prison (Reuters, 2014). In Thailand in 2012, regulators like the SEC filed against PLC’.Singha Paratech (SINGHA) ​​was referred to the Department of Special Investigation, due to the actions important to document and record revenue sale false accounts and financial statements of SINGHA in 2010, a total of 543.3 million. An auditor is limited to the scope of the management and cannot express an opinion on the financial statements for the year 2010 (Bangkokbiznews, 2012). Therefore, the event has encouraged widespread accounting reform both in Thailand and overseas, reflecting the responsibilities of management and auditors to be aware of operating at full capacity and ability. Auditors are responsible for audit and express an opinion in the audit report. Auditors must be allowed to express an opinion on the validity of the statements that will affect the quality of the financial statements and build the confidence of users that the financial statements are reasonable and that practical standards of accounting and auditing standards were used (Tandiontong, 2013; IFAC, 2003). Due to the fact that the work of auditors is affected by laws which are consistent with the duties and responsibilities of the auditors on the financial statements, high standards are required. Honesty, independence and obligations to the accounting profession are at a higher level, which is what the auditor will have to try to keep as long as possible. The study by Ahamad, Anantharman and Ismail (2012) emphasized that the obligations of the profession are important because employees with career commitment will have to abide by these regardless ethics and contribute to the higher turnover than employees who do not have such a career commitment. Therefore, the demand for accounting information for external users and internal users in decisions and investments, for which an auditor provides assurance as to the reason that the financial statements do not present information that contains material significant misstatement of facts, means that the financial statements are reliably useful and are based on audit quality. Thus, the importance of auditors has played a significant role in improving the quality of reports. They explicitly help users assess and investigate the advantage and benefits of firms to enable the auditor to evaluate whether or not the financial statements are prepared under the prescribed rules (Generally Accepted Accounting Principles: GAAP). Their roles have been examined from several perspectives. Audit professional commitment refers to improved audit quality (Chaikambang and Ussahawanitchakit, 2011; Intakhand and Ussahawanitchakit, 2009; Ussahawanitchakit and Intakhan, 2011; Tandiontong, 2013), and affects role stress, turnover intention, job satisfaction, job performance and the implementation of independent reportage (Leong, Huang and Hsu, 2003; Intakhan and Ussahawanitchakit, 2009; Tandiontong, 2013). Thus, the behavior of the individual auditor is important and necessary because the auditor is a major player in the operation to achieve the objectives. Likewise, auditors’ professional practice through professional commitment has influenced their professional citizenship behavior, best audit practice and professional loyalty awareness. It has impacted their audit quality, audit success and audit survival in competitive markets and environments. Therefore, auditor behaviors, competencies, capabilities, duties, and functions have been major concepts of interest for researchers and practitioners in accounting for more than 20 years (Hall and Langfield-Smith, 2005).  Accordingly, professional commitment is attached to individuals in the profession, or to the strength of an individual’s identification with a profession (Nasution and Ostermark, 2012). Likewise, more committed professionals are less likely to leave their profession as they have a strong belief in, and acceptance of, professional goals, and have a strong desire to maintain membership in the profession. They are willing to use their efforts to advance the profession (Aranya, Pollock and Amemic, 1981). Ahamad, Anantharman and Ismail (2012) emphasized the need to study professional commitment because it leads to higher sensitivity on ethical and involvement issues. Meanwhile, a number of studies have examined the professional commitment of accountants (Chen, Silverthorne and Hung, 2006; Bryant, Moshavi and Nugen, 2007; Arens, Elder, and Beasley, 2010). Therefore, professional commitment has been linked to positive outcomes such as in performance improvement, turnover intentions, and the level of satisfaction in the profession (Hall and Langfield-Smith, 2005). Likewise, auditors have professional commitment affecting job satisfaction and job performance (Leong, Huang and Hsu, 2003).  It is formed by creating a specialized code of ethics so as to circumscribe the profession and its community and is concerned with the professions' credibility, marketability, and effectiveness. In this research, two important perspectives have been integrated and named as “strategic audit professional commitment” which are strategic and audit professional commitment. Strategic refers to the ideas, plans, and actions of the various organizations used to gain success over competitors, as well as strategies to help organizations achieve a competitive advantage in competition. Success comes from the ability to make the organization stand out and above the competition (Pitts and Lei, 2005).  The  strategic  audit  is an  important  major  driving  forces  of  audit  judgment  and  quality  of  audit (Carpenter, 2007; Chang, Tsai, Shih and Hwang, 2008; McCracken, Salterio and Gibbins, 2008). Likewise, the component of a definition of strategic audit includes internal control system evaluation, business risk assessment, fraud risk analysis, and technology intensity (Sinchuen and Ussahawanitchakit, 2009).  Professional commitment refers to the “psychological link between an individual and his/her occupation that is based on an affective reaction to that occupation,” (Lee, Carswell and Allen, 2000).  Therefore, in this study, strategic audit professional commitment is defined as the ability, goals, values, a willingness to exert considerable effort on behalf of the profession, a strong desire to maintain membership in the profession, compliance with profession standards, profession accountability, and ethics of the profession (Aranya, Pollock and Amemic, 1981; Arens, Elder and Beasley, 2010; Bryant, Moshavi and Nugen, 2007; Chen, Silverthorne and Hung, 2006; Tandiontong, 2013). Further, an acceptance of professional ethics and goals includes professional behavior, affiliation with professional organizations, attendance at professional conferences, compliance  with professional  standards, professional  accountability,  and the ethics of  the profession the effect of creating a sustainable competitive advantage (Analoui, 2007; Aranya and Ferris, 1984; Arens et al., 2010; Baugh and Robert,1994; Bryant, Moshavi and Nugen, 2007; Chen, Silverthorne and Hung, 2006; Lanchaman and Aranya, 1986; Sorensen and Sorensen, 1974).  In the review of previous studies, strategic professional commitment has been seen as a factor in influencing an individual's behavior regarding compliance and duty within professional practice (Kwon and Banks, 2004), decreased turnover (Porter et al., 1974), and promotion of greater organizational citizenship behavior (Bogler and Somech, 2004). Further, professional commitment negatively affects personal turnover intentions (Harrell, Chewning and Taylor, 1986). Accordingly, professional commitment is defined as auditors' behavior in terms of compliance and duty to their professional audit practices that indicates that they perform the audit process with beliefs, acceptance, and goals to maintain professional standards for their clients. This standard has been linked to significant outcomes on audit performance (Hiltion and Souhgate, 2007).


