The Business Review, Cambridge

Vol. 25 * Number 1 * Summer. 2017

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

Online Computer Library Center   *   OCLC: 920449522

National Library of Australia * NLA: 55269788

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The primary goal of the journal will be to provide opportunities for business related academicians and professionals from various business related fields in a global realm to publish their paper in one source. The Business Review, Cambridge will bring together academicians and professionals from all areas related business fields and related fields to interact with members inside and outside their own particular disciplines. The journal will provide opportunities for publishing researcher's paper as well as providing opportunities to view other's work.  All submissions are subject to a double blind peer review process. The Business Review, Cambridge is a refereed academic journal which  publishes the  scientific research findings in its field with the ISSN 1553-5827 issued by the Library of Congress, Washington, DC.  No Manuscript Will Be Accepted Without the Required Format.  All Manuscripts Should Be Professionally Proofread Before the Submission.  You can use www.editavenue.com for professional proofreading / editing etc...The journal will meet the quality and integrity requirements of applicable accreditation agencies (AACSB, regional) and journal evaluation organizations to insure our publications provide our authors publication venues that are recognized by their institutions for academic advancement and academically qualified statue. 

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The Ambiguous Duty of Corporate Directors

Dr. Donald G. Margotta, Northeastern University, Boston, MA

 

ABSTRACT

This paper addresses the question of whether boards of directors of public corporations have a primary duty to the corporation itself or to the shareholders of the corporation. It suggests that proponents of each side of this long-standing debate appear to be more divided not over the “duty to whom” question, but rather over questions of whether directors in fact make value enhancing decisions, how the outcomes of their decisions are measured, and how increases in value are distributed among various competing corporate constituencies.  The paper concludes that resolution of conflicting views on this topic lies in a well-established legal principle, the business judgment rule.  The wide range of commentators on the question posed in this paper is remarkable and includes finance and legal scholars, Delaware Chancery and Supreme Court judges, U.S. Supreme Court justices, state and federal legislators, practicing attorneys, as well as religious and political scholars.  Also remarkable is how old the question is. Berle comments on it in 1932 (Berle and Means, 1032) and even at that time he refers to the question as “ancient,” calling it “the ancient metaphysical squabble between loyalty to the ‘corporation’ and loyalty to the stockholders.” Sixty years later the same question was posed by Chancellor Allen (1993) of Delaware’s Chancery Court as follows: “The question, what is a corporation, has a correlative question: for whose benefit are those in control of a corporation supposed to act?” The paper begins with a description of director duties as defined in statutory and case law. It then discusses what duty to the corporation means and describes arguments made by proponents of that view. It next does the same for the duty to shareholder view. The discussion of these two views leads to conclusion that the “duty to whom” question cannot be answered as stated because neither view is clearly defined and neither has specific, measurable goals. However, the paper argues that the two views can converge on a goal of increasing the value of the corporation which, while being more specific, raises additional questions how value is measured. These questions ultimately lead to a conclusion that resolution of the “duty to whom” question must come from the business judgment rule. While statutes defining the duties of corporate directors vary among states most share common objectives and similar language.  Section 8.30 (a) of the Model Business Corporation Act provides typical language found in these statutes:1 “Each member of the board of directors, when discharging the duties of a director, shall act: (1) in good faith, and (2) in a manner the director reasonably believes to be in the best interests of the corporation.” Further, Eccles and Youmans (Forbes, 2015) examined statutes in other countries and found that a wide range of those statutes also state that a board’s duty is to the corporation: “We routinely hear board directors, CEOs, and CFOs of publicly-listed corporations refer to shareholders as owners of the corporation. Under this thinking, it is natural to conclude that the board’s duty is to its shareholders. Contrary to this popular belief, however, a board’s real duty is to the interests of the corporation itself.”  In an ongoing study these researchers studied the fiduciary duty statutes of more than twenty countries and found that in “every jurisdiction across the world without exception that the board of director’s primary duty is to the corporation itself as a separate legal person.”  Duty to the corporation is also stressed in the fiduciary statues of all fifty states in the U.S. and none of these statutes state that a board’s sole duty is to shareholders (Wallman, 1991). Even states without a statutory definition of director duties are often guided by case law to the same end. Former Delaware Supreme Court Justice Veasey states that although Delaware has no statute defining the standard of care, “…

