The Business Review, Cambridge

Vol. 6 * Number 1 * Dec. 2006

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

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Crew Resource Management: Assessing Potential Problems of Non-Interlinked Side Stick Aircraft Flight Controls on Airbus Aircraft

Major Scott William Forn, Sr., U.S. Air Force

Dr. Marian C. Schultz, The University of West Florida, FL

Dr. James T. Schultz, Embry-Riddle Aeronautical University, FL



Airbus and Boeing aircraft differ greatly in one aspect; Boeing’s interlinked control columns versus Airbus’s non-interlinked side stick controllers. The side stick controllers present a unique challenge when transferring aircraft control, or intervening when necessary. The authors hypothesized that aircrew were not properly transferring control with the side sticks. Survey results revealed that 30.6% of the respondents nudged the side stick controllers, rather than taking over the aircraft per normal operating procedures, and 86.7% of these were in a leadership or examiner role. The data from the study supports the research hypothesis and reveals cause for concern from a safety perspective. It is not an issue of the yokes verses side stick controllers, but a safety problem because of a lack of interlinking. Boeing and Airbus airplanes are very similar in many ways, but differ greatly in a few key areas. Control sticks and columns versus side stick controllers is the key issue the authors are addressing in this paper. When Airbus introduced its commercial airliner, the A-300, it had a center yoke and controls that were linked together.  When one control wheel was turned, the opposite side turned in the same direction. Boeing aircraft, to include its newest airplanes, have control columns and yokes that are linked and move together. The current generation of Airbus aircraft, the A-319, 320, 321, 340, and the newest aircraft, the A-380, all have side stick controllers that are not mechanically linked together. It is this non-linked interface that this paper explored.  This study sought to determine whether crew resource management (CRM) problems and/or issues exist when conducting flight operations and training in Airbus aircraft, specifically with respect to the aircraft’s side stick controllers. The study surveyed a wide variety of crew members to determine whether standard operating procedures (SOPs) were always being followed for side stick controller usage.  Ever since the Wright Brothers flew the Flyer at Kitty Hawk, designers and engineers have been working on making airplanes more efficient, faster, able to carry more weight farther distances. Manufacturers have differed in a great number of areas, but one area that has remained relatively constant is the interface of pilots with their machines. Cockpits have, for the most part, contained control yokes that were interlinked to one another and those controls have either been linked directly to the control surface, or have driven cables that actuate hydraulic cylinders throughout the aircraft. Not until the advent of Fly-By-Wire aircraft, did the side stick controller that Airbus Industries uses today become one of the accepted standards for cockpit design. According to the Aviation Resource Center “Like all Boeing airplanes (and 95% of the world's jet transports), flight is controlled with standard wheel and column controls that are interlinked and back-driven” (Boeing 717 General Overview, 1997).  An interlinked control is merely one that causes both similar controls to move when either control is moved in the cockpit. Figure 1 shows the control columns of a Boeing 747-100 series cockpit. It is significant to note that both control wheels are turned to the left, and they are deflected approximately the same amount to the left. This type of cockpit control yoke allows the supporting crew member to easily see what the other pilot is doing with the controls merely by watching them move. The Wrights moved to a seated pilot position and upright hand controls with the prototype airplane made in 1908 for the U.S. Army Signal Corps. Additionally, another seat with dual controls was added at this time. The pilot, seated in the left seat, controlled the throttle with the left hand, and the wing warping, rudder, and elevator with the right hand. In 1909, on a Model B aircraft, the brothers modified this scheme for their first "left-handed" pilot, Walter Brookins, who sat in the right seat and worked the wing-warping controls with his left hand. That way he could train students sitting in the left seat. A foundation for modern instructing was born. The first control wheels were installed in a specially built Wright airplane - two steering wheels connected with what looked to be a bicycle chain (Boatman, 2003). Even small civilian airplanes built by a number of manufacturers have interlinked cockpit controls. Figure 2 is a cockpit from a very popular civilian airplane, the Cessna-210. The most significant difference between the cockpits in Figure’s 1 and 2 is that the control cables from the Cessna’s control yokes connect directly to the flight controls through a series of cables and pulleys. The Boeing’s control yokes and associated cables and pulleys connect to hydraulic actuators out at the flight control surface. Hydraulic fluid, under high pressure, moves the control surface through a hydraulic servo that converts the positional information transmitted via the cables into flight surface control deflection.