Perceived Product Quality and Soft Drink Brand Loyalty in the Lebanese Market

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

Albert Andraos, Lebanese American University, Lebanon

Garo Agopian, Rensselaer Polytechnic Institute, NY



Pivotal proofs from marketing literature and similar methodological research works as well as supporting insights from an exploratory study are combined in a theoretical paper that defines and examines the shared meanings of perceived product quality and brand loyalty. This study begins with a conceptualized part that answers the fundamental question “What do consumers mean by product quality and brand loyalty?” in the context of soft drinks. The paper then attempts to present an exploration of the linkage between these two elusive concepts by calculating the correlation of the quality-loyalty relationship. The discussion focuses on the soft drinks industry in Lebanon with data gathered through a questionnaire. Implications and propositions about the concepts are presented for managing the perceptions of quality and loyalty through differentiated and integrated marketing communication tools. Marketing is an interdisciplinary field which draws on knowledge and decisions from the social and behavioral sciences including social, clinical and cognitive psychology, sociology and anthropology – the study of humankind – as well as orientations and concepts from many other fields and disciplines such as philosophy, design and management. Some even go as far as to call marketing “applied economics”. The rise of holistic marketing that occurred at the turn of the century led to a shift in the understanding of marketing as a field of art and science. Moreover, the adoption of the holistic marketing concept fueled the recent development of one of the most interesting trends in marketing, the realm of consumer behavior. Consumer behavior is an offshoot of marketing that that focuses on directly dealing with the dissection of the mainstream consumer decision making process. Consumer behavior is concerned with understanding how both men and women choose and use products, ideas, services and experiences, their selection behavior and the ‘why’ behind their behavior as well as consumer goods, product quality and brand loyalty among many other concepts (Solomon, 2007, p. 7). Consumer goods include convenience, shopping, specialty and unsought goods. Convenience goods are those consumer goods which are purchased frequently, immediately and with minimum shopping effort (Kotler & Keller, 2012). Convenience goods have many subdivisions with FMCG (Fast Moving Consumer Goods) referring to those goods which have a short lifespan and are used frequently and conveniently by consumers (Mise, Nair, Odera, & Ogutu, 2013b). Among the most famous groupings within the clan of FMCG are the extended families of alcoholic and non-alcoholic beverages; the former being labeled as “hard liquor” and the latter including the class of ‘soft drinks’ (Mise, Nair, Odera, & Ogutu, 2013a). Non-alcoholic beverages in general and soft drinks in particular were among the first FMCG groupings to have an almost complete global presence - with marketing efforts dating back to the 17th century - and since then have come a long way to be considered as consumer staples among the myriad of 21st century FMCG (Mise et al., 2013a). With so many beverage varieties today, marketing efforts are even more intense with soft drink marketers hard-pressed to make their drinks stand out among others (White & Pringle, 2002).Since the Lebanese FMCG market forms one of the major sectors of the country’s economy, various local and regional marketing efforts are in place with increasing attention among marketers focusing on the youth market “as a potentially loyal segment” (Close, 2006). One of the major markets of soft drink consumers in Lebanon is the “highly-dynamic” young youth/student audience which provides a perplexing challenge for companies that decide to reach and connect with it (Carter, 2011). This youth audience has a significantly higher intake of soft drinks than do older age groups (Nasreddine et al, 2006). Since their early years, this market has been exposed to the World Wide Web and specifically Google, mobile communications, media, technology and fashion. They are educated and extremely savvy yet highly skeptical consumers influencing as much as 81 percent of their parents’ apparel purchases (Carter, 2011). Focusing on satisfying the target market of an organization is known to be the groundwork on which marketing is practiced (Murphy & Werner, 2014). The majority of this demographic obtain money from part-time jobs making them price sensitive; some even ask their family members for money, making them even more sensitive to spending considerations regarding price as “the number one concern” followed by the sense of individuality (Carter, 2011). Moreover, the recent economic downturns of the past decade have led to a decrease in available money for youth which has brought forward a global and cultural modification in youth consumption.  Even though soft drinks present various opportunities in both the retailing and wholesaling functions, this study focuses on the business-to-consumer counterpart of the soft drinks industry to examine the characteristics of perceived product quality and brand loyalty. Thus, the purpose of this study is to examine the important quality-loyalty relationship among the major groups of soft drink consumers in the Lebanese market with the aim of having theoretical and practical contribution to relevant marketing communications decisions. Moreover, particular attention is paid to identifying and establishing a positive correlation between perceived product quality and brand loyalty among soft drink consumers in Lebanon. The following is considered within the paper: 1. Testing the hypothesis that there is a positive correlation between product quality and brand loyalty among soft drink consumers. 2. Testing the hypothesis that there exist differences in perceived product quality, marketing attributes and brand loyalty among the various soft drinks consumer groups. In this section, we take a look at the two defining concepts of our subject matter, product quality and brand loyalty, and take a glimpse at the cola giants. The term product quality has a vague meaning (Solomon, 2013, p. 378). It can be identified as a construct which is an intangible, overall, relative and dynamic perception of the brand by consumers. Even though it may not necessarily be objectively determined, it is one of the two elements that consumers look for in products; the other being value (Aaker, 1991; Solomon, 2007; Zeithmal, 1988). According to Aaker (1991), perceived quality generates value. Aaker (1991) also illustrates the relativity of the feeling of perceived quality by saying that customers have vastly diverse personalities, needs, preferences as well as judgments about what is important and what is not. Solomon (2007) goes further to note that consumers evaluate product quality based on appearance, taste, texture, or smell. Product formulation is one of the most important components of perceived product quality. This idea is backed up by Hossain (2007), who indicates that attributes such as taste/flavor, sugar content, brand image, color and price create the product image and indicate product perceived quality perception. As with the other elements of product quality, product formulations change over time (Hart & Murphy, 1998, p. 34). However, perceived quality is different from customer satisfaction since a customer can be satisfied due to a low expectation level about performance (Aaker, 1991). Yet, perceived quality is also different from consumer attitude as a positive attitude can be generated because of a low quality product being cheap or vice versa (Aaker, 1991). When it comes to soft drinks, taste is particularly important. This is why both Coca-Cola and PepsiCo use electronic tongues to taste their products during production (Tagliabue, 2002). On the other hand, a study has been done to assess if taste actually matters when it comes to soft drinks (Kühn & Gallinat, 2013). Furthermore, a study conducted in Lebanon concluded that soft drink brand names affect taste perceptions (Baalbaki & Moukkaddem, 2000). Coca-Cola came face-to-face with this taste issue in the 1980s when even though its New Coke was preferred over Pepsi in blind taste tests, the product did not do well in the marketplace (Davis, 1987).The brand loyalty construct has had a long global history dating back to 1923 (Mise et al., 2013a). Aaker (1991) depicts brand loyalty as the “measure of the attachment that a customer has to a brand” , and considers it as one of the building blocks of brand equity alongside perceived quality, brand awareness, brand associations as well as other proprietary brand assets.According to Solomon (2007), products are rewarded with brand loyalty which is a bond between a product and the consumer that is very difficult to weaken and split. Once rewarded with loyalty, the product enters into a virtual agreement binding it to the marketplace (Kapferer, 1992, p. 16). Brand loyalty defines repeat buying behavior that reveals a conscious choice to continue purchasing the same brand (Jacoby & Chestnut, 1978). According to Close (2006), brand loyalty determinants include “demographic variables, namely as teenage status and gender” as well as other variables such as taste, quality, image, and the utility of the soft drink. The consumer is constantly looking for ways to acquire a unique experience. According to Civre (2014), this is referred to as the “consumers’ need for uniqueness” and plays a central role in the consumer’s decision-making process.


Organizational Renewal Capability and Firm Sustainability:

An Empirical investigation of Chemical and Chemical Products Businesses in Thailand