 

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Succession Planning in a Religious Association: Preliminary Findings and Analyses

Dr. Joseph C. Santora, Ecole des Ponts Business School, France

Michael James, International School of Management, France

Dr. Gil Bozer, Sapir Academic College, Shderot, Israel

 

ABSTRACT

The aim of this article is twofold: (a) to investigate the degree to which small churches plan for succession of departing pastors, and (b) to determine the degree to which church governing bodies (councils) select insiders or outsiders as replacements for departing pastors. We investigated these two questions with a French religious association comprised of 30 small churches that have congregations of approximately 100 parishioners each using an adaptation of the Global Survey of Executive Succession (GSES) in Nonprofit Organizations/NGOs (Santora, Sarros, & Cooper, 2009). The survey response rate from the association membership was 73%. The results indicated that most association churches (65%) do not plan for succession and that most churches (80%) select outsiders as replacements for departing pastors, even though 40% of the churches in the survey had assistant pastors. Implications for leadership and management are discussed. Limitations of the study include a lack of generalizability and the small sample size. Recommendations for future studies are provided.  Harrison (2001) notes that “on the average about every three or four years a U-Haul backs up to the parsonage, and minister and family relocate to another field of work. These ministerial changes have traditionally been viewed as blights upon the churches involved” (p. 87). Clergy leave churches for a variety of reasons. For example, there is the necessary change for the betterment of the pastor and/or the congregation. There are personal reasons, such as retirement, death, burnout, and family issues. In addition to these voluntary reasons, clergy leave due to reassignment, departure from the church, and, in some cases, termination (Joynt & Dreyer, 2013). Smith, Carson, and Alexander (1984) found that “the United Methodist Church has a policy of regular reassignment of ministers (on the average of every 5 years)” (p. 767). It almost seems that as soon as a pastor gets to “know” a congregation, the pastor is reassigned. The relatively short tenure of pastors should, at the very least, raise some eyebrows about the way in which church boards view the role of pastoral leadership. The transition that occurs from one pastor to another is, as Ciampa and Dotlich (2015) suggest, “never smooth or easy to transfer power from one leader to a successor” (p. xiii). Moreover, the transition from one pastor to another in short periods of time may also create some leadership and management challenges for the departing pastor as well as some congregation disruptions for the incoming pastor as a spiritual leader, the church, and its parishioners. Any pastoral transition inevitably drives a church into a period of instability. For example, Carroll and Roozen (1990) state that “clergy beginning a new pastorate find, wittingly or unwittingly, that each congregation they enter is different in certain important ways and that they must learn to understand those differences if they are to exercise effective leadership in the congregation” (p. 351).

 

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An Entrepreneurial Innovation Model for Competitive Advantage: Logistics Business Case Studies

Dr. Sut Sakchutchawarn, Kean University, New Jersey

Dr. Clifford Fisher, Purdue University, Indiana

Jeffrey Chelston, Kean University, New Jersey

 