Real Rates of Return, Risk, and Exchange Rate Determination: The Case of Euro and the U.S. Dollar

Dr. Ioannis N. Kallianiotis, University of Scranton, Scranton, PA



The objective of this analysis is to determine the movements of the exchange rate between the U.S. dollar and the euro by looking at the real rate of return and risk that financial assets have in these two economies. Risk averse speculators will try to maximize their return and minimize their risk by investing domestically or abroad, and these capital flows will affect the value of the two currencies (the exchange rate). The empirical results show that before 2001 the real return in the U.S. was high and the dollar was appreciated; after 2001, the same real return became negative and the dollar was depreciated, but after 2004 the real returns have growing positively, so the dollar is expected to appreciate, except if the risk, by investing in the U.S., would increase. Then, forecasting risk and return in countries’ assets, we can determine the direction of the exchange rate by estimating the long-term trend of these real returns in the future. Years of large current account deficits, high real return on U.S. assets, and relatively low risk have left the United States with the world’s largest stock of international liabilities. By the end of 2004, foreign net claims on the U.S. amounted to $2.5 trillion, equivalent to 22% of U.S. GDP, according to Higgins, Klitgaard, and Tille (2005, 1). This tremendous demand for U.S. assets was expected to appreciate the U.S. dollar relative to euro and the other foreign currencies, but data show exactly the opposite. Then, other factors might have affected the exchange rate between the dollar and the euro, like speculation and uncertainty for the future, due to the Middle East crises (Palestinians and Israelis, Afghanistan, Iraq, Lebanon, and the creeping ones in Syria, Iran and North Korea). It is well established that the volatility of exchange rates displays considerable persistence. That is, large movements in spot rates tend to be followed by more large movements later, which increasing risk and producing serial correlation in real returns. Thus, past volatility and current one can be used to predict future volatility and the forward discount or premium of the different currencies. Investors in foreign assets pay attention not only to the expected return from their investment activity, but also to the risk that they incur. Risk averse investors try to reduce their exposure during periods of high volatility by predicting the real return of their investment and the volatility (variance) of this return. Kallianiotis (2004a and b) has forecasted this volatility with a GARCH (p, q) model and Neely and Weller (2002) by a genetic program, which give broadly similar results. Investors will invest in assets denominated in a currency that its real return will be higher than the others and its risk to be the smallest one. Determining these assets with the highest real return and lowest risk, we can determine the trend of the exchange rate of this specific country. An excess demand for the country’s assets will appreciate its currency.  