The Business Review, Cambridge

Vol. 25 * Number 1 * Summer. 2017

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

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The Ambiguous Duty of Corporate Directors

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



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, “…Delaware case law teaches that a business decision made in good faith and with due care will fall under the business judgment umbrella if made for purposes that the directors believed to be in the best interests of the corporation." (Veasey, 1982 at 1282).  If the plain language of the statutes and case law is so clear in stating that directors’ duties are to the corporation why is there so much controversy and literature on this question? This paper suggests it is because there is no explanation or definition of what either of those duties specifically mean. “Duty to the corporation” is usually stated as “directors must work in the best interests of the corporation” but there is no definition of what those best interests are, or how they are achieved, or how their achievement is measured.  There is also no statutory definition of what “duty to shareholders” means although many observers take it to mean maximizing share prices. But “maximizing share prices” has its own ambiguity and complexity. Chief Justice Strine (2015) of the Delaware Supreme Court touches on that when he makes a distinction between maximizing short-term and long-term share prices.  This is a common distinction made by many but as stated does not conform to modern finance theory which suggests that current stock prices reflect all publicly available information, i.e. that current prices reflect the discounted value of all future cash flows, so in that sense there is no difference between the short-term and the long-term.  However, Justice Strine’s distinction can be made in a way that does conform to finance theory, and in a way that may shed light on the underlying questions addressed in this paper. For example, directors can acknowledge the demonstrable fact that the market does take into account its estimates of long term cash flows, while at the same time legitimately saying that they disagree with those estimates. Also, either explanation, short term vs. long term, or disagreement with the market’s estimates of the long term, points to a larger issue which is that managers and judges who make these distinctions are essentially rejecting an interpretation of efficient market theory and in both cases are relying on their own business judgment, not that of the market. As noted above, fiduciary duty statutes require directors to act in the best interests of the corporation. Many scholars share that perspective, among them Adolf Berle, who was a convert to that view. Early in his career he called for managers to focus on shareholder interests saying, “When the owner was also in control of his enterprise he could operate it in his own interest and the philosophy surrounding the institution of private property has assumed that he would do so.  This assumption has been carried over to present conditions and it is still expected that enterprise will be operated in the interests of the owners.” (Berle and Means, 1932, at 109).  However, Berle (1962) subsequently changed his view in a way that lead to an opposite view of the shareholder focus often attributed to him. Thirty years after the publication of “The Modern Corporation,” he said: When we stated that the corporation would be operated financially in the interest of "control,” we stated at least part of what has happened.  Not that the "control" or the managements have become thieves; quite the contrary.  Rather, they have come to recognize that first claim on accumulated profits is the claim of the enterprise itself - that, for example, the first duty of a steel company is to make steel, and have it there in sufficient quantity to meet the existing or foreseeable future requirements of the community.  These needs take precedence over the dividend desires of any body of passive stockholders-as indeed they should.  Critics of the “duty to corporation” view claim it is too ambiguous to be an effective guide for director decision making. Wallman (1991), however, draws an analogy with non-profit corporations such as the Harvard Corporation and points out that trustees of such institutions have no apparent problem in making decisions they believe are in the best interests of the corporation even though there are no share prices involved. While that still does not describe what the best interests of those corporations are it does suggest that directors can make such decisions using their business judgment, even if those interests cannot be specified in terms of share prices.