ABSTRACT

In today’s highly competitive environment, firms must sustain their market shares and competitive edge. The dynamic of international competition forces firms to change their practice in doing business. This paper addresses the impact of multiple external pressures on firm management. An entrepreneurial innovation model is presented for competitive advantage in response to several drivers. This paper employs case studies, e-research, and survey of literature as research methodologies. This study indicates logistics service firms display superior performance when the entrepreneurial innovation model is implemented with proper management involvement, process-rationalization, and information technology utilization. The relevant outcomes are discussed in order to respond to the concern of entrepreneur and business firms. Competitive advantage is the firm’s ability to obtain with superior management and innovation. Competition in global business is intense with many pressures and factors. Recently, several issues on entrepreneurial management were developed. Unnecessary cost, expenses, and penalty also occurs in the process due to lack of the accurate and relevant information in the logistics innovation. The operational problem has an urgent need for efficient and flexible integration of information and logistics system. Emphasis needs to be placed on the provision of relevant cost and timely information, throughout the operational procedure, to allow participants to have improved knowledge about what is happening at each stage and control what happens to their goods or services. There is no doubt that innovation improves firm performance.  Logistics service firms display superior performance when the innovation is implemented properly. An innovation can also provide firms with competiveness. According to Mentzer, an effective logistics operation can provide a competitive advantage for a firm and increase a firm’s profit and market share (Mentzer et al., 2001). This paper addresses the impact of multiple drivers on firm management. An entrepreneurial innovation model is presented for superior operations and management. This paper employs e-research, survey of literature, and case studies as research methodology. The case studies demonstrate the implementation of innovation in their operational process that led firms to superior performance. The specific research questions in this study are: . What are the external drivers of the entrepreneurial innovation model?  . What is the process of implementation of the entrepreneurial innovation model that is essential for firms to sustain better operational performance and financial performance?  What is the impact of innovation on logistics firms after implementation?  The methodology used in this research was based on e-research, and a survey of the literature in the field (Zikmund, 2003). This paper also employed a case study. Case study method is an exploratory research technique that intensively investigates one or a few situations similar to the research’s problem situation. According to Bonoma (1985), case study research is particularly useful when the phenomenon under investigation is difficult to study outside its natural setting and also when the concepts and variables under study are difficult to quantify. Case study is based on a process model and it is a description of a management situation. It is particularly well-suited to this research paper since existing concepts in logistics innovation seems inadequate (Yin, 2008). Figure 1(Entrepreneurial Innovation Model) presents a model that defines the nature of problems and issues that this paper is addressing. This research model identifies external pressures, strategic action, integration of logistics innovation, and key performance outcomes. The concept of innovation is valued in most organizations in order to respond to the external pressure from competition, regulatory requirement, and customer pressure. Firms need to have strategic responses in place in order to facilitate the innovation process. Firms are also experiencing the internationalization of technology, globalization of manufacturing and increasingly sophisticated customers need and a greater integration of technologies.

 

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The Influence of Shanghai-Hong Kong Stock Connect Policy on Market Efficiency of A Shares and H Shares

Dr. Han-Ching Huang, Chung Yuan Christian University, Taiwan R.O.C.

Jyuan-Huei Lin, Chung Yuan Christian University, Taiwan R.O.C.

 

ABSTRACT

We investigate the impact of “Shanghai-Hong Kong Stock Connect Policy” on market efficiency of A Shares and H Shares, using daily data covering the period from Aug., 2014 to Feb., 2015. To be comparability, we collect the day which has trading simultaneously. Past stock returns are used to test weak form market efficiency and stock order imbalance are used to test strong form market efficiency. We find that the market efficiency has changed during “Shanghai-Hong Kong Stock Connect Policy”.  The stock market is an important position in the financial markets. A mature stock market not only can provide investors with investment channels, but also promote the efficient allocation of funds. The form of evolution and pace of stock markets development are different between each country. But international exchanges, opening degree and interaction and other relative issues become more popular due to internationalization. Foerster and Karolyi (1999) document that cross-listing can alter the market risks and increase the base of shareholders. With the trends of internationalization, many enterprises take advantage of multiple channels to finance, which not only promote the awareness of overseas enterprises, but also decreases the influence of many uncertain factors on capital cost.  Having experienced the financial reforms which resulted in opening up and entered into World Trade Organization (WTO) in 2001 with rapid economic development, the Chinese stock markets become fast-growing emerging ones, which draw global attention. The Chinese stock market includes Shanghai Stock Exchange (SSE) and Shenzhen Stock Exchange (SZSE), which lists shares divided into A, B, H, N, S shares and so on. The trading and settlement currency or price limits are different for different classifications of shares. The two exchanges are directly supervised and managed by China Securities Regulatory Commission (CSRC). Their trading and closing ranges are nationally wide and their regulations also tend to be more mature.  Since the Asian financial crisis in 1998, the Hong Kong stock market has become more robust. In order to improve its international competitiveness and for the convenience of governing, all exchanges had built were combined into the only one - The Stock Exchange of Hong Kong Limited (SEHK). SEHK is an extremely free market with high transparency list system. The two main markets are main board market and Growth Enterprises Market (GEM), the listing requirements of the main board market is stricter. Hong Kong is close to the China, which become an area where most of China companies are listed and have the highest sum of raised money. Hong Kong is an important window entering into China as well. In recent years, Hong Kong stock exchange has enlarged its scale, becoming the brightest market in Asia. 