Some recent facts (“news”) reveal the effect of speculation on the different exchange rates. On Tuesday February 22, 2005, South Korea’s Central Bank announced that plans to diversify its foreign exchange reserves, which traders took to mean a slowdown in purchases of dollar-denominated securities. The U.S. dollar fell to $1.3259 per euro and lost value with respect to the other major currencies. The DJIA slid 174.02 points (-1.6%) as concerns about the weak dollar sparked a sell-off of the U.S. currency. Also, gold surged $7.40 to $434.50 and oil climbed to $51.42 per barrel. In addition, terrorist attacks globally rose in 2004 to about 650 from 175 in 2003, said congressional aides briefed by State Department and intelligence officials. A terrorist attack in London on July 7, 2005 caused stocks worldwide to fall; the London stocks (FTSE 100 index) fell by 200 points, the DJIA fell by 250 points, U.K. pound slumped to $1.7403 from $1.7556, bonds gained (10-year AAA=4.80%), oil in N.Y. fell by $5 to $57, and gold price increased by $4 to $430 per troy ounce; but after this shudder in the markets, they rebounded quickly. On Monday, October 3, 2005, Turkey started accession talks with EU and we were expected to see some effects on euro, but nothing happened; the exchange rate did not change at all. On November 1, 2005, the FOMC raised the federal funds rate to 4% and instead of having an appreciation of the U.S. dollar, we had the opposite: the exchange rate increased to 1.2067 $/euro. On December 13, 2005, Fed raised for 13th time in a row the federal funds rate to 4.25% (today, it is 5.25%) and instead of having an appreciation of the U.S. dollar, it fell to 1.2034 $/euro from 1.1668 $/euro that was on November 17, 2005. At the same time, we read that the U.S. net purchases of overseas stocks during the first 10 months were on a pace to smash the 2003 record of $88.6 billion. At an average of more than $9.5 billion a month, the 2005 total could hit $115 billion. This huge demand for foreign financial assets causes the dollar to depreciate. On August 29, 2006, it has fallen to 1.2826 $/euro. In July 2006, Israel invaded Lebanon, but the exchange rates stayed the same; oil prices reached $75.00/barrel. Then, invasions have no effects on exchange rates, only speculations have. Economists, moral philosophers, and all social scientists have a very hard time analyzing our current corrupted world, which is becoming worse every day. Although a number of economic models [Bilson (1978), Dornbusch (1976, 1984), Bhandari and Putnam (1984), Frenkel (1983)]  have been used to interpret exchange rate movements, virtually none of the existing models can explain exchange rate behavior well because it is so much speculation and uncertainty in this market that make economic theories useless. Some economists [Tucker, Madura, and Chiang (1991, 52)] attempt to interpret the phenomenon of deviation of the actual currency values from their fundamental values as speculative bubbles. Particularly, economic agents form their exchange rate expectations based on a certain kind of extrapolative behavior. Thus, favorable changes in financial variables or in the investment environment may tend to generate an exchange rate appreciation that, in turn, may lead to expectations of a further appreciation. But here, especially with the “euro”, we did not have any major changes (improvements) in fundamentals. The above process continues as long as the market believes the currency price will persist moving in the same direction. Since the actual price moves farther away from the fundamentals as time passes, capital gains would have to be sufficiently large to compensate for the risk of a bursting bubble, which it is not obvious for the euro at this moment.