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



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). Each new pastor brings in a unique personality, background, ministry priorities and agenda, leadership style, and vision, accompanied by an influence on pastoral dynamics that should not be underestimated as part of the leadership transition from one pastoral assignment to another.  The challenges associated with leadership succession and transition in the private sector (e.g., Ciampa & Dotlich, 2015), nonprofit sector (e.g., Dym, Egmont, & Watkins, 2011), and in religious settings (e.g., Homer, 2016; Ngomane & Mahlangu, 2014) have received serious attention in academic journals and the popular press. However, specific reference to French pastoral succession and transition does not exist in the literature. This current study is an attempt to inform that discussion and add to the literature (e.g., Hong, 2001) from a culture perspective. Since pastor changes seem to occur frequently, we sought to investigate the degree to which a formal succession planning process is followed when reassigning pastors as successors to congregations. Based on a survey of nearly 2,500 respondents, Busby (2014) found that approximately 65% of board chairs and 69% of board members surveyed were unprepared to “name” the next CEO of a religious organization. Thus, 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. To collect data for our study, we used an adapted version of Santora et al.’s (2009) Global Survey of Executive Succession’s (GSES) three-part questionnaire, consisting of (a) organizational background; (b) respondent background; and (c) executive succession issues. The survey contained 39 questions (34 close-ended and 5 open-ended). The GSES has recently been used to collect data on nonprofit organizations in various countries (e.g., Bassi, 2013; Bozer & Kuna, 2013; Santora, Sarros, & Cooper, 2011; Santora, Sarros, Esposito, & Kalugina, 2013). The GSES was translated into French by one of the authors who is fluent in French, but not of French origin. It was back-translated to English to ensure accuracy (see Brislin, 1970; Brislin, Thorndike, & Lonner, 1973). This same author then administered the questionnaire to 20 pastors (one per church) of a French religious alliance (N = 30 members) who attended the alliance’s annual meeting in June 2014. A follow-up e-mail was sent to 10 10 additional pastors who did not attend the annual meeting, but only 2 of them completed and returned the questionnaire for analysis. The remaining 8 pastors did not respond to the request to complete the questionnaire. The response rate was a robust 73% (see Nulty, 2008, for a discussion of response rates). The Alliance des Églises Évangéliques Interdépendantes (AEEI) is an association of interdependent evangelical churches pioneered by American missionaries in the 1950s. The churches, organized as “associations culturelles,” based on the French 1905 law separating church and state, proclaim the basic tenets of the Christian faith, such as salvation by faith in Jesus. The association consists of 30 churches located mainly in the greater Paris region, with 1 church in Normandy and 3 churches in the Lyon region. All churches have a governing body, or “conseil”; most employ either a full-or part-time pastor; and most have a congregation of less than 100 members, based on their preference for establishing new churches over building larger congregations.


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



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. These challenges have compelled organizations to develop innovative strategies and processes. It is very important for firms to seek ways of adding value through innovation in order to create a better performance. This model displays the factors that are driving logistics process globally. It is important for firms to implement the proper logistics innovation in organizations in order for firms to be able to create an effective function that results in superior operational performance and superior financial performance.  Competition motivates firms to improve their services or products by utilizing a better strategy. Competition is a fact of life for today's business. It is important that firms must sustain competitive positions in order to keep their market share. Competition within the global logistic industry is intense with many competitors. The ability of a firm to survive depends on how the firm takes advantage of the opportunities in the market place to satisfy its customers. Many companies have demonstrated their capabilities of being been sensitive to their customers by trying to understand customers’ needs, customers’ complaint, and planning long-range marketing programs to meet those needs. According to resource-advantage theory, firms also seek to use their resources gain a competitive advantage in the market, which will ultimately lead to superior financial performance. Resource-advantage theory suggests that a comparative advantage in resources results in a competitive advantage in the marketplace (Hunt and Morgan, 1996). Resources include a firm’s assets, processes, information, and knowledge that help a firm improves efficiency and effectiveness (Barney, 1991). The goal for firms as directed by the resource-advantage theory is superior financial performance, which can only be attained by achieving a competitive advantage in the marketplace. Innovation plays a key role in resource-advantage theory. Firms will innovate to improve their resource position. Firms occupying positions of competitive advantage can maintain such positions by engaging in proactive innovation to ensure that their resources are comparatively better than the resources of competing firms. Firms occupying positions of competitive disadvantage can attempt to surpass advantaged firms by engaging in reactive innovation (Sakchutchawan, 2012). To stay ahead in the current global marketplace, firms must constantly look for innovative strategies to improve their competitiveness. Logistics market competition has forced firms to incorporate modern technology into their key offerings to discerning customers who might have or might not have service loyalty. It is important to keep up with customer demand, otherwise the firms risk losing out to competitors with logistics innovation and technology (Bitner et al., 2000). Service innovations are non-technical in nature, although technology might act as the vehicle that activates and enhances the process. Innovation in services is essentially a value-creating activity that drives business performance. It is imperative that firms plan and operate with a new logistics innovation. The factors that contributed to success of firms in the past might no longer be relevant in today’s turbulent business. The changing in technology has compelled many firms to think about new method in the pursuit of innovation.  Regulations can cause negative impacts on business in many ways. Regulations may hinder business growth and economic activities. Regulation has been a major barrier for logistics and global trade for decades. The impact of trade regulation on the procedure of custom and documents is exporters and importers always face voluminous paperwork, complex formalities, and many potential delays and errors (Hill, 2014). Likewise, Czinkota (2004) mentioned a firm must deal with numerous forms and documents when exporting and importing to ensure that all goods meet local and foreign laws and regulations. The principle of the trade facilitation rationale is to reduce unnecessary customs scrutiny that impedes the movement of shipments. However, many countries still lack of information communication technology system to facilitate speedy and cost-effective custom processing of importers and exporters. In countries that innovate their custom procedure, this procedure relies on information communication technology system to gather and study the relevant data and intelligence on each shipment. Thus, the custom department is able to expedite clearance to the low-risk shipments. However, all import shipment is subject to a possible random physical inspection. By law, each importer's international trade accounts are subject to random post-clearance audits to determine whether the correct duties were paid and if any trade regulations were breached. In North America, the impact of innovation and automation and regulatory initiatives affect the information communication technology decisions of customs brokers in terms of three general sets of processes: the preparation of shipment documentation for submission of documents to the Canada Border Services Agency, actual document submission, and processes following a shipment's clearance or release. The importance of the link between information communication technology and document preparation can be related to, for example, the steep increase in fines that importers incur for breaching customs regulations. The punitive fines for underpayment of customs duties (whether resulting from inadvertent or deliberate misclassification of imported products) increase the desirability of customs brokers that have systems to minimize errors. These systems automate processes such as product classification and shipment data entry and without them a broker may be competitively vulnerable (Haughton, 2006). According to Sheppard (1995), the country that has high level of custom innovation would allow importers to use software for self-perform classification without customs broker assistance and attain significant cost savings. The following proposition was developed from the above discussion:


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.



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.  Cross-listing is a important channel for all the companies to finance around the world. Hong Kong is the first choice for China companies to list. Chen (2005) finds that when Hong Kong investors could directly invest in A share market, the liquidity has a significant effect on the stock price. To reinforce the exchange relationship and contact between China and Hong Kong two capital markets, the governments of China and Hong Kong implement the policy “Shanghai-Hong Kong Stock Connect Policy” (hereafter SHKSCP). Under SHKSCP, investors in each market are able to trade shares on the other market using their local brokers and clearing houses. For the revenue generated from “SHKSCP”, SSE, SEHK, the China Securities Depository and Clearing Co., Ltd (CSDC) and Hong Kong Securities Clearing Co., Ltd (HKSDC) share equally according to the fair and reciprocity principle.  Since the implementation of “SHKSCP”, it can be expected to have positive effects on China and Hong Kong stock markets. First, Hong Kong investors can trade with their original stock account without restriction of investing limitation and threshold. However, with the system of market inter-connectivity, capital mobility is more flexibility and reasonableness between two stock markets. Newly, promoting Ren Min Bi (RMB) to internationalization effectively, making RMB can flow orderly and flexibly between China and Hong Kong. The related stocks are expected to be benefited for a long time and toward reciprocal goal synchronously. Lastly, China has higher chance to be submitted in MSCI emerging market index to enlarge the internationalization level of China stock market. Individual share prices often change significantly because of important economic events. In this paper, we discuss the relationship of individual share prices between China and Hong Kong stock markets after the announcement of “SHKSCP”. That is, we investigate the changes of market efficiency after the implementation of “SHKSCP”.  Granville (1976) comes up with the theory of On Balance Volume (OBV), suggesting that the effective changes of market price must cooperate with trading volume and the volume is the leading indicator of price. By using OBV theory can verify the reliability tendency of current share prices, and it also can get reverse signal. So far, the relation of price and volume are important indicators of technical analysis of shares in practice. It is also a vital factors to measure share prices. Observing the changes of capital volume can grasp the supply and demand situation of stock markets. According to the increasing and decreasing speed of trading volume, the trading momentum can be estimated. We can find the appropriate trading opportunity and predict the tendency of future markets.  Chen (1991) samples randomly from 60 listed stocks in TWSE from 1986 to 1990 and use Granger’s causality theory to find that both the price change and its absolute value are positively related to the trading volume. Therefore, we can infer that the volume is the leading indicator of price. Hsu (1994), using GARCH model to study the stocks of 50 listed companies from January, 1991 to August, 1993. The result of which shows that regardless of using any kinds of volume indicator, Taiwan stock markets present the phenomenon of price senior to volume, and confirm that there are important relation between price and volume in Taiwan stock market. Lo (1995), uses Granger model to study the relation of price and volume of the SSE and SZSE during 1993 and 1995. The result of which shows that the relation of price and volume in both of the SSE and SZSE conform to causality defined by Granger, and the price and volume affect each other. Lou (1996) uses Granger model to analyze the relation of price and volume and other features of Taiwan Stock Exchange (TWSE) at ten o’clock of the day. The result of which shows the variance of stock returns and trading volume are positive related, and the GARCH effect of stock returns variance within a point of TWSE will not be affected by information turnover. Wu (2006), using GARCH model to discuss the relationship between daily stock index and volume of the East Asian stock markets during 1994 and 2003. The result shows that the price and volume of stock markets have significant relation, and the effect of price on volume is greater than that of volume on price. He also finds the price-volume fluctuation of each stock market has its own features. But overall, the price-volume relation of stock markets with higher economic level will last less long than that with lower economic level. Lee (2011) discusses the relation of industry indexes in SSE based on Granger’s causality. The result of which shows that except of the stock returns effect of the estate is greater than that of trading volume, the stock returns of the other four indexes and trading volume have bidirectional causality. But for the impact of price-volume relation, the five indexes in SSE have significant effect on trading volume. Huang (2014) uses Granger Causality Test and impulse-response to discuss the causality study of price-volume relation in TWSE, and finds that whether the trading volume can be the leading indicator for price, the result of which shows that the price-volume relation of Taiwan weighted stock interacts in a causal relationship, and volume is the leading indicator for price. This study supports that there are price-volume relation in Taiwan weighted stocks.