Piyawan Khumyat, Mahasarakham University, Thailand

Dr. Karun Pratoom, Mahasarakham University, Thailand

Dr. Pakorn Sujchaphong, Mahasarakham University, Thailand



The current global business environment is highly competitive and turbulent. Thus, firms need to continually renew themselves to ensure success in competitiveness and in sustainable achievement, as firms need to deal with the changing situation by finding effective ways. Therefore, this research investigates the relationships between organizational renewal capability (including dynamic organizational learning, continuous organizational development orientation, proactive knowledge improvement awareness, flexible business practice concentration, and aggressive idea generation) on firm sustainability via organizational value creation, organizational innovation effectiveness, organizational excellence efficiency, and organizational competitiveness. Moreover, five antecedent variables, namely, top management support, organizational change readiness, organizational knowledge focus, technology turbulence and environmental uncertainty, are examined for their impact on five dimensions of organizational renewal capability. The conceptual model is proposed by drawing on the theories of Dynamic Capabilities Theory and Contingency Theory, both within the capability stream. The model is empirically tested by using data collected from mail surveys from among chemical and chemical products businesses in Thailand. Multiple regression analyses are utilized to examine and demonstrate the relationships among the consequents and the antecedents of organizational renewal capability. The results reveal that the posited five dimensions of organizational renewal capability have positive associations with five outcomes and five antecedents have positive associations with each dimension of organizational renewal capability. Competition in today’s business environment is becoming more global. Organizations are thus faced with unexpected changes and pressure from this increasing and constantly changing competition. Competition can arise in the same or in a different industry in which there is rivalry among both existing firms and new entrants. Furthermore, the current era of interconnected information and social networks allows consumers greater bargaining power because they have information for evaluating the choices before making a decision (Shimov, 2003; Sunarno, 2001). Thus, firms face extreme pressure to try to find a way to mark themselves as superior to their competitors. For the above reasons, most firms emphasize the importance of choosing and using an appropriate strategy, including finding those characteristics and capabilities which are required of the organization. Moreover, organizations must configure their existing assets and create new resources and capabilities according to dynamic environment (Eisenhardt and Martin, 2000). However, organizations need for their competitiveness to be sustainable rather than just a competitive advantage. In turbulent environments sustainability is a characteristic to sustain both long term opportunities and the potential of the firm. Therefore, the ability of the organization to continuously innovate, modify, create organizational resources and strategic capabilities are important (Agarwal and Helfat, 2009). However, competition in business acts as an appropriate judge between the firm and its environment and that can lead to the disappearance of the firm where a renewal does not occur or is not achieved. Adaptability and changeability become the guarantors of organizational survival according to their firm’s guidelines and environmental context (Santos, 2002 and 2003). Organizational renewal capability considers how best to implement changes and basis development that operational capability from inside and outside of the change. In that case, firm has to make appropriate choices between internal development and external suppliers as to which capability could renew their ability to be effective and benefit over the long term (Agarwal and Helfat, 2009; Rosenkopf and Nerkar, 2001). Moreover, many firms are trying to create their capabilities through continuous adaptation. Firms in industry face a critical gap between their capabilities and the needs of competition in an environment that changes all the time (Capron and Mitchell, 2009). The main focus of organizational renewal capability is a systematic method to link strengths to strategy. This means that an organization that has effective goals must be completely different from an organization that has focused on innovation or radical changes. Thus, organizational innovation and effectiveness have emphasis on renewal working as dynamic system or self-management. Organizational renewal capability is dependent on the difference both the systemic change within organization and the situation and organizational goals. (Junell and Ståhle, 2011). Organizational renewal capability refers to the organizational collective capability to adapt and change in a manner consistent with its strategy and business environment. This paper provides an empirical analysis of organizational capability as an example of a renewal capability. For the purposes of this study, renewal represents a firm’s ability to adapt and change an operational characteristic which responds appropriately to environmental dynamics for the purpose of developing organizational competitiveness and firm sustainability. The population for this study, chemical and chemical products businesses, represent an ideal setting to examine renewal capability as this industry involves an enormous diversity of products. Furthermore, the nature of chemical industry involves a dependence on high technology (Leker and Herzog, 2004). In the context of organizational renewal capability and in the context of Thailand's renew operational sectors, the organizational renewal capability can be studied as systemic dynamics within the organization. Particularly, this paper considers the emergence of renewal capability and its implications. The key research question of this paper is, "How does organizational renewal capability affect firm sustainability?" The examination of organizational renewal capability from among Thailand chemical and chemical products businesses forms the data for the empirical research. The next section is a review of appropriate literature, followed by the research methodology. There follows a section that presents the findings and a section discussing the results. This paper concludes with theoretical and managerial implications and also some limitations of this study. The literature on organizational renewal capability has focused on the capability of a firm to increase its competencies in competitiveness and sustainability. Dynamic Capability Theory explains that the ability of firms to renew competencies is best achieved in accordance with dynamics of a changing business environment by implementing internal and external adaptations and with reconfigurations of organizational management and organizational resources, both tangible and intangible that will allow firms to be sustainable. Additionally, Contingency Theory provides an understanding of the ability of an organization to assess the situational nature of strategic management in that there is an appropriate bridge between structural factors and situations for better performance. Dynamic Capability Theory explains the differences of capabilities that are in the development and application by the firm. Organizational renewal capability in this research is viewed as the capability of a firm to create sustainability, for which the firm is able to maintain competitive advantage in the long term by combining opportunities and seeking behavior advantage. Moreover, organizational renewal capability complements the firm’s resources and capabilities by serving to improve the firm in its use of its capabilities when confronted with environmental change. Furthermore, dynamic capability is important to the research of organizational renewal capability, as the approach is the dominant approach to strategic management. Organizational renewal is the corporate form in which capabilities based management is most explicitly met (Eisenhardt and Martin, 2000; Winter, 2003). However, capabilities focus on complicated interactions between multitudinous resources bases. Also, it influences the development of future capabilities. Thus, capabilities are past activities, and the range of prospects they are able to make (Ståhle, Ståhle, and Pöyhönen, 2003). In this research, Dynamic Capability Theory is applied to organizational renewal capability which includes five dimensions, namely, dynamic organizational learning, continuous organizational development orientation, proactive knowledge improvement awareness, flexible business practice concentration, and aggressive idea generation commitment. These dimensions are capabilities whose characteristics are dynamic, proactive, knowledge based, social, systemic, strategic, and multi-dimensional by the nature of a firm, that is, the ability of a firm to engage in continuous organizational development. Thus, organizational renewal capability leads firms to competitiveness and sustainability. Currently, organizations operate in a dynamic environment into which they must fit and into a changing environment by continuously seeking appropriate ways (Mulili and Wong, 2011). Furthermore, managerial change perceptions affect organizational behavior towards the renewal of their firm’s resource base. This perspective allows the adoption of a contingency approach to our analysis as discussed concerning dissimilarity of dynamic capabilities in different environmental predicaments (Helfat and Peteraf, 2003). The basic assumption is that the appropriate fit between the external environment and the organization has significant implications for performance (Tsang and Yip, 2007). Furthermore, the assumption of Contingency Theory suggests that the open systems conception defines an organization as a social system in an operational environment. Organizations adapt appropriately over time with changing situations so as to maintain effectiveness. Thus, Contingency Theory contains the reasonable concept which encompasses organizational renewal capability (Sauser, Reilly, and Shenhar, 2009). Therefore, the relationship between the organization and its environment is one in which the organization practices, creates or adapts in accordance with that environment. The internal environmental factors such as organization culture, technological resources, and firm size, are all identified as environmental factors that affect the different forms of organizational effectiveness (O’Connor, 1995). The external environment factors such as economic conditions, market competition,   technology change, and uncertainty can also affect the effectiveness of organization. The main point of Contingency Theory refers to the operational fit of the organization (Miles, Covin, and Heeley, 2000). This research applies Contingency Theory to explain the relationship of organizational renewal capability and firm sustainability through organizational value creation, organizational innovation effectiveness, organizational excellence efficiency, and organizational competitiveness which depend on both external and internal environments. The context of Contingency Theory provides the way to change capability for better performance matching the environmental context (Nasrallah and Qawasmeh, 2009).