Modi Operandi of U.S. and European Fraud: Focus on Parmalat

Dr. John L. Teall, Pace University, New York, NY


Both European and U.S. firms have endured waves of corporate governance breakdowns leading to corporate fraud and failures. Recent research has proposed that differences in U.S. and European ownership structures have led to different types of managerial fraud, suggesting that the two economies require different regulatory and monitoring structures to stem fraud occurrence. This paper focuses on he Parmalat meltdown, one of the few with strong roots in both Europe and in the United States, and argues that the Parmalat case does not necessarily suggest that the root causes of managerial fraud in the two economies are fundamentally different. The core of the argument in this paper is that although the Italian roots and ownership of Parmalat do follow the typical European model, U.S.-based co-conspirators, facilitators, victims and business interests suggest that the Parmalat has very strong U.S. roots as well. Hence, the Parmalat case alone is insufficient to demonstrate that U.S. and European regulatory frameworks should be fundamentally different. Effective corporate governance is a key characteristic of successful firms that maximize shareholder wealth and realize the objectives of other corporate stakeholders. A large number of high profile incidences of corporate governance failure have led to executives being accused and convicted of committing fraud, stealing, improperly diverting funds and lying to investors to receive more money. Coffee [2005] and others argue that while both European and U.S. companies have suffered a wave of governance scandals in recent years, the natures of the scandals are fundamentally different, largely due to differences in governance structures. More specifically, Coffee argues that: . . . differences in the structure of share ownership account for differences in corporate scandals, both in terms of the nature of the fraud, the identity of the perpetrators, and the seeming disparity in the number of scandals at any given time. In dispersed ownership systems, corporate managers tend to be the rogues of the story, while in concentrated ownership systems, it is controlling shareholders who play the corresponding role. Although this point may seem obvious, its corollary is less so: the modus operandi of fraud is also characteristically different. Corporate managers tend to engage in earnings manipulation, while controlling shareholders tend to exploit the private benefits of control. Coffee [2005], p. 2. Coffee further observes that the primary mechanism for managerial fraud in the U.S. revolved around earnings, revenue and other income statement manipulations and resultant restatements. Coffee notes that the General Accounting Office (GAO) reported that approximately 10% of listed firms had at least 1 financial statement re-statement between 1997 and 2002. (1) Such income statement manipulation could serve to increase managerial compensation and decrease corporate volatility (and protect managerial employment). The U.S. Congress contributed to the use of stock- and option-based compensation by passing legislation that limited the tax deductibility of nonperformance-based managerial compensation to $1,000,000 per year, further increasing managerial incentives to manipulate share prices to maximize managerial stock option values and to manipulate accounting data to affect accounting-based performance measures. On the other hand, Coffee observes that European incidences of managerial fraud were tied to agency issues, focusing on appropriation of private benefits of control. Coffee does correctly acknowledge that the wave of U.S. public firm scandals seemed to precede the European wave and that many of the earlier European scandals did have American roots. In addition, a number of other major European scandals were based on accounting irregularities. He also notes important differences in U.S. and European executive compensation methods, with the U.S. focus on option-based compensation. This U.S. options-based compensation system, highly sensitive to accounting statement reports and their impact on share prices certainly gave U.S. managers a stronger incentive to commit fraud through accounting irregularities. A study by Efendi, Srivastava and Swanson [2004] concluded that earnings restatements were strongly related to options-based executive compensation. Several papers and articles in the business media have argued (e.g. Heller [2003] and Mulligan and Munchau [2003]) that the Parmalat case is a particularly Italian scandal, suggesting that such a case is country-specific and therefore more likely to happen in Italy than elsewhere. These papers are supported by others arguing that Italy is also considered to be a particularly striking example as having corporations with weak corporate governance structures (e.g. La Porta et al [1997], Macey [1998] and Johnson et al [2000]). Melis [2005] considers positions made in these papers and concludes that the Parmalat case is not uniquely Italian. There are a number of techniques by which controlling shareholders in highly concentrated firms can extract private benefits. Jensen and Meckling [1976] discuss perquisite consumption and shirking. Johnson et al [2000] discuss tunneling, a method by which controlling shareholders force acquisitions of their firms where assets are sold to other firms that they control at below-market prices. Such techniques are more prevalent in Europe where, for example, Coffee [2005] reports that approximately two-thirds of 1040 listed firms in Bulgaria had been de-listed following takeovers at coercive prices. Such transactions are prohibited in the extreme cases in U.S. and Italian financial markets, and limited otherwise, they may still occur, especially where ownership concentration is more significant.