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



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. Thus, as we continue to explore the issue, we consider the following questions. In our sample of a family-owned business, if the General Manager were also a family member, would the family-owned company’s risk management policies differ from those of the non-family-owned company? More specifically, would the General Manager who is also a family member be less apt to hedge through derivatives because the decision of the family-owned business’ General Manager would be more lenient? Finally, the family-owned business’ corporate value is also included in the General Manager’s risk-taking decisions, thus decreasing the company’s value as compared with the non-family-owned type. In addition to academic value, this study also has practical implications. First, if family businesses tend to use derivatives speculatively or engage in excessive risk avoidance, good corporate governance is essential to avoid increasing the company’s critical risk level. This also contributes to the company’s risk management. Second, if the family General Manager is not using derivatives to hedge risk exposure, the company’s board should reform the risk management mechanism when the company encounters external risk factors in the future. Third, if the family-owned company or its General Manager’s use of derivatives reduces the company’s value, then the company should be carefully assessed or the use of other risk management strategies should be adopted to avoid shareholders’ loss in interests.  (1) Influence of family business ownership on company decisions and corporate value. More than 50 percent of East Asian businesses are controlled by families, and many Asian family-owned enterprises are owned by the Chinese. A study conducted by Claessens, Djankov, and Lang (2000) studied a sample of 2,980 family companies from 1996. The sample comprised companies from nine East Asian countries, including Taiwanese publicly-traded companies; statistics revealed that 65.6% of Taiwan-listed companies were family-owned businesses. The study conducted by Yeh, Lee, and Woidtke (2001) from the years 1994–1995 also revealed that 81.4% of 208 Taiwanese public companies were family owned; thus, the phenomenon of widespread domestic family-owned enterprises becomes highly visible. However, family businesses are not unique to Asia and are also very common in the United States (Shleifer and Vishny, 1986, La Porta, Lopez-De-Silanes, and Shleifer, 1999, Anderson and Reeb, 2003).  Family members having ownership or control as shareholders belong to a special category that has unique incentives and a power structure. Significant differences are observed in the financial decisions between family- and non-family-owned enterprises. For example, Anderson, Duru, and Reeb’s (2012) empirical findings found that family enterprises do far less long-term investment than non-family enterprises. If long-term investment is classified as investment in research and development and in capital spending, then family enterprises tend to invest in real assets rather than in research and development. Therefore, the author believes that family enterprises prefer low risk, thus affecting the company’s investment in research and development and capital expenditures.  The company values of family- and non-family-owned businesses also vary. Villalonga and Amit (2006) maintain that, in accordance with a study by Jensen and Meckling (1976), the ratio of controlling shareholders’ holdings is higher in family enterprises, with more incentives being given to the supervising managers, thus reducing the agent problem (the author states that this applies to the first class agent problem); however, the ratio of controlling shareholders is higher. Furthermore, a second class agent problem has appeared; controlling shareholders from the family may use the larger shareholder advantage they have to procure private interest, thus sacrificing smaller shareholder interest. The second agent problem is more prominent than the first one. Shleifer and Vishny (1997) stated that a significant conflict of interest exists between the majority and minority shareholders. Villalonga and Amit (2006) considered Fortune 500 companies as samples, and the results of their study revealed that family shareholders would not be able to help in increasing the company’s value unless the company’s founder were to serve as General Manager or a founder or the Chairman were to hire an outsider to serve as General Manager.