Social Media Behavior and Influence on University Students in Lebanon

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

Annelie Moukaddem Baalbaki, Lebanese American University, Beirut, Lebanon



Social Networking is becoming an essential part of our everyday life. People of all ages, cultures, backgrounds, genders and professions are joining these networks to interact, communicate and socialize with each other. These social networks (Facebook, Twitter, Instagram, Pinterest, Google+, LinkedIn) are engaging consumers from all over the world and keeping them busy and entertained. The number of users joining these networks is increasing by the day since it not just because it is a social trend to do so, but because of several benefits and advantages generated from joining social media. Consumers use these online social networks to share their interests, backgrounds, activities, photos, stories and real-life connections with their “friends”. They also share experiences with the products and services that they buy. Companies, on the others hand, use these social networks to communicate with their customers, attract them, engage them, build relationships with them and eventually trigger them to buy their products and services. This research tries to explore the social media habits of university students in Lebanon and its effect on their behavior as consumers. It also explores the effect of electronic word of mouth. In other words, it looks into the effect of recommendations by friends and by experts on the consumer behavior and buying intentions. Quantitative data was collected and studied through the use of a questionnaire. The sample composed of 227 university students living in Lebanon since this age group represents a major customer base.  According to Alkhas (2011), social media network is a new marketing phenomenon because it has become a new instrument used for integrated marketing communications. Moreover, it is used to allow companies grow a solid relationship with their customers. Social media involves a wide range of ways to share information. This includes social networking sites (Mangold & Faulds 2009). Online social networks sites as Facebook and MySpace have grabbed the attention of millions of users by which it’s used for many different tasks (Bicen and Cavus, 2010). Indeed, social networking’s reputation is highly obvious by its number of users (Cheung et al., 2010). According to the Statistic Brain Research Institute (2014), the number of monthly active Facebook users is 1.31 billion and the average time spent on Facebook per visit is 18 minutes. Among 135 million Arabs world widely, 81 million are active users of social media by May 2014, compared to 54 million users in May 2013 (Nazra A'la I'lam Al'ijtima'i Fi Al Alam Al Arabi, 2014) – a whopping 50% increase in just 12 months. Statista reported that 32.71% of the Lebanese population have Facebook accounts during 2012 while the percentage increased to 43% during 2013 (Nazra A'la I'lam Al'ijtima'i Fi Al Alam Al Arabi, 2014). During 2013, 1.9 millions of Lebanese citizens had access to the internet while only 61% of them are active users. Of the active users, 87% have social networks where Facebook and Twitter ranked the primary and secondary social networks. Of Lebanese people who carry a smartphone population, 85% has access to the mobile internet (Arab Brains, 2014)­.  However, despite Facebook’s and other social media’s popularity, the university student in Lebanon’s behavior on social media is still unclear. In addition, it is almost unknown how the material shared on Facebook or on any other social network is affecting his buying decision and behavior. Furthermore, understanding how and how much a consumer is affected by social media and electronic word of mouth (e-wom) is little in the Arabian countries in general, Lebanon in specific. Based on the above, this study sheds light on social media habits of university students in Lebanon, the devices they use to access social media, the brands of the phones they use and the time they spent on social media. Then it elaborates on how the information shared by friends and experts on social networks is affecting other consumers and their buying behavior and intentions.  Kaplan & Haenlein (2010) defined social media as a “a group of internet based applications that builds on the ideological and technological foundations of Web 2.0, and it allows the creation and exchange of user-generated content’’. In another way, a social networking website is defined as a “network of friends” for proficient or social communications (Trusov, Bucklin, & Pauwels, 2009). Akrimi & Khemakhem (2012) believe that online social networks have strongly improved the flow of information by rendering it extremely flexible to share and propagate information over the internet. Moreover, social media had also an impact on the consumer behavior starting from searching for info to after-purchase behavior as disappointment phrases or behaviors (Mangold & Faulds, 2009).  Chen, Haumen and Johnston (2013) defined Facebook and Twitter both as “social computing systems” which have progressively grown to be popular among university students. As for Lampe et al. (2008, p721), they described social network sites as Facebook, to include three major features opening the way for users to "(1) construct a public or semi-public profile within abounded system, (2) articulate a list of other users with whom they share a connection, and (3) view and traverse their list of connections and those made by others within the system".  User-content such as images, statuses and interests can be posted by users of typical social network sites (Chen, Haumen and Johnston, 2013). These sites generate an online society that depends on the user involvement and participation (Waters, Burnett, Lamm &Lucas, 2009).  A research was made evaluating the Arabian world and the internet usage. It was reported that 50% of the respondents spend 1-5 hours daily on the internet using their laptops, 54% of the respondents spend less than an hour per day on the internet via their smartphones and 73% of them spend less than an hour surfing the net daily using their pads (Al-A’lam Al-A’rabi ala Internet, 2014). MarketingCharts (2013) posted an article explaining that the American (ages 18-64) user’s average time spent on social media is 3.2 hours per day according to the research made by Open Thinking Exchange. The article also states that the American social network users (ages 18-34) spend more time on social networks (3.8 hours) than older users and that, on average, women spend more time than man. According to Cowen and Co., according the time spent on Facebook per day, it is the number one social network averaging 42 minutes per day for the average American user (E-marketer, 2014).  Al-A’lam Al-A’rabi ala Internet (2014) reported that 40.8% of the respondents check their social network account several times a day while 30.6% of the respondents checked it once per day. Akyildiz and Argan (2010) believe that students with a diverse of “interests and purposes” use Facebook for several reasons. They initialized a survey in Turkey which targeted undergraduate students. The survey asked about the purposes behind Facebook’s usage including social activities and school related activities. The survey showed that students use Facebook to “follow photos, videos, events etc.” in the first place where to “contact friends who are away from home” came in the second place and to “have fun” came in the third place. Bosch (2009) and Roblyer et al. (2010) revealed that students use Facebook for both social and educational purposes. The Arab Media Forum report 2014 showed that 16.9% of Arab teachers use Facebook Groups and Google+ Circles for educational purposes. On the other hand, some literature stated that online social networks’ usage for educational purposes might induce students to create social connections with other users; they share thoughts, build identities, generate products, and obtain constant response (Dron & Anderson, 2009a; Greenhow, 2011; Wheeler et al., 2008). Nazra A'la I'lam Al'ijtima'i Fi Al Alam Al Arabi (2014) also showed that 27.59% of Arabs used social media to follow the latest news between 2011 and 2014 where 6% of Arabs considered social media their primary resource to know the news. In addition, 26.9% of the respondents believed that their primary usage of the social media is to get to know more about the current news, causes raised and any relative information of different issues while 26.7% of the respondents considered socializing as their primary usage of the social media (Al-A’lam Al-A’rabi ala Internet, 2014). "Social networking is anytime, anywhere access," says Marc Choma, communications director at the Ottawa-based Canadian Wireless Telecommunications Association (CWTA). This might be a clarification of the huge popularity of mobile social networking apps knowing that based on a 79% penetration; social networking apps come in second in the most downloaded apps in Canada (Strategy, 2012). A recent study done by comScore (May 2014) in the US showed that 71% of social network users access the online network through their mobile devices more than the desktop computers. During 2013, it showed that the total mobile engagement on social media has increased by 55%. In addition, when Arabian respondents were asked about the most application they use on their smartphones, the most frequent answer was the social networks applications (Al-A’lam Al-A’rabi ala Internet, 2014). Shu-Chuan and Kim (2011) believe that the rise of Internet-based media has eased the growth of the “electronic word-of-mouth” online. To define it, the electronic word of mouth is ‘any positive or negative statement made by potential, actual, or former customers about a product or company which is made available to a multitude of people and institutions via the Internet” (Hennig-Thurau et al., 2004).  Norman & Russel (2006) assure that online-passing behavior is a crucial result of electronic word of mouth that eases the information flow. Indeed, Torben (2013) assures that the rise of social media has started a new marketing avenue for companies. He explains that the usual “word-of-mouth” term has been substituted by the “word-of-web” because customers now long for social media sites prior purchasing a product, thus affecting the consumer’s buying behavior.


Strategic Learning Management Orientation and Firm Sustainability: An Empirical Investigation of Auto Parts Businesses in Thailand