The Impact of E-Mail Utilization on Job Satisfaction The Case of Multi Locations

Dr. Aysar Philip Sussan, University of Central Florida, Orlando, FL

Dr. Anthony Recascino, University of Central Florida, Orlando, FL



The use of technology, such as electronic mail and the Internet, is becoming the norm in many workplaces. This is especially true in most service organizations. This study examined how electronic mail impact job satisfaction for employees in service organizations, the case of higher education. Results of the study found that administrative level employees both sent and received more email than non-administrative level staff. Job satisfaction was not found to be related to the amount of email sent or received. No difference in job satisfaction was found between employees at the head quarter versus multiple locations, nor was there a difference in job satisfaction between those employees who were supervised primarily via email and those who had in-person supervision. Results of this study help to clarify the role of electronic mail plays in the workplace behavior and attitudes of employees. Other studies could examine Internet usage or focus on the integration of new technologies into other organizations.  The use of computers and technology is ubiquitous in service organization today (Blake, 2000).  Much of the paperwork that was done to communicate information among staff and administration has been transferred to electronic formats.  However, despite the proliferation of electronic communication, such as email, in service settings, little research has been conducted to examine the effect that electronic communication, particularly email, has on the interaction among members of the head quarter or on how email usage affects job satisfaction for employees. Much of the focus of current research related to electronic communication on college campuses has explored email communication only from a student-student, or student-teacher perspective.  For example, Gigliotti (2002) examined the effects of email on the academic relationship between first-year students and their faculty advisors.  Sipe (2000) examined how the incorporation of electronic communication into a writing class influenced faculty-student relations.  Other studies on the student-student or student-teacher relationship shed light on the nature of email communication. Gueguen (2003) explored factors that affect whether or not students at a university were likely to respond to an email request.  In this study, Guerguen found that if the first name of the individual requesting help via email (the solicitor) was the same as the receptor, that compliance to the emailed request was higher. The importance of this research was that it supported the idea that subtle differences in email communication, of which the receptor may not even be explicitly aware, could change the outcome of the communication. In an earlier study comparing face to face and computer-mediated communication, Straus and McGrath (1994) found that in a task related to passing judgment on another student (a disciplinary action), students in the computer-mediated groups were less productive and rated their satisfaction level in the group as lower than the face to face groups.   However, when Straus (1997) followed up on the 1994 work, she found that computer-mediated (CM) groups exhibited a higher level of communications across members than did face-to-face groups. Overall, the CM groups also showed greater equality in their levels of participation across members than did face to face groups.  It certainly could be proposed that as email communication became more widespread and accepted, norms regarding computer-mediated Communication rapidly evolved. Nearly all of the research related to electronic communication and its effect in academe has involved the college student population. However, another important area that needs to be examined involves how email communication may influence the relationship among staff members. Email communication could potentially relate to staff perceptions of the leadership qualities of their direct supervisors, as well as influencing the levels of satisfaction between these two parties. Perhaps of the most interest to the present study is the work of Lantz (1998) who created a survey for use in assessing the affect email usage has on worker behavior.  In this study, she first surveyed 58 employees of the same organization who used email.  She found that heavy email users did not typically have problems handling email.  In addition, she found that managers had more problems with email handling than their subordinates. In a second, smaller study, Lantz interviewed 10 people within the same organization about their email usage for a more comprehensive examination of the topic.  A number of email users entered their email program frequently, thus interrupting their daily work.  However, in the interviews, these users did not see frequent email usage as disruptive to work.  The employees interviewed did report that they did not have sufficient time to process their email messages. Lantz’ findings call into question the general assumption (e.g., Walsh & Maloney, 2002) that electronic communication and use of technology enhances worker task completion. Only a small number of research projects have utilized adult employees or scientists, and topics studied in these groups mostly examined how email was used as opposed to examining job satisfaction or how email can influence inter-office relationships. Overall, it is clear that more work needs to be done to examine how email and electronic communication usage impact work-related variables in an adult sample of college employees.