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



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. The very basic reason behind this truth is the lack of our commitment through our education system, which is not at all involved in the very basic development of entrepreneurship among its students. Recent studies have revealed that the global economy is growing at a pace of 2% to 3% annually, which in return reflects the scope of the entrepreneurial approach for almost all types of businesses worldwide. Although the existing educational system, incorporating universities and institutions of higher education and research, has made a remarkable and significant contribution to the process of transmission and transformation of skills through knowledge, a lot more needs to be done in terms of spreading the entrepreneurial approach as a regular practice. We should accept this great need of our times as a challenge. We as a society are represented by a very widespread pool of talented, intelligent, and educated people from various disciplines. If smart efforts are applied to somehow bring them to a common platform with honest intentions, this would represent a giant leap towards the accomplishment of our goal of spreading an entrepreneurial approach in society. The governments of almost all nations have taken a serious stance in this regard and have started implementing a practical approach towards developing entrepreneurial skills in the curriculums and courses offered by the respective educational and skill-development institutions, attended by citizens from all levels of society.  To highlight the role of education in an entrepreneurial approach in society.  To mark the hurdles and challenges in terms of introducing an entrepreneurial approach in the education system.  To evaluate the role of educational institutions in developing and inculcating entrepreneurial skills among students.  In research methodology, the method exhibits the process of selection that reflects the rationale for the processes and procedures applied to identify, select, analyze, and communicate information gathered towards the implementation of understanding the task or problem considered for the purpose of research. Research methodology allows researchers to conduct a critical evaluation of the overall validity, reliability and, at the end, the feasibility of the research. Hence, the selection of the methodology for a research is suitable for the process and practices that are applicable in terms of its quantum for the collection and generation of the required data. The other important aspect of the data collection methodology adopted is to reflect the process of analysis of the data. Therefore, it becomes very important in the process of conducting research that the data collection process is implemented with due care and responsibility.  The selection process for the research methodology is crucial in terms of drawing the results of the research. One should be very precise in terms of using the research methodology as it reflects the ways and means, and later the cause and factors that influence the results. Other important considerations that have an impact on the conduct of the research are costs, time and opportunities for establishing the ways and means to correctly measure the outcomes in view of the constraints the above factors pose to the research. The selection of the measurement tool is also important in terms of yielding the correct outcome of that research. Therefore, the significance of the relevant tests has an important role to play in the research process. This way it leads through the pathway to determine the significance of the hypothesis. As social researches depend heavily on significance tests  Qualitative tests, Statistical Tests, Emotional Intellegence Test which are intended to measure an effectiveness may drive the research process in a new direction, based on the findings and outcome. Using one or more significance tests in turn helps the researcher to compare two supposedly equal sets of data collected to figure out their similarities or differences. Finally, the tests help researchers draw conclusions about the relevance of the hypothesis/hypotheses.  The validity and reliability of the research process is yet another aspect to be considered while conducting and selecting the methodology for the research.  The term validity refers to the degree to which the research addresses the selected problem, while reliability refers to the consistency of the set of measurements. In this paper, [we examine] the concept of replication studies, considered as a way to test the reliability of research. Both validity and reliability are important aspects in research methodology for the purpose of extracting a better, more viable explanation of the world around us. The term reliability is defined as “yielding compatible results in different experiments and trails.” Hence, research methodology that lacks the consideration and inclusion of reliability cannot be trusted with regard to its outcomes. There are many ways and means to test reliability, including statistical reliability, reproducibility, internal consistency reliability, inter-rater reliability, instrument reliability, and test-retest reliability.