Mongkol Ekkaphan, Mahasarakham University, Thailand

Dr. Karun Pratoom, Mahasarakham University, Thailand

Dr. Pakorn Sujchaphong, Mahasarakham University, Thailand



Strategic learning management orientation has been viewed as one of key components that influence organizational performance. Drawing on the organizational learning theory and contingency theory, the objective of the study is to investigate the relationships among strategic learning management orientation and its consequences; organizational productivity, operational success, business excellence, corporate competitiveness and firm sustainability and also to explore the antecedents influence of  executive proactive vision, competitive knowledge, potential technology adaptation, and business environment complexity . The results were derived from a survey of 115 auto parts firms in Thailand provided the interesting points of the strategic learning management orientation was directly associated with firm sustainability. The hypothesized relationships among variables are examined by using ordinary least square (OLS) regression analysis. Results suggest that strategic learning management orientation are positively related to organizational productivity, operational success, business excellence, and corporate competitiveness which are as the mediator between strategic learning management orientation and firm sustainability. Executive proactive vision, potential technology adaptation, and business environment complexity do play an antecedent role in this study. Moreover, theoretical and managerial contributions, conclusion, and suggestions for future research are also interesting to be discussed. Globalization is a phenomenon of the 21st century. There are drastic transitions in their competitive environment such as political, social, cultural, technological and economical changes in the market conditions (Zhang & Zhang, 2003). According to business environment changes, criterions and requirements of doing businesses must be established to create the proper strategy in order to achieve the organization objectives under the intensely competitive circumstance. Also, firms have to formulate the strategies in organizational level with the clear and concrete operationalization. It is clear that firms need to learn, and the organization’s ability to learn is a key strategic capability to compete in modern markets (Santos-Vijande, López-Sánchez, & Trespalacios, 2012). Organizational learning has become unique tools in order to competitive advantage and performance (Garvin, 2000). The goal objective of organizational learning is to enhance an organization's core competence and create competitive advantages for success (Chau, 2008). Similarly, Barney and Zajac (1994) supported that the firms who connects organizational knowledge to learning from difference of competence process has results in increasing important competitive advantage. Thus, organizational learning is a source of heterogeneity among firms and a basis for a possible competitive advantage in dealing with business management practices and situations (Jerez-Gomez, Cespedes-Lorente, & Valle- Cabrera, 2005). The Thai automotive industry is one of the most important industries in Thailand. The Thai automotive industry is experiencing a high growth rate, and, as a result of the Thai government’s “Detroit in Asia” policy it affects Thailand‘s automotive industry progress toward a steady goal of becoming the world’s 10th biggest automaker (Bongsebandhu-phubhakdi, Saiki, & Osada, 2009). Especially, the main policy of the Thai government supports consumers to purchase new cars, namely, “The First Car Policy” (Panya & Ussahawanichakit, 2013). Consequently, high demand from the market has effect on domestic auto-makers to sell more vehicles. It is clear that the automotive industry is embarking into new ventures, facing new challenges, and will be operating in a continually changing environment. This view was also suggested by Kenney and Florida (1993), proposed that the future of automobile industry appears characterized by uncertainty, continuous change and innovation in technology, work practices, and markets. These factors necessitate the learning of new skills and the development of sustainable source of new strategies. Therefore, these firms need to developing learning management is an important issue for auto parts businesses.  Strategic learning management orientation is an important strategy of the firms that can operates to creating and using knowledge to enhance competitive advantage in various competitive environments (Calantone, Cavusgil, & Zhao, 2002). Firms with strategic learning management orientation tend to achieve competitive advantage over rivals in environmental complexity. Interestingly, how firms create it and what its outcomes are. A review of the existing literatures reveals that there have been few empirical researches on strategic learning management orientation, whereas there have been many conceptual researches which have focused on the definition of organizational learning, the conceptualization of organizational learning, and the consequences of organizational learning. Moreover, there has been little empirical investigation regarding the relationships between strategic learning management orientation and other business factors which guide the firm to gain sustainability. Therefore, it explicitly identifies contribution to the literature of strategic learning management orientation. Firstly, this research also attempts to the development of new dimensions of strategic learning management orientation which is created differently from those in the past. Secondly, also attempts to extend the literature by using the organizational learning theory (Levinthal & March, 1993) and contingency theory (Drazin & Van de Ven, 1985) which links empirical evidence with research phenomena. Third, the antecedents and consequences of strategic learning management orientation are the new concepts in empirical research. Finally, the outcomes of this research would benefit new ways for organization strategy to help enhance firm sustainability by creating new factors of strategic learning management orientation which executives and managers of auto parts businesses, or businesses of a similar nature can apply to support their decision- making for strategy management.  The purpose of this research is to examine influence of strategic learning management orientation on firm sustainability. The research question of this research is, “How does strategic learning management orientation relate to firm sustainability?” Moreover, specific research questions are as follows: 1) How does strategic learning management orientation relate to organizational productivity, business excellence, operational success, and corporate competitiveness? 2) How does organizational productivity and operational success relate to business excellence? 3) How does organizational productivity, business excellence, operational success relate to corporate competitiveness? 4) How does corporate competitiveness relate to firm sustainability? 5) How does executive proactive vision, competitive knowledge, potential technology adaptation, business environment complexity relate to strategic learning management orientation?  The remainder of this study is organized as follows; the first section represents the theoretical foundation explaining the research phenomenon. The second section presents relevant literatures and hypotheses development in the areas of strategic learning management orientation, its consequences (organizational productivity, business excellence, operational success, corporate competitiveness and firm sustainability), antecedents (executive proactive vision, competitive knowledge, potential technology adaptation, and business environment complexity). The third section describes research methods including sample selection, data collection procedure, the measurement of variables, the instrumental verification, the statistics and equations to test the hypotheses. The findings and discussions empirical results of the investigation are provided. Moreover, the final part provides theoretical and managerial implications, limitations, suggestions for future research, and conclusion. This study integrates many theoretical perspectives to support how strategic learning management orientation influence on firm sustainability including the cognitive theory and organizational learning theory. Firstly, the organizational learning theory, Argyris and Schon (1978) found that organizational learning appears when members of the organization act as a learning representative for the organization, responding to the change in the internal and external environment of the organization by detecting and correcting errors. The conceptualization of organizational learning can be internal and external. According to Bierly and Chakrabarti (1996) firms should achieve an adequate balance between internal and external learning that best fits their resource configuration and strategic objectives. Internal learning occurs when members of the organization generate and distribute new knowledge inside the firm; it depends mainly on organizational culture factors such as participative decision making (Hurley & Hult, 1998) or learning form experience and knowledge sharing (Garvin, 1993). External learning occurs when new knowledge comes from outside the firm and is then transferred throughout the organization; it is chiefly a result of the firm’s absorptive capacity, its ability to identify, assimilate and exploit knowledge from the environment (Lane, Koka, & Pathak, 2006). This theory is appropriate to explain the organizational competence for generating learning variable that affects strategic learning management orientation. Strategic learning management orientation is the internal capability of the firm, and is the major means to interact with environment and adapt to change it (Davies & Brady, 2000). The organizational learning theory is applied to explain the relationships between strategic learning management orientation and organizational outcomes; namely, organizational productivity, business excellent, operation success and corporate competitiveness, leading to firm sustainability.  Secondly, the contingency theory illustrates not the best practice for every contingence, but the determinant way to the decision-making of the businesses in which the firm should be careful in contingency analysis (Vroom & Yetton, 1973). Wei and Atuahene-Gima (2009) proposed that organizational effectiveness depends on the firm’s ability to adaptation to the internal and external environment and is a plus when organizational structure fits with the demands of their environments. As mentioned earlier, the ability of a firm to adapt to changes in the environment (both internal and external environment) has an effect on firm performance. According to Augusto and Coelho (2009) the internal environment factors consist of organization culture, technology, firm size, firm experience, and innovation of which all variables impact on firm performance. Meanwhile, the external environment factors are customers, competition, market turbulence, technological change, and economic conditions that affect organizational performance. Therefore, the contingency theory was applied to executive proactive vision, competitive knowledge, potential technology adaptation and business environmental complexity as an improvement of the organization which can enhance strategic learning management orientation. Thus, the contingency theory is employed to investigate the effect of the antecedent variables on strategic learning management orientation.


Issuing Firm Valuations pre- and post-IPO: Which Risk Component Matters?