Globalization: The Good, Bad and Ugly

Anna Turri, Sam Houston State University, Huntsville, TX

Dr. Balasundram Maniam, Sam Houston State University, Huntsville, TX

Dr. Hadley Leavell, Sam Houston State University, Huntsville, TX



Advances in technology and the expansion of trade have improved the standard of living dramatically for people around the world.  This paper will explore the costs and benefits of globalization and corporations that should globalize.  The paper will review literature giving supportive and negative effects of globalization, review different cultures thoughts on globalization, and review an example industry currently in the process of globalization.  It will also review successes in emerging economies and any long-term threats to the U.S. economy.  Finally, the paper will show an analysis of the current globalization trends in the U.S. In recent years, the term “globalization” seemed to roll off the tongues of everyone with such ease that this popular phrase has nearly become cliché. As technology and innovations increase, countries that once took days or more to share information can now share data instantaneously.  The world has not become smaller, but the ability to work across the globe is quickly becoming the norm.  Globalization allows merchandise, resources, technology, thoughts, and people to move seamlessly across national boundaries (Kellner, 2002).  Academics, economists and businesses have conflicting views regarding globalization.  These conflicts arise from differences from definitions, whether it is an end-state or a process, over the degree to which it is happening or has already reached and when globalization actually began.  This study will review each difference found and define why the differences exist.  This study also reviews the costs and benefits of globalization.  The study will then compare benefits and costs to determine if globalization is good for the economy and the world. The spectacular growth of corporations around the globe is an important topic that is concerning employees of corporations working in developed economies and exciting new entrants into the workplace in emerging economies.  This study will review the current growth of the software industry and review current successes and implications for affected countries. Myers (2001) provides insight to the ecological price of globalization in the tropical areas.  Myers worries that tropical regions are in danger of losing their environment due to globalization; he questions if cheaper products are worth the costs of the tropical environment.  Hoel (2004) focuses on the effects of technology on geography education.  This article reviews two new terms, geomatics and informatics, and how they are now being taught.  Geomatics refers “to the increasing powerful applications of technology to geography.”  Informatics, by comparison, refers to the increasing applications of technology to information.  Kienle and Loyd (2005) focus on implications of globalization for postsecondary programs.  They state that now is the time for universities and graduate schools to train students to encourage diversity and lead in this new global economy.  Since a low percentage of Americans study abroad, there is a need to have the secondary institutions teach globalization and diversity among students.  In conclusion, this article promotes teaching graduate students an understanding of the world, leading in a global economy and building better relationships with multiple cultures. Electronic commerce is an essential tool for organizations to use to keep in contact with global customers.  Kraemer and Wigand (2004) elaborate on this tool by stating that e-commerce has been used to make a connection between information technology firms and their global business partners and consumers and to incorporate global supply chains.  In the article, the authors present four reviews of other contributions addressing various aspects of electronic commerce. These include interoperation between electronic markets and that the success of electronic commerce depends on the leadership of the financial sector, the leadership of the firm adopting electronic commerce and the importance of local vs. global forces driving electronic commerce. Kellner (2002) sketches aspects of a theory of globalization.  He completes the sketch by discussing transformations in the world economy, politics and culture. Kellner’s theory supports individuals and groups using new technologies to create a more multicultural, democratic and ecological world.  Globalization should not be forced upon people, but it must be accepted and used by the people. Young (1988) reviews the trade surpluses and deficits in the United States as well as offers explanations to why companies are globalizing and what the Americans can do to keep their competitiveness.  The article states the United States did not have a trade deficit until 1971 and since this time, the deficit has risen dramatically.  Multi-national companies now complete research and development globally instead of only at their home base.  Now, Americans must do more than match the productivity increases of the competing nations. Global strategies may not be the correct choice for all companies, even multinational corporations.  Baden-Fuller and Stopford (1991) examine the proposition that economic balance can change over time, sometimes favoring global strategies and sometimes favoring national strategies.  The paper looks at the appliance industry and found that this mature and multinational industry has had multinational costs rise not by government regulations or tariffs, but by local preferences, nationally oriented distributors, scale economies in advertising and product development.  Some multinational industries have changed strategies to national standards while others turn more profit with global strategies.