 

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Can Hedging Increase the Value of Family-Owned Businesses?

Dr. Po-Kai Huang, Shih Hsin University, Taiwan

Ming-Hua Chou, JinWen University of Science and Technology, Taiwan

 

ABSTRACT

This study investigates the effect of derivatives use decisions on the value of family-owned businesses. Specifically, the study addresses the effects of family-owned businesses’ hedging decisions on company value. The results show that family firm is positive to firm value. The derivative hedge dummy also has positive relation on firm value. The most importantly, the cross term between family business and derivative use hold positive views on firm value. However, the other results also find that cross term between family business and derivative use hold negative views on firm value. We conclude that the mix results may be due to the different definition of family business.  A plethora of documents have supported the arguments stating that a company can increase corporate value by adopting derivatives when seeking risk avoidance. However, hedging can also positively affect the value of family-owned businesses, which is an issue that requires further scrutiny. Family business owners and company values are combined. In addition, the family’s personal wealth cannot be distributed. To reduce the company’s risk exposure and the volatility of the company’s value, family businesses need to focus more on the company’s risk management decisions. Villalonga and Amit (2006) believe that the agent issue and costs result in hindering family business owners’ attempts to increase company value.  One of the objectives of this paper is to discuss the effect of hedging decisions on the value of family-owned businesses; however, this paper is not the first article to address this idea. Owing to the importance of this emerging issue, Kim, Pantzalis, and Park (2014) used the composite index from the years 1992–1999, especially Standard and Poor’s 500 Index, to provide empirical proof. They found that hedging does not help family-owned businesses to increase their value. The author believes that perhaps, in seeking risk avoidance, family businesses cannot diversify their personal wealth; therefore, making suboptimal risk management decisions in the extraneous or unnecessary use of derivatives will alleviate the positive effect that hedging may have on the company.  Due to the government’s disclosure policy regarding derivative use, which requires the company to reveal the purpose of derivative use, that is, whether it is for hedging or speculation, this paper extends and expands upon the Kim, Pantzalis, and Park (2014) study. The study addresses the effects of family-owned businesses’ hedging decisions on company value. In the study conducted by Kim, Pantzalis, and Park (2014), it was difficult to distinguish family-owned businesses’ purpose of using derivatives due to data limitations. This paper has utilized disclosure purposes to classify family-owned businesses’ purposes for using derivatives; it has then excluded the use of derivative speculation by family-owned businesses to reexamine the effect of hedging decisions on the value of these businesses. McConaughy (2000) and Blumentritt, Keyt, and Astrachan (2007) considered it necessary to distinguish between the family-owned business’ General Manager and the non-family-owned business’ General Manager in terms of their decision-making behaviors; thus, the respective manager’s “identity” varies. The different risk decision-making behavior is a result of divergent motivations1 and capabilities.

 

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Starring Role of Educational Institutions in Nurturing Entrepreneurship through Education

Dr. Tarun Kumar Sharma, Arab Open University, Kuwait

Dr. Sahar Abdullah Al Hamli, Arab Open University, Kuwait

 

ABSTRACT

It is a firm belief that the inculcation of an entrepreneurial culture is possible only through a tuned educational system in that society. Therefore, it would be timely to consider a positive move towards developing a rationale linkage between formal education and entrepreneurship. Entrepreneurship and formal education can be blended and delivered with the role of developing society to its fullest capacity. Accordingly, regular and repeated efforts should be directed  toward introducing, practicing, and enhancing the concept of entrepreneurship among students through policies implemented in the educational system. This initiative will ultimately contribute significantly towards generating a large pool of budding entrepreneurs in society. With the shrinking scope of employment, this noble move can act as an effective measure towards generating worthy solutions in terms of generating a trend a self-employment for students in the near future. This emerging trend of self-employment could well serve as a solution for the crisis of unemployment and underemployment in developing and underdeveloped regions worldwide. It has become an increasingly important need of the current times for schools, universities, and educational institutions globally to passionately embrace and develop an entrepreneurial culture in educational curriculums. In due course, this will not only generate entrepreneurs loaded with innovative approaches but will also develop and establish several new sources of income, thereby strengthening the economy overall.  Education is of paramount importance for an individual who wants to bring his ideas successfully into the market. Educational institutions can help these individuals to nurture and develop the necessary skills and competencies to accomplish this goal. These institutions provide guidance, allow routines to develop, and ultimately reduce the uncertainty of social interaction.  Millions of students around the world are graduating from educational institutions every semester. These students represent a very wide cross-section of fields they have studied in these educational institutions. Some have completed professional courses offering great opportunities for employment. However, while some graduates are employed, the majority of students remain unemployed. Therefore, this section of society, which represents unskilled or underdeveloped human resources, actually serves to restrain the growth of the economy. Many students who graduate from institutions such as universities are sometimes marginally skills oriented and hence lack a practical approach in their activities. These activities could be conducted either as employees in the workplace or owners of businesses. Several researches have proved that the per capita contribution of such people does not justify their existence in society.