Dr. Marie-Claude Beaulieu, Laval University, FSA, Qc, Canada

Habiba Mrissa Bouden, Laval University, FSA, Qc, Canada



This paper studies the role of firm and IPO market risks on IPO pricing.  We decompose total risk into its systematic and idiosyncratic components to reveal which one affects pre- and post-IPO valuations.  Our results show that IPOs are undervalued relative to a matched sample of traded firms when accounting for IPO market idiosyncratic risk during the IPO registration period. When we examine post-IPO valuation, we find that only the idiosyncratic risk of the issuing firm is not incorporated in the IPO market price in the first trading day. We also note that the level of idiosyncratic risk in the IPO market during the IPO registration period positively affects the issuing firm idiosyncratic risk in the early aftermarket stage. Overall, we show that IPO mispricing in the pre-offer period is explained only by the measure of idiosyncratic risk. Previous research on IPOs reveals a short-term anomaly, IPO underpricing (Ibbotson, 1975 and Ritter, 1984), which challenges our understanding of asset pricing. Information asymmetry, agency problems, signal and litigation are proposed explanations for this phenomenon. Typically, underwriters set an offer price below the fundamental value of a firm to motivate investors to purchase newly issued shares. This deliberate underpricing induces high initial IPO returns during the early aftermarket stage. To measure underpricing, authors such as Ritter (1984) often use the IPO initial return as measured by the percentage difference between the IPO price on the first day of trading and the IPO offer price. Purnanandam and Swaminathan (P&S) (2004) note that IPO aftermarket prices during the first days of trading do not correspond with the fundamental value of the issuing firm (p. 812). They use the market value of a selected established firm with characteristics similar to a given IPO to estimate the IPO relative value ratio (p. 818). They find that IPOs are overvalued compared to their matched firms (p. 812). Zheng (2007) reviews P&S’s valuation method and shows possible biases due to the omission of new primary shares, cash holding and debt value. Using a modified IPO valuation method to avoid the upward biases in the P&S (2004) valuation method, Zheng (2007) finds that IPOs are not overvalued relative to their peers. However, he shows that the mean of first day return is 12.16%, which is consistent with similar analyses in the literature. One question remains: if there is no over or undervaluation of issuing firms in the pre-IPO, then why are there high initial returns in the early aftermarket stage?  This paper focuses not only on IPO valuation but also on the possible explanations of IPO pricing in pre- and post-IPO stages by highlighting the important role of the issuing firm and IPO market risk characteristics during the IPO process. We investigate which risk component is involved in the ex-ante and ex-post IPO valuations. Compared to established firms, uncertain IPO stock value and demand for these newly issued equities are important because new issues have no stock market history. Thus, the high degree of information asymmetry among contributors in the IPO market (issuers, underwriters and investors) affects ex-ante IPO pricing. As IPOs are characterized by a higher degree of information asymmetry than established firms, it is interesting to separate the variance of shocks in the individual issuing firm returns from the total variance1 to distinguish between idiosyncratic risk, which is tied to firm specific factors and used as a proxy for information asymmetry, and systematic risk, which corresponds to firm sensitivity to common factors. This risk decomposition reveals which risk component is important for IPO valuation. Our research distinguishes between pre- and post-IPO valuations using the Price-to-Value ratio to proxy for pre-IPO valuation and IPO initial return for post-IPO valuation. We consider pre- and post IPO risk and measure risk in the IPO market during the IPO registration period to proxy for IPO ex-ante uncertainty and risk of the issuing firms during the early aftermarket stage to proxy for IPO ex-post uncertainty. Modeling typically requires more than one relation, or equation, between these variables. Therefore, we use a simultaneous equation model to capture the interaction between IPO pricing and risk.  Our findings show that the idiosyncratic risk of previous issues is negatively correlated with pre-IPO valuation. This suggests that higher information asymmetry in the IPO market during the IPO bookbuilding process leads underwriters to undervalue IPOs relative to their matched firms in order to stimulate demand from the non-informed investors. Moreover, we find that post-IPO valuation is affected only by the idiosyncratic risk of the issuing firm. This finding supports the idea that information asymmetry of new issues and IPO underpricing are positively correlated as documented in previous studies. Finally, we note a positive relationship between the IPO market idiosyncratic risk assessed during the IPO registration period and the issuing firm’s idiosyncratic risk computed during the first month of trading. We find that the degree of asymmetric information at the firm level, which is approximated by the IPO idiosyncratic risk, is positively correlated with the level of information asymmetry in the IPO market in pre-IPO. This implies that the degree of uncertainty associated with previous IPOs affects the level of equity pricing accuracy for following IPOs through the idiosyncratic risk fraction.  The pre-IPO valuation is approximated by the Price-to-Value ratio as computed by Zheng (2007) as follows: If (), then the IPO offer price is established above (below) the fair value of the issuer, which we define as the IPO is overvalued (undervalued) by the underwriter. The post-IPO valuation is assessed by the IPO initial return on the first day of IPO trading, which has frequently been used in previous studies as an IPO underpricing measure:  where is the offer price of IPO (i) andis the closing price on the first day of trading.  While previous authors such as Ritter (1984) use the volatility of IPO initial return to proxy for issuing firm risk, our research stipulates that the risk impact on IPO valuation depends on the type of the issuing firm risk. Therefore, we consider not only the IPO total risk, but we decompose it into two components (systematic and idiosyncratic). These risk components  are assessed  based on the modified Fama and French (2003) model that include the lagged-factor effect as in the study by Ritter and Welch (2002), who conclude that systematic risk may be underestimated when the lagged effect is ignored (p. 1819):  where is the stock excess return for firm (i) relative to the risk-free rate in t, and  are the market risk premium in t and t-1, respectively; SMBt and SMBt-1 are the size factor measured by the return on a portfolio of small stocks minus the return on a portfolio of large stocks in t and t-1, respectively; and HMLt and HMLt-1 are the book-to-market factor measured by the return on a portfolio of high book-to-market stocks minus the return on a portfolio of low book-to-market stocks in t and t-1, respectively. First, we compute three risk components at the firm level: (1) firm total risk, (2) firm idiosyncratic risk and (3) firm systematic risk. The total risk of firm (i) during the first trading month following the IPO (equivalent to 21 trading days) is measured as follows:  . The idiosyncratic risk component of firm (i) is estimated by the variance of the model residuals during the first trading month from the offering date (n=21): . The systematic risk of firm (i) during the first trading month following the IPO is approximated by the difference between total and idiosyncratic risk given by: . Second, because new issues have no stock market price history before the offering date, we compute three risk components at the IPO market-level during the month before the offering (m-1), which correspond to the registration period of new issues: (1) IPO market total risk, (2) IPO market idiosyncratic risk and (3) IPO market systematic risk. Benveniste, Busaba and Wilhelm (2002) argue that information produced by firms that go public influences not only their own production decisions but also those of their rivals. These authors note that "the transfer between pioneers and followers leads to a more equitable distribution of information-production costs" (p. 62).  Therefore, we suggest that the degree of uncertainty associated with pioneers could affect equity pricing and its level of accuracy for followers. Hence, we use IPO market risk instead of overall market risk as a proxy for IPO ex-ante uncertainty. The IPO market total, systematic and idiosyncratic risks in the month (m-1) before the offering of IPO


Comprehensive Audit Planning Proficiency and Sustainable Audit Success: An Empirical Research of Certified Public Accountants (CPAs) in Thailand

Supawadee Chopset, Mahasarakham University, Thailand

Dr. Suparak Janjarasjit, Mahasarakham University, Thailand

Dr. Saranya Raksong, Mahasarakham University, Thailand



The objective of this research is two-fold; the first is to examine the effects of comprehensive audit planning proficiency on sustainable audit success through the mediating effect of effective audit judgment, audit value increase, audit risk reduction, efficient audit report, and audit reputation of certified public accountants (CPAs) in Thailand. Second, is to the studyimpact of long-term audit vision, audit profession well-roundedness, audit experience, audit learning competency, and business situation dynamism on comprehensive audit planning proficiency. In this research, data were collected by mail survey questionnaire administered to the 205certified public accountants in Thailand who are the sample of this study. The results of OLS regression analysis suggest that comprehensive audit planning proficiency has a significant positive effect on comprehensive audit planning proficiency consequents. Additionally, comprehensive audit planning proficiency consequents have a significant positive with efficient audit report, audit reputation, and sustainable audit success.Moreover, the influences of the antecedents, this research found that long-term audit vision, audit profession well-roundedness, audit experience, audit learning competency, and business situation dynamism have a significant positive effect on comprehensive audit planning. Future research needs to identify and examine other variables that may affect comprehensive audit planning proficiency, as well as mediating variables, in order to increase the contributions and benefits of the study. Also needs to collect data from different groups of other auditing professions, such as tax auditors (TAs) and governmental auditors (GAs) in Thailand. Nowadays, the rapid change and volatility of the economic environment has influenced on survival and maintenance of sustainable growth in a highly competitive situation. It include the climate of intense competition in the auditing profession has resulted in auditors paying more attention to conducting efficient and effective audits (Knechel, 2007).Which the regulators, capital markets have improved and more stringent regulations to align with complex business and economic conditions, which directly affects both accounting and auditing. Especially auditing has been expected from stakeholder for the reliability and quality of financial reporting, and usefulness for decision making(Peecher et al., 2007).Accordingly, auditors are both insurance providers and information intermediaries that provide independent verification of manager-prepared financial statements; audit performance contributes to the reliability and quality of financial reporting. Moreover, audit planning is an important factor in the competitive environment. Especially, the climate of competition in the audit market pressures auditors to gain audit competency (Mansouri, Pirayesh, and Salehi, 2009). Thus, the auditors should the audit planning toward effective practice and keeping up-to-date. The Federation of Accounting Professions and regulators have created the roles for taking disciplinary action that serves as a high standard in auditing. Thus, auditors should develop and improve themselves for sustainability in the current competitive environment,by uses the knowledge, skills and experience in design to enable the auditors to perform by emphasizing the considerationof an audit planningto cover all of the operational activities of the audit (Bedard, Graham, and Jackson, 2005; Blay, Sneathen, and Kizirian, 2007).  Moreover, the auditors need to be concerned with comprehensive audit planning proficiency by continue improvement and be aware of the long-term value creation for clients, with an emphasis on extensively monitoring mechanisms and audit practice under the rules to create more value for clients, stakeholders and overall society (Fereira and Otley, 2009; Figueroa and Cardona, 2013). In include, auditors should actively practice and in accordance with applicable knowledge accounting, auditing standards, relevant law or rule, pertinent information, and appropriate analysis when providing audit services (Dando and Swift, 2003; Robertson and Houston, 2010). Thus, comprehensive audit planning proficiency is the way for auditors to have omniscient and professional proficiency about accounting knowledge, accounting standards, audit standards, the knowledge of laws, technology, and other knowledge related to the profession of auditing (Garcia-Benau and Zorio, 2004).Additionally, the auditors should apply past audit experience by accumulating a variety of knowledge, and analyzing the audit successes and errors so as to reduce errors in audit planning in the present (Arel, 2010; Wong and Cheung, 2008). They should continuously learn by participating in accounting and auditing training programs to develop skills and knowledge, participating and exchange opinions in accounting professionals and others (Real, Leal, and Roldan, 2006; Wong and Cheung, 2008). Also, the external environment of business can help auditors to know more about the impact of change, make a good basis for planning, and affect the performance of auditing (Autore, Billingsley, and Schneller, 2009). Hence, auditors improve and are aware of long-term value creation, attainments, expertise, professional proficiency, learning from past audit experience, audit learning competency, and perceiving business situation dynamism that leads them to be concerned with comprehensive audit planning proficiency. There are a few empirical research studies that focus on the impact of comprehensive audit planning proficiency on subsequent audit actions. This study will be the first empirical evidence that supports causal relationships between comprehensive audit planning proficiency and its antecedents and consequences of the certified public accountants (CPAs) in Thailand, which seems to be necessary in academic research. The objective of this study is to investigates the impact of comprehensive audit planning proficiency on sustainable audit success by utilizing audit outcome (effective audit judgment, audit value increase, audit risk reduction), efficient audit report and audit reputation as the mediating variable.Moreover, this study assigns long-term audit vision, audit profession well-roundedness, audit experience, audit learning competency and business situation dynamism as the antecedents of comprehensive audit planning proficiency. This study is outlined as follows. The literature review of comprehensive audit planning proficiency effective audit judgment, audit value increase, audit risk reduction, efficient audit report, audit reputation, and sustainable audit success are addressed and examined; and significant research hypotheses developments are presented. Next, the research methods using to test the hypotheses are discussed including the sample selection and data collection procedure, variables, and methods. The results of the study were derived from 205 certified public accountants are indicated and their reasonable discussions with existing literature supports are shown. Lastly, the study concludes by discussing the implications for theories and practices, identifying the limitations of the study, and providing suggestions and directions for future research.  The resource-advantage theory (R-A theory) was employed in this research to describe the conceptual model. It is suggested that the source of competitive advantage and sustainable performance begins with the idea that the company's resources are valuable, rare, non-substitutable, and inimitable (Hunt and Morgan, 1995). The resources in the R-A theory are different assets. An asset is defined by Thai accounting standards (“Framework for the Preparation and Presentation of Financial Statements”, adopted from the International Accounting Standard, “Framework for the Preparation and Presentation of Financial Statements”, bound volume, 2012), as resources under the control of the business. These arose from past events and the company expects to benefit economically from the resources in the future. Moreover, these capabilities help convert selected strategies in the process of shaping positional advantages by creating comprehensive audit planning proficiency and sustainable audit success. This sustainable audit success depends on its ability to create new resources and build on firms which use this strategy to create new services or new processes for comprehensive audit planning proficiency to quickly respond to the environment. As a result, the environmental benefits of the process create value that competitors cannot replicate and are difficult to replace in order to achieve a competitive advantage and sustainable development (Barney, 1991). Thus, in the audit process, auditors should plan audits efficiently and effectively.The audit plan should be prepared to use existing resources with maximum benefits. The resources that should be prepared include skills, knowledge of individual staff, controls, audit method, audit scope or competence, knowledge of consumers, and knowledge from the past job (Chanruang and Ussahawanitchakit, 2011). The audit resource makes for an effective audit judgment, audit value increase, and audit risk reduction. This allows auditors to express an opinion so as to match the facts that have occurred, and affect reputation and the sustainable audit success of auditors.