An Investigation of Business School’s On-Line Mission Statement Accessibility

Dr. Peter J. Billington, Colorado State University – Pueblo, Colorado

Dr. Michael W. Wakefield, Colorado State University – Pueblo, Colorado



AACSB accreditation standards require that  “The school publishes a mission statement …and “…disseminates its mission statement widely…”  This research studies how AACSB member schools are using internet presence as one means of disseminating their missions. The differences between accredited and non-accredited schools are analyzed for the business school mission.  Ease of locating the mission statement is one variable studied. AACSB accrediting standards (AACSB 2006a) require that “The school publishes a mission statement or its equivalent that provides direction for making decisions,”  “The school's mission statement is appropriate to higher education for management and consonant with the mission of any institution of which the school is a part,” andThe school disseminates its mission statement widely to interested parties.”  This research studies how AACSB member schools are satisfying these requirements using their internet presence as one of many means of disseminating their mission to stakeholders.  The research studies how easy it is to find a mission statement on a web site and how many clicks it takes from the initial school web page to locate the mission statement.  The differences between member and accredited schools are analyzed for the business school mission. This research is part of a long-term project on business school and university mission statements.  This work focuses on AACSB member schools only, and on business school mission statements only.  A near-obsession over mission statement development in the business world was launched in the 1970’s and early 1980’s with management philosophies espousing the value of mission statements (Drucker, 1973; Peters and Waterman, 1982).  Virtually every strategic management textbook offers a chapter, or at least a significant portion of a chapter, on mission statements and how to develop an effective mission statement (e.g., Dess, Lumpkin & Eisner, 2007; David, 2007; Parthasarthy, 2007; Thompson, Strickland III, & Gamble, 2007). The process of developing a mission statement is viewed as an important first step in the strategic planning process (Keller, 1983; Pearce and David, 1987).  A company’s mission statement should also articulate a present business purpose (Thompson, et. al, 2007), “the basis of competition and competitive advantage… and suggest that organizations must respond to multiple constituencies...” (Dess, et. al, 2007, p. 32).  Others intimate that mission statements express a vision for the institutions future (Campbell & Yeung, 1991; Davies & Glaister, 1997; Martin, 1985). The relationship between mission statements in for-profit organizations and financial performance of the firm is somewhat mixed.  One study of mission statements (Bart and Baetz, 1998) shows that mission statements in for-profit organizations do not necessarily result in improved organizational performance.  Pearce and David (1987), however, found a relationship between higher performing firms and comparatively more comprehensive mission statements.   Sidhu (2004) found that firms with an explicit business-domain definition outperformed firms whose business-domain definition was vague.  Establishing such definitions may have the effect of “staking out” turf in the industry, which sends a clear message to competitors where in the industry the firm intends to compete, and by silence in the mission statement, where the firm does not intend to compete, thereby allowing others to “stake their own claim.”  So it appears that when care is taken in developing a comprehensive, yet specific mission statement, financial firm performance can be enhanced. Other performance-related evidence of the value of mission statements exists.  For example, an analysis by Grossman and Jennings (2002) supports the strategic importance argument of mission statements by demonstrating that mission-directed behavior is associated with organizational longevity.  Mission statements also have been linked to higher levels of employee commitment (Ireland and Hitt, 1992).  A well-developed and articulated mission statement, when communicated to employees, may provide both direction and motivation for performance. It took nearly a decade for the exuberance over mission statements to spill into the academic environment (Birnbaum, 2000).  Most universities and colleges have developed mission statements in recent years (De Pillis and De Pillis, 2005).  In 1994, 80% of colleges and university who had mission statements were making major revisions to their mission statements (Association of American Colleges, 1994). The purpose of mission statements for colleges and universities may differ somewhat from the role that mission statements fulfill in for-profit organizations.  If it is assumed, as Bart and Baetz (1998) do, that mission statements are central to strategic planning which should ultimately lead to profit, this proves problematic.  There is no direct corollary, since there is no profit for public colleges and universities to measure.  However, what mission statements should do for colleges and universities is provide the dual benefits of instruction that guides behavior (Morphew and Hartley, 2006), and a vehicle to inspire a shared sense of purpose that may be communicated to key external constituents (Davies and Glaister, 1997; Morphew and Hartley, 2006).