 

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The Effect of Local Knowledge on the Risk Bearing Capacity of Multinational Enterprises

Tianjiao Feng, East China Normal University, Shanghai, China

Dr. Hung-hsin Chen, East China Normal University, Shanghai, China

 

ABSTRACT

This study investigates how local knowledge influences the risk bearing capacity of multinational enterprises (MNEs). Based on past studies revealing that the understanding of local knowledge can help overseas companies reduce the disadvantages of foreignness, and more capable of handling risks of foreign operations, the researchers posit that, local knowledge leads to the perception of fewer risks and uncertainties. The researchers hypothesize that, knowledge of the local economy, politics, business practice, market, and raw materials are positively related to the risk bearing capacity of multinational enterprises. The empirical results obtained from a sample of 133 foreign companies in Shanghai support the hypotheses. Nowadays, companies with competitive advantages choosing to explore the international market have become a common phenomenon. However, executives find that they are always in an inferior status when competing with local companies, despite facing the same market and sharing the same resources. One of the possible reasons is that local companies are more powerful in bearing risks and therefore more willing to take risks. Taking risks is closely related to growth opportunities for a firm, and low-risk firms have limited opportunities (Wright, Ferris et al. 1996). Besides, low performance may show that managers lack opportunities to leverage high risk-high return strategies (Wiseman and Bromiley 1996). To reduce sources of risk and comprehend differences in the local areas where they operate, foreign firms attempt to identify and manage risks to decrease the knowledge gap, thus increasing the performance of their international projects (Javernick-Will and Scott 2010). As for the knowledge gap, when compared with non-locals, locals of local companies are expected to bring abundant country knowledge to their teams in the form of insight into the local conditions they are familiar with, which enables them to distinguish better sources and obtain country knowledge more easily (Makino and Delios 1996). As a result, it is important for foreign companies to learn from locals to improve their capacity in bearing and taking risks. Therefore, this study aims to select the key local knowledge factors that have significant correlations with risk bearing capacity and discuss how they influence it. Risk bearing capacity is the ability to undertake additional risks without adverse influences to critical plans, strategies, operational and financial resources of a company. The financial aspect of it will not be discussed here, as it concerns the actual wealth that a firm owns, on which local knowledge can hardly have an influence. To analyze the risk bearing capacity of an MNE, it is necessary to choose several international risks which MNEs face in host countries. According to Ghoshal (1987), managers will assess a variety of risks together carefully before making a strategic decision, but not all risks are strategic because some risks can be easily diversified, shifted, or shared through routine market transactions, and it is only those risks which cannot be diversified through a readily available external market that are of concern at the strategic level.

 

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The Effect of Face on Marketing Alliance Performance

Wenxin Zhang, East China Normal University, China

Dr. Hung-hsin Chen, East China Normal University, China

 