Do University Outcomes Measure Up: An Australian Case Study?

Dr. Veronica Hampson, University of Southern Queensland, Toowoomba, Queensland, Australia



This research investigates the application of a change-based approach to outcomes based performance management (OBPM) in two Australian Universities.  The extent to which this approach is adopted and applied by the two Universities selected for the research is examined. A mixed-method research approach was used, incorporating document analysis, as part of Stage 1, and case study interviews, as part of Stage 2, to assess the effectiveness of implementation of OBPM in these Universities. This paper reports on the results of the document analysis from key documents from two Australian State Universities. Concerns are raised about the degree to which OBPM is adequate, in its current state of implementation, for enabling these Universities to know whether or not it is contributing to the long term outcomes they desire.  Performance measurement in all its various forms has become a central feature of much contemporary accounting research. The measurement of performance is increasingly common within universities, driven probably by Government policy that has seen the withdrawal of government funding so as to shift universities from being full funded to being partially subsidized. Universities are increasingly being asked to find productivity improvements, increase student contributions to funding, and to report on the educational impacts of their activities. For public universities to function within this increasingly competitive environment, stakeholders and users not only need information about what is spent on university activities, they also need information about what outcomes have been achieved (Frolich, 2011).  Such performance information must be published and disseminated to users if they are to make informed choices (Talbot 2005: 496–501). This is only possible if strategies and the use of performance measures are implemented.  The aim of this research is to investigate the application of a change-based approach to OBPM in two Australian Universities. The extent to which this approach is adopted and applied by these universities is examined. The research was conducted in two phases, namely document analysis and case study.   This paper reports on the results of the document analysis from key documents from two Australian State Universities.  This paper is organized into five sections. The next section provides an overview of the literature and commentaries on the OBPM approach to managing universities. Section 3 discusses the research methodology. The final two sections provide the results and discussions of the study followed by the conclusion and implications. As is the case with the general public sector, Australian universities are adopting management techniques associated with a performance measurement culture so as to improve their accountability. Accountability, in this sense, refers to improved outcomes or results. The assumption here is that focusing on producing outcomes and satisfying stakeholder interests will enhance accountability (Frolich, 2011). An OBPM approach to reporting performance requires universities to pay more attention to the way programs are contributing to outcomes and less on simply delivering outputs, carrying out activities and implementing processes. Because the university function involves a complex range of activities, it is not straightforward to design adequate outcome measures that are valid and which reliably capture the multifaceted nature of performance in the university (Poister, Pasha, & Edwards, 2013).  Many of the things that universities seek to do for students, such as exposing them to new ideas, experiences, and perspectives, are difficult, if not impossible, to quantify.  Universities provide people with a range of different important outcomes and not just a qualification.  This means that universities need to be sophisticated in defining and interpreting outcomes (Broadbent, 2007).  Unfortunately, however, a number of questions remain about both the extent and effectiveness of performance information used by public universities (Coburn & Turner, 2012). The centerpiece of an OBPM approach to managing is the development of outcomes-based objectives (Medina-Borja & Triantis, 2001). If these objectives are not well articulated and the pathway to achieving them is not clearly outlined, it is impossible to understand the [university’s] program (Stinchcomb, 2001: p. 392). Behn (2008) argues that this requires a clear strategic logic of how operational activities relates to outcomes. Typically, this approach involves: identifying outcomes that the University wants to achieve for its community; setting clear strategic direction and objectives; monitoring operations and measuring results; and analysing, reporting, and obtaining feedback on outcomes. Clearly it is the strategic planning process of a University, which involves the gathering of information about the “big picture”, establishes a long-term direction for the University. That direction is then translated into specific outcomes, goals, objectives and actions. The need to draw strong links between performance measurement and strategic direction setting is paramount. The process is incomplete without its integration with monitoring and evaluation processes, which complete the performance management cycle. In essence, the adoption of an OBPM approach to managing Universities requires them to define “what they intend to accomplish, measure performance for, and report on, and use the information for decision making and strengthening accountability” (Caudle, 2001: p 77). The core idea of this approach is “to use performance information to increase performance by holding [universities] accountable for clearly specified goals and providing them with adequate authority to achieve these goals” (Moynihan, 2006: p 78).To set clear goals which are measurable against these outcomes, University decisions and controls must focus on outcomes and outputs rather than on inputs and procedures (Wholey & Hatry, 1992; Mwita, 2000; Modell, 2005). Each of these elements depends on one another and they are not simply “a menu of independent prescriptions” (Moynihan, 2006: p 79). It is the disclosure of outcome data that enhances public accountability – “the end we seek is not better service but better results” (Friedman, 1996: p 5). This distinction enhances the performance management process because it contributes to a clearer thinking about what the University is to achieve and assists in the selection of appropriate strategies to get there. Practical guidance for implementing OBPM is well documented by various public sector agencies (Queensland Treasury, 2003; SSC, 2002; Treasury Board of Canada, 2006) as well as by several researchers (Kaufman, 1988; Galera et al, 2000; Hampson, Best & Kavanagh, 2012). As early as 1988, Kaufman identified five organizational elements to which performance measures can be applied:  1. Inputs such as resources and community characteristics; 2. Processes such as teaching activities; 3. Products such as courses completed; 4. Outputs which are the aggregate products of a system such as degrees awarded and papers published; and 5. Outcomes which are the effects of outputs in society including employment rates. Galera et al (2000) reinforced the necessity to have a typology of measures that includes the following: 1. Process measures being those measures that indicate the quantity of goods and services that is generated by the Universities productive process; 2. Impact measures being the scope of measurement have to do with certain phenomenon happening outside the assessed university. These aim to inform the degree of coverage of the social needs covered by their action. Galera, et al (2000) purports to measuring the quality of life and of the social benefits experienced by the members of the society in general and the university community in particular, as a result of the activities performed by the university, make up the basic goal. Garrett-Jones (2000) offered a typology of measures.