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



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. Therefore, Ghoshal’s classification for international risks was adopted, that is, macroeconomic risks, political and policy risks, competitive risks and resource risks. Moreover, as for resource risks, it was defined as required resources that the firm does not have, cannot acquire, or spare. Different from the rest, it emphasizes the actual possession of certain resources rather than the understanding of certain knowledge. Hence, it will not be included here. This concept has been discussed a lot in the international business literature. Makino and Delios (1996) once mentioned, it comprises information and know-how about the local economy, politics, culture and business customs of a region; information on local demands and tastes; as well as information on how to access the local labor force, distribution channels, infrastructure, raw materials and other factors required for the conduct of business in a region. Sufficient local knowledge can mitigate the disadvantages of being foreign, and thus can enhance the performance of international subsidiaries (Makino and Delios 1996). It is suggested that a lack of necessary local knowledge will badly influence managers’ competence in decision-making and their performance in foreign markets (Makino and Delios 1996, Lord and Ranft 2000).  Local economy. Compared with locals, foreign investors are subject to inferior status in their knowledge and forecast of the economic events of new markets (Mariotti and Piscitello 1995). Furthermore, the more active the involvement of foreign investors in the economic activities of a new market, the lower the risk and more favorable the operating environment will be (Zhao and Zhu 1998).  Hypothesis 1: Knowledge of local economy is positively related to the risk bearing capacity of MNEs.  Local politics. The investment projects of foreign firms take the political business cycle into great consideration, the rate and number of new project announcements alters significantly according to the different right-wing and left-wing incumbents (Vaaler 2008). With the establishment a repository of knowledge concerning international political systems, the level of perceived risk is reduced (Oviatt and McDougall 2005).  Hypothesis 2: Knowledge of local politics is positively related to the risk bearing capacity of MNEs.  Local business practice. To reduce the perceived risk of foreign operations, firms will first enter the markets whose business practices they understand the most (Johanson and Vahlne 1977, Johansson 1990). Managers owning accumulated knowledge of foreign business practices through international involvement are more capable of handling risks of foreign operations, and therefore normally see foreign investments as less uncertain than managers lacking such experiences (Carpenter, Sanders et al. 2001).  Hypothesis 3: Knowledge of local business practice is positively related to the risk bearing capacity of MNEs.  Local market. The inadequacy of market knowledge causes risk and uncertainty in international expansion‎ (Fletcher and Harris 2012). The more knowledge of the market, the lesser the perceived market risk will be, and the greater the foreign investment level of that market (Forsgren 2002).  Hypothesis 4: Knowledge of local market is positively related to the risk bearing capacity of MNEs.  Local raw materials. The tangible essence of industrial goods makes manufacturers sensitive to fluctuation in quality, quantity, and timing (Richardson 1993). When materials risk is low, overseas manufacturing companies prefer depending on local firms, which already own credible sources of materials, rather than choosing more integrated entry modes (Anderson and Gatignon 1986, Hennart 1991). This knowledge enables foreign firms to better monitor the variation and uncertainty in the quality, availability, and quantity of materials for manufacturing.  Hypothesis 5: Knowledge of local raw materials is positively related to the risk bearing capacity of MNEs.  The research framework is presented in Figure 1 and illustrates the proposed effects of key factors on risk bearing capacity. It served as the foundation of this research, on which the hypotheses development, measurement development, structural equation modeling, and data analysis all will be based. (Insert Fig. 1 here)  All items in the questionnaire were adapted from published works that were relevant to our study. Structural equation models (SEM) are most beneficially specified for theoretical frameworks of moderate complexity in which p/f (the number of measure items per factor) = 3 or 4. It is wisest to analyze relatively small sets of variables, with 20 variables at most in a model (Bentler and Chou 1987). Hence, the number of indicators to factors of this research would be 3 or 4.