ABSTRACT

In today's business practices, marketing alliance is a relatively common and growing inter-agency cooperative behavior. However, various problems in their process management exist. As marketing management scholars, this study stems from two respective aspects arising in alliances, the composition of face and marketing management, and tries to segment and identify these factors and their effect on relevant factors of marketing management. This study collected 103 questionnaires of MBA students who had experience on marketing alliance, and analysis the data by Mplus to gain the final model. There are three findings. Firstly, the four factors, Learning Capacity, Authority of alliance object, Degree of intimacy and Trust, are all related to having face rather than losing face. Secondly, the contribution from the biggest to the least is Learning Capacity, Authority of alliance object, Degree of intimacy and Trust between both sides. Thirdly, Dependency on alliance and Authority of alliance object has an effect compare to the subject. Although the sample size is small limited to the time and expense, the study has both practical and social implication. People could take some actions to make others have the face to promote performance when corporate. It is an innovation to take sociological factor, face, into management. The central value of forming an alliance is that it cannot only produce a greater external impact, but also form a stronger internal defense (Gammoh & Voss, 2013). In the business field, based on the different types of alliance function, strategic alliances can be divided into R&D alliances, production alliances, and marketing alliances and technology alliances. Last century, two different theories arising from different viewpoints  social dignity of the individual and face were brought together into the same focus, and their effects on decisions and actions in alliance were researched (Bao et al., 2003; Chan, Wan, & Sin, 2009; Chiu, Tsang, & Yang, 1988). Firstly, it discusses the progress related to decision-making in alliances under China’s unique cultural background to find what their roles are in every stage. Secondly, considering the influence of special culture about face and collectivism on face, this research provides reasonable and scientific explanations on Chinese enterprises operations and management. Thirdly, two kinds actions of face (i.e., save face and lose face) are researched and their function and influence in alliances is discussed. Face is a single concept made up of multiple factors, both from a personal view, collective view or interaction between people, and its importance has been recognized by society (Spencer-Oatey, 2007).

 

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Funding Higher Education in the Midst of Change: United States versus the Globe

Dr. Ayse Olcay Costello, Eastern Illinois, University, IL

Dr. Thomas G. Costello, Eastern Illinois, University, IL

Jordan Nelson, Eastern Illinois, University, IL

 

ABSTRACT

In the United States, many of the fifty states are currently struggling with issues related to the funding of their state universities. This situation arises as the U.S., as well as its individual states, struggle with fiscal problems as tax revenues go down, government spending goes up, and deficits grow (Costello and Costello, 2012). There is increasing pressure on the states to curb their expenses, and state universities fall victim to this pressure. With increasing pressure, there is fear that public universities are shifting from being free thinking institutions to sales centers (Hightower, 2013) and becoming more corporate. The corporatization of universities is leading universities to focus more on prospective students and less on current students (Mills, 2012), as universities find themselves competing with other schools to obtain as many ‘ideal’ students as possible to increase numbers and to beat out their competitors. Furthermore, when the universities see declining revenues, they cut budgets by reducing the number of faculty, increasing class sizes, and increasing tuition (Wurth, 2015a). The students are adversely affected as the changes taking place reduce the quality of the education that they are receiving. The general U.S. economy is also impacted as the productivity of the universities as innovation engines decreases (Wurth, 2015b).  In this paper, we look at U.S. based state universities’ budgets to see how they are funded and where the funds are spent. One of the areas we find most interesting is that although U.S. universities have large budgets, with a lot of funds coming in they also have large outflows, which are only tangentially relevant to knowledge creation and dissemination. This anomaly, sets U.S. universities apart from their foreign counterparts, especially when compared to Ph.D. granting, world class, institutions in other regions of the world (both developed and developing). Specifically, in this paper, one of the author’s own experiences at a Ph.D. granting Turkish University, and an interviewee’s experiences at a German University, along with other available data will be compared and contrasted with an analysis of financial statements from a smaller Florida university (Nissen, 2014). Preliminary findings indicate that U.S. Universities do less with more in terms of educational services they provide. The areas of inefficiency in the U.S. University system seem to be primarily administrative, which may be a result of the high cost of providing competitive dining and accommodation services, federal mandate compliance, and nationally competitive athletic experiences. In today’s fully globalized economy, the world is experiencing developments that redefine the concept of higher education (i.e., education beyond high school) and how it is delivered. Both private and public institutions that provide higher education find themselves facing budgetary problems, and increased scrutiny regarding the value of the education that they are providing. Sometimes, the budgetary problems and increased scrutiny are coupled with decreasing enrollment; and many institutions face further problems, such as students’ entering as freshman lacking many of the basic skills required for handling university level expectations. The budget problems facing universities is a symptom of a larger problem. Specifically, globalization is wreaking havoc in global economies, with both developed and developing countries being impacted negatively, while multinational corporations are achieving record breaking revenue gains and profitability (Costello and Costello, 2012). Costello and Costello (2012) emphasize that developed countries suffer mainly as a result of job losses due to outsourcing, because they can’t compete with the lower wages and lax regulations offered to corporations in developing countries. On the other hand, developing countries suffer under the yolk of low wages offered in sweatshops, labor oversupply, and less than ideal labor and environmental protections. Economic property rights in the form of human capital that are possessed by the citizens of developed and developing countries are thus eroded (Costello and Costello, 2005).