The Effect of Conservatism in Current Earnings’ Ability to Predict Future Cash Flows vs Future Earnings (Empirical Study of Manufacturing Companies in Indonesia Stock Exchange)

Ni Made Mega Primandari, Bournemouth University, UK



This research aims to test the effect of conservatism in current earnings’ ability to predict future cash flows and future earnings by using two different measurements of conservatism. Conservatism is measured by nonoperating accruals (Givoly and Hayn, 2000) and asymmetric timeliness measure (Basu, 1997). This research use 50 listed manufacturing companies in Indonesia Stock Exchange from the period of 2000 until 2011 as the sample. Regressions models are used to answer the research questions. Based on the result, conservatism increases the ability of current earnings’ to predict future cash flows based on nonoperating accruals method. On the other hand, the result using asymmetric timeliness measure indicates that conservatism reduces the ability of current earnings to predict cash flows. While, for the future earnings prediction the result from nonoperating accruals measurement shows that conservatism increases the ability of current earnings’ to predict future earnings. However, the result is not significant. Meanwhile, using the asymmetric timeliness measure, it found that conservatism decreases the ability of current earnings to predict future earnings. Therefore, these results suggest that the use of different conservatism measurement generates different results.  Financial reporting is one source of information that communicates the financial condition of the company’s operating activities in a certain time to interested parties. According to IASB Framework, there are some qualities that cause financial information helpful for business and financial decision-making. Two of those qualities are relevance and reliability. Relevance is assessed as the ability of current earnings to predict future cash flows (Kim and Kross, 2005) while reliability is defined as the ability of current earnings to predict future earnings (Richardson et al., 2005). Furthermore, many studies have been conducted about the ability of financial items such as current earnings and current cash flows as the predictor of both future cash flows and future earnings. The findings found that current earnings as the best predictor. However, there is an issue appears regarding the improvisation of the use of financial reporting. Accounting standard setters have adopted some new accounting standards throughout the past several decades in order to enhance the usefulness of financial reporting (Bandyopadhyay et al., 2010). Financial Accounting Standards gives a freedom to companies to choose the accounting method that they use in order to anticipate the unstable economic condition, one of the method is conservatism. This freedom is taken together result in an increase of conservatism in accounting numbers.  Conservatism is a fundamental practice of financial reporting. However, despite its core role in accounting practice, no accredited definition of conservatism exists. Watts (2003a) has explained conservatism as a principle in financial reporting which intend to assess earnings and assets with cautious because of the economic and business activities covered by the uncertainty. A general explanation of conservatism is expressed by the International Accounting Standard Board (IASB, 1989), which indicates that conservatism is “ a level of caution in the use of the judgement required in making the estimates involved under situations of uncertainty such that assets or revenues are not overstated and liabilities or expenses are not understated” (Ismail and Elbolok, 2011). The implication of this principle is the choice of accounting methods that aim to report assets lower than debts. Conservatism defines as the implementation of earnings reduction (and net assets reduction) with regard to bad announcement, yet no increase in net income (and increase in net assets) in reaction to good announcement (Basu, 1997).  According to Scott (1997), positive accounting theory involves the actions of managers to choose accounting policies and how they react to proposed new accounting policies. Positive accounting theory describes that managers are likely to be rational and will choose accounting policies based on their own benefits. That is, managers maximize their own expected utility. The predictions made by positive accounting theory are largely organized around three hypotheses, formulated by Watts and Zimmerman (1986). These hypotheses are given in their opportunistic form, this is how they have most frequently been interpreted. 1) Bonus Plan Hypothesis. Bonus plan hypothesis assumes managers are more likely to choose accounting mechanism that shift reported earnings from future periods to the current period. The accounting method that creates a higher reported current earning would be chosen to get more bonuses. However, the existence of accruals accounting are likely to lower future reported earnings and bonuses. 2) Debt Covenant Hypothesis. Debt Covenant Hypothesis explains companies that close to violate the debt covenants will tend to choose accounting mechanism which shifts reported earnings from future periods to the current period. By increasing the reported earnings, it will reduce the probability of technical omission. It generally found on the most of debt agreements include some covenants that have to be fulfilled by the borrowers during the period of agreement such as the covenants that a borrowing company needs to maintain debt to equity, working capital and shareholders’ equity. 3) Political Cost Hypothesis. This hypothesis explains as an action of manager that tends to choose accounting method, which defers current reported earnings to future period as the result of higher political costs (taxes, regulations). From the hypotheses explanation, it suggests that managers with bonus plan are predicted to select less conservative accounting policies than managers without such plan. Similarly, based on the debt covenant hypothesis company with higher debt to equity ratio will tend to choose less conservative method than company with lower debt to equity ratio. On the other hand, the political cost hypothesis predicts that larger companies are likely to select more conservative accounting procedure rather than smaller companies as larger companies are assumed to be more profitable than smaller companies therefore, political costs will be magnified. Several results from previous literatures have been provided different conclusion regarding the effects of conservatism on the persistence and predictability of earnings (Ruch and Taylor, 2011). According to Jackson and Liu (2010) conservatism is not beneficial as it reduces the quality of accounting information or increases the possibilities of companies to manipulate their earnings. Dechow and Dichev (2002) further suggest that the extent of accruals estimation, which is resulted from conservatism, and thus, large amounts of estimation errors in accruals indicates poor quality of earnings and also reduces the earnings predictability. According to Penman and Zhang (2002) conservatism produces ‘hidden reserves’ which increases bias and error in current reported earnings and it will burden the investors as it decreases the ability of current reported earnings to predict future earnings. Furthermore, Dichev and Tang (2008b) propose there is a decline in the matching of revenues and expenses due to conservative accounting over period 1967 to 2003. They further found that the failure of expenses to match revenues contemporaneously leads to the increasing of earnings volatility and the decreasing of earnings persistence and earnings predictability. Penman and Zhang (2002) comment imply the implementation of conservatism under investment activity would produce fluctuating earnings. Fluctuate earnings have a lower predictive power than stable earnings to predict future cash flows and future earnings. However, some researchers also found that conservatism beneficial for the users. Watts (2003b) imply conservatism increases the efficiency of earnings as an indicator to measure company’s performance. A finding from Kee and Yi (2012) propose that conservatism has an effect on earnings’ quality, which is also related to the informativeness of earnings. A study from Kim and Kross (2005) by using the nonoperating accruals model of Givoly and Hayn (2000) found that the enhancing level of conservatism increases the earnings’ predictability. Bandyopadhyay et al. (2010) by using nonoperating accruals model show strong evidence that an enhancing number of conservative earnings in the year of 1973 until 2005 has driven to increase the relevance of current earning but decrease the reliability of current earnings. Relevance is defined as the ability of current earnings to predict future cash flows (Kim and Kross, 2005). Reliability is explained as the ability of current earnings to predict future earnings (Richardson et al., 2005). Kim and Kross (2005) have found the correlation between current earnings and future cash flows has been increasing over the time and the majority of companies argue current earnings is the most reliable predictor of future cash flows. The application of advance expenses recognition and the inclusion of future losses in current income along with the delay of profits recognition until they are realized have been contributed for the increasing of conservatism, which is possibly cause the enhancing of current earnings’ ability to predict future cash flows (Givoly and Hayn, 2000). However, using the Basu’s method of asymmetric timeliness measure Bratten, Causholli and Khan (2012) indicate that current earning has an equal ability to predict both future earnings and future cash flows. It can be seen that from the previous literatures on the effect of conservatism to current earnings’ predictability, the results are generating a conflict and it seems that the jury is still deliberating. In addition, there are currently only a few of literatures that test and compare the implication of different conservatism measurement models toward current earnings predictability and the results are still not clear. Therefore, it becomes a motivation of this research to further investigate the effect of conservatism in current earnings’ predictability by using two different methods of conservatism measurement and observe whether the use of two different methods will give different results or vice versa.


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