The Effect of Face on Marketing Alliance Performance

Wenxin Zhang, East China Normal University, China

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



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). Most scholars at home and abroad view face as individuals seeking for a positive social identity, social evaluation and social values (Goffman, 1955; Ho, 1976; Hu, 1944; Yaoji, 1988).But most Western scholars care about the psychological needs of the individual(P. Brown & Levinson, 1978, 1987; Ting-Toomey, 1996),while Chinese scholars are more concerned about the value of social recognition(Ho, 1976; Hu, 1944; Yaoji, 1988; Yinan, 2006). Alliances are an important form of cooperation among enterprises, in which both sides agree to recognize that part of their business success depends on the other side (Anderson & Narus, 1990). Meanwhile, both sides can often improve their learning ability in an alliance, as well as save operating costs and share resources. The success depends on three phases of management. First, the Alliance project's choice, followed by alliance partner selection, and finally maintaining the balance of the alliance after formation (Bucklin & Sengupta, 1993). The action about face-saving is directly affected by the degree of closeness of the relationship between allies. When they are not intimate, they may perceive that the amount of face threat carried by a  face-threatening act (FTA) is higher than the absolute or normal face threat of the FTA (Lim & Bowers, 1991).  Hypothesis 1 Degree of intimacy between allies has an effect on saving face for the performance of the strategic alliance.  When conflicts happened in an alliance, it is better to ask for the advice of others, and then express one’s own opinions to avoid bringing pressure to one’s partners (Reingen & Kernan, 1979; Rich, 2003).  Hypothesis 2 The FTA has an effect on the performance of the strategic alliance.  Learning capacity is defined as an alliance partner’s acquisition of the ability to digest and internalize new knowledge and skills, which is just as needed as physical and mental ability in an alliance(Lado, Boyd, & Hanlon, 1997). Organizations try to show the performance of study in alliances in order to save face.  Hypothesis 3 If the enterprise cares about face appropriately, the performance of the strategic alliance will be better with the developing learning capacity.  There is something like give face to others or for someone else's face existing in the interaction between individuals in China(Xuewei, 2004). So in the process of forming marketing strategy alliances, not only does their own face play an important role, the face-saving action in the circle is also an influencing factor.  Hypothesis 4 Circle culture in China about face has a positive effect on the performance of the strategic alliance. Trust is the basic element of the success of alliances. The trust between partners has a positive effect on fulfilling obligations, and also can reduce a lot of details in management and contracts. It makes firms have-face to gain the trust of others, while the lack of trust will lead to the failure of the entire alliance project.  Hypothesis 5 The trust between each other positively affects the performance of the strategic alliance. Commitment implies a willingness to make short-term sacrifices to realize longer-term benefits (Dwyer et al., 1987). It is believed to be associated with motivation and involvement, positive effect and loyalty, and performance and obedience to organizational policies (Angle & Perry, 1981). It provides a foundation for the development of social norms of governance, which are considered important mechanisms for regulating long-term relational exchanges and reducing opportunism (Macneil, 1980). Therefore, commitment is obviously affected by face.


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



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). Another impact of the lowered earning potential of human capital is a lowering of tax revenue that can be collected from them. At the same time, unemployed (i.e., the ones in developed countries) and low paid (i.e., the ones in developing countries) employees need government assistance and related programs for their survival, thus forcing governments to spend more even as they face dwindling tax revenues. Not surprisingly, rising expenditures and falling tax revenues lead to increasing budget deficits at least in the slower growing developed countries. As a result, the public funding that universities receive become more tenuous, causing universities to contemplate far reaching budget cuts.  The budget cuts, usually require universities to cut programs, layoff non-tenured teaching professionals, and reduce support staff (Wurth, 2015a). The immediate impact of such actions are seen both in increasing class sizes, and in a reduced variety of course offerings in programs. The remaining faculty and support staff usually end up supporting a higher workload potentially reducing the quality of their output. And in the long run, program cuts impact all of society.  Universities usually try to cut the programs seeing lower attendance levels and they use this metric to justify the cuts. However, this may be very shortsighted given the historical mission of universities (Denley, 2013). The first universities were founded in Medieval Europe and elsewhere to further the study of subjects such as theology, astronomy, law, and medicine. They were usually offshoots of Christian cathedral schools or monastic schools and their main purpose was to create and transmit knowledge. The reason for the existence of these institutions was not to churn out graduates with diplomas, but rather to study fields of interest to the church and the state (Denley, 2013). The institutions were financed by churches, rich benefactors, and others (e.g., kings, and other royals) and whether the graduates were able to find jobs or repay their student loans were not considered in deciding what would be studied and who would be accepted as students. In today’s budget calculations, it is common to hear that art history majors, for example, are not likely to find well-paying jobs, and therefore, an art history program may be one of the first to be downsized in a state where state finances don’t support public universities as much as they were supported before. However, in medieval universities such considerations were fortunately not as prominent, since without such program as art history, the renaissance (i.e., an end to dark and middle ages) would have been much delayed.  the modern day U.S., the impact of budgetary pressures is undoubtedly going to be unfortunate. It is hard to guarantee that channeling university efforts towards what brings in students now is the best use of higher education. A great number of students study subject matters such as business, which do create graduates that are hired in lower and middle management positions. However, research and study in subject areas that may fuel future innovation may be getting shortchanged if those areas are not popular in terms of after-graduation job prospects or the cost of education and research in those fields is high (e.g., the University of Illinois getting rid of its aviation program due to costs). In the U.S., facing outsourcing of many manufacturing jobs, public policy makers, economists, and executives have constantly argued that the U.S. is the most innovative country in the world. But university cutbacks may mean that the innovation pipeline is drying up. If this happens, the innovation related jobs to replace outsourced jobs won’t be created (Wurth, 2015b).  Another interesting development that parallels the above mentioned issues is that universities are starting to become more corporate-like entities with a focus on recruiting students, as if they are trying to capture consumers and market share. We see schools redoubling their marketing efforts and spending money on bettering room and board options, and entertainment capabilities (e.g., athletic teams and sports complexes). As a result of these efforts, a lot of money goes into administrative structures that emphasize federal compliance, student life betterment, and budget control. In addition, money goes into athletics and buildings and equipment. For example, in the corporate structure of the University of Illinois, some of the top 10 earners in 2014-2015 academic year were the following. Football Coach Tim Beckman ($1.8 million); Chancellor Phyllis Wise ($549,068); Football Assistant Coach Bill Cubit ($515,000); and Provost Ilesanmi Adesida ($460,416) (D’Alessio, 2015). Furthermore, all of these “corporate stars” have resigned or been fired within about one year period of each other. As can be seen, these are very high salaries (paid to individuals with mixed levels of success in their jobs), which mimic salaries seen in the corporate world. Another example is the University of Illinois spending $76.3 million in the renovation of its century old Natural History Building (Wurth, 2015c). Again, the number of dollars spent on the project are staggering, with the question being whether another entity should be taking over such a building with historical significance but with less clear instructional value.