 

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Credibility and Consumer Trust: The Keys to Mobile Advertising Success

Dr. Ying Wang, Youngstown State University, Youngstown, OH

 

ABSTRACT

With the rapid growth of mobile phone use, mobile advertising has increasingly become a promising advertising channel for marketers to reach targeted consumers and to generate new revenue streams worldwide. However, given the unique characteristics of this new medium, how to use it effectively is an important issue worth further exploration. This study proposes and tests an integrated model of mobile advertising to illustrate how key influencing factors affect the effectiveness of mobile advertising. The results show that credibility and perceived easy to use significantly and positively influences attitudes toward mobile advertising (ATMA). ATMA positively and significantly influences consumers’ intention to use mobile advertising which further influences purchase intention. In addition, trust and privacy concerns emerged as significant predictors of people’s intention to use mobile advertising. Limitations and future research directions are also discussed. As the consumer cynicism growing in the global marketplace, marketers are increasingly looking for new advertising channels to reach targeted audiences. With its high penetration rate along with unique characteristics, mobile has the potential to become a powerful marketing communication tool for brand advertisers around the world. Moreover, the soaring popularity of smartphones and tablets and proliferation of  “apps” also helped to fuel a jump in the mobile advertising market. According to eMarketer (2015), the global mobile advertising spending will surpass $100 billion for the first time in 2016, accounting for more 50% of all digital advertising expenditure. Mobile advertising has been defined as the act of transmitting promotional messages to consumers in the form of time and location sensitive, personalized information through interactive mobile media (Haghirian, Madlberger, and Tanuskova, 2005). Multiple technological platforms are available to support mobile advertising applications including wireless application protocol (WAP), short message service (SMS) and multimedia message service (MMS) (Dickinger et al., 2004). Past research has identified various unique features of mobile media. Perlado and Barwise (2005), for example, identified five characteristics of mobile phones including portability, relatively small interface, personal identity, ubiquity, and location sensitivity. Haghirian et al. (2005) also pointed out that personalization and interactivity are the main characteristics of mobile advertising.  Despite the rapid penetration of mobile devices and growing interest of the global advertising industry, there is a lack of theoretical and empirical studies in academic literature concerning the effectiveness of mobile advertising. As a unique advertising medium, mobile advertising challenges the validity of a host of studies conducted in the past on advertising effectiveness due to the fact that old concepts and theories may not apply or need to be modified in the new media context. As Chaffee and Metzger (2001) commented, “new media bring challenges to our old models, as well as the occasion to reevaluate, extend, and perhaps even supersede them” (p. 378).  Established marketing/advertising theories such as Theory of Reasoned Action (TRA) posits that beliefs and attitudes towards advertising play an important role in advertising effects such as consumer acceptance and purchase intention (Fishbein and Ajzen, 1975). Developed based on TRA, the Technology Acceptance Model (TAM) (Venkatesh and Davis, 2000) posits that an individual’s intention to adopt and use a new medium is determined by perceived usefulness and perceived ease of use. In this study, we examine different factors influencing the adoption and usage of mobile advertising including beliefs and attitudes, social norms, trust, privacy concerns, and incentives on customer intention to use mobile advertising and consumers’ behavioral responses. The goal is to test the established theories in the new medium environment. Moreover, we attempt to identify the key factors that have the most impacting power for this unique advertising channel.  

 

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Copyright: All rights reserved. No part of the material protected by this copyright notice may be reproduced or utilized in any form or by any means, including photocopying and recording, or by any information storage and retrieval system, without the written permission of JAABC journals.  You are hereby notified that any disclosure, copying, distribution or use of any information (text; pictures; tables. etc..) from this web site or any other linked web pages is strictly prohibited. Request permission / Purchase article (s):  jaabc1@aol.com

 

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