Credibility and Consumer Trust: The Keys to Mobile Advertising Success

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



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.  Practically, this study is to help marketers better understand the nature and implications of the new advertising medium. Lack of experience and understanding on the part of marketers and ad agencies is one reason for the slow advancement of mobile marketing (eMarketer, 2015). Thus, understanding how consumers perceive and react to mobile advertising is critical for marketers to develop effective campaigns. The rest of the paper is organized as follows: First, the author briefly reviews the relevant literature on mobile advertising research pertaining to the relationship between the influencing factors and mobile advertising effectiveness; second, the theoretical model and hypotheses are proposed; third, research methods and significant research results are presented; lastly, the author discusses implications of findings and identifies limitations and future research directions.  Most studies in the mobile advertising research have been conducted under the theoretical guideline of TRA and TAM. The Theory of Reasoned Action (TRA) has been widely applied in the marketing and advertising literature (Ajzen, 1991). TRA posits that users’ beliefs determine attitudes and intentions, which then influence consumer behaviors. TRA has been applied to examining consumer attitudes toward advertising in different media environments. Pollay and Mittal (1993), for example, proposed seven factors underlying attitudes toward advertising including, product information, social role and image, hedonic/pleasure, value corruption, falsity/no sense, good for the economy, and materialism. Apply the theory to online advertising, Ducoffe (1996) investigated whether and how the advertising values such as informativeness, entertainment, and irritation were related to consumers’ attitudes towards online advertising. He found that consumers viewed online advertising as somewhat valuable, informative, not very entertaining, and not particularly irritating. More recently, Dix et al. (2016) examined the drivers of consumer acceptance and response of SMS advertising among Australian consumers. The researchers found that attitudes toward mobile advertising in general emerged as significant factors influencing consumers’ acceptance of SMS advertising.  Similar with TRA, TAM predicts that beliefs influence attitudes toward information technologies, which then determine intention to use and actual behavior. Specifically, TAM proposes two basic beliefs – perceived usefulness and perceived ease of use – are the primary reasons for individuals to adopt new technology. The perceived usefulness consists several dimensions such as perceived informational usefulness, perceived entertainment usefulness, and perceived social usefulness. Venkatesh and Davis (2000) further extended the original TAM by incorporating social influence variables including subjective norm, voluntariness, and image. Scholars have applied TAM and extended TAM to mobile advertising research, which provides both theoretical and empirical support for the framework. Yang (2007), for example, employed the extended TAM to examine the relationship between ATMA and intention to use mobile advertising among college students in Taiwan. The results show that ATMA is more powerful and stable than other variables. Zhang and Mao (2008) looked at the acceptance of SMS advertising among young Chinese consumers based on TAM.  Results show that the perceived usefulness (i.e., perceived information usefulness, perceived entertainment usefulness and perceived social usefulness) and perceived ease of use of SMS advertising messages, predicted the intention to use mobile advertising. Trust and subjective norms also contribute to the intention to use.


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