Real Exchange Rates and the Trade Balance: Beyond the J-Curve

Dr. Ernst Coupet, Jr., Chicago State University, Chicago, IL

Jason Coupet, University of Michigan, Ann Arbor, MI



The author tests for Granger-causality between the trade balances and real exchange rates using panel data from 21 members of the OECD countries. The results of the panel unit root test indicate a unit root in the nominal trade balances, its first difference, as well as the PPP adjusted trade balances.  These results cast a shadow over conclusions reached by some researchers in the economics literature who claim a J-curve effect, as these results may be spurious. Using the growth rate of the PPP-adjusted trade balance data provides no evidence of the J-curve effect, or causality between the two variables. However, there is weak evidence of reverse Granger causality of the PPP-adjusted trade balance Granger on the level of real exchange rates.  Since the start of the floating exchange rate era in 1973, followed by a subsequent increase in exchange rate volatility, the behavior of exchange rates has piqued the interest of economists. Much of this interest has been focused on finding empirical evidence in support of the existence of the J-curve effect, a theory that postulates that the path of the trade balance following a country’s real currency devaluation, initially deteriorates prior to improving.  Recall that Marshallian demand curves determine the demand for both domestic and foreign import. This is illustrated by: where M* = exports to foreign country, denominated in the home country’s currency, x = real exchange rate and xM = value of imports by home country, denominated in the exporting country’s currency.  Differentiating equation (1) with respect to the real exchange rate yields, Setting equation (1) to zero requires the sum of import and export price elasticities of demand to be greater unity. This is commonly known as the Marshall-Lerner condition. This states that when the trade balance begins from zero, a surplus of the account will be established when the price elasticities of import and export demand exceeds unity.  This J-curve phenomenon can partly be explained with the effect of time on the Marshall-Lerner condition.  Since time and elasticities are generally positively related, the trade balance would not improve until sufficient time has elapsed to make imports and exports more elastic. Moreover, current devaluation may signal expectations of future devaluations, further reducing exports and the trade balance. However, even though the Marshall-Lerner condition is a widely accepted exchange rate theory, there is inconclusive empirical evidence in its support.  Due to the increased volatility of the exchange rate and less reliance on the exchange rate as a policy tool, a more general approach to exchange rate theory would be to test for the existence of a causal relationship between the exchange rate and the trade balance. However, the literature on the causal relationship between the exchange rate and the trade balance is less extensive. Narayan (2004) uses time series data for New Zealand to find not only a J-curve relationship between the effective exchange rate and the trade balance, but finds Granger causality from the trade balance to real effective exchange rate. Zhang (1996) uses annual data for China and finds strong but unidirectional evidence of causality from the changes in the trade balance to changes in the exchange rate. Using quarterly data from 1973 to 1989, Demeulemeester and Rochat (1995) find bidirectional causality between the real exchange rate and the trade balance.  This paper adds to the literature by testing for stationarity of relevant variables and for causality between the real exchange rate and the trade balance using panel data of 21 OECD countries, over the floating exchange rate era.  As discussed in Rose (1990), estimating this equation in a fixed-exchange rate regime with OLS will yield consistent estimators as equation (1) would be in a reduced-form, since the real exchange rate is taken as exogenous. However, modeling a floating-exchange rate regime with equation (1) is problematic. Consider the following system of equations where, where Y is real GDP,  is the level of expected domestic real interest rates,  is the level of expected world real interest rates,  is the real exchange rate, is planned expenditure and the remainder are the usual open economy national account identity variables. Equations (3), (4) and (5) are a system of equations for the economy’s LM function, equilibrium planned expenditure function and interest rate constraints; where, and are endogenously determined. As will be discussed below, the money supply is endogenized only in a floating-exchange rate regime. The Mundell-Flemming model can be used to analyze the effects of fiscal and monetary shocks on an open economy. These stochastic shocks may be in the form of unanticipated policies implemented by policymakers or from other shocks to aggregate demand. The authors will analyze these effects on relevant macroeconomic variables to ascertain their endogeneity. Since the effects of these shocks depend on the foreign exchange rate regime adopted by authorities, we will analyze the effects of these shocks under both, fixed and floating exchange rate systems.  Consider a small open economy described by equations (3), (4), and (5) under perfect capital mobility. We further assume that the nominal foreign exchange rate is E=E*, where E is the number of foreign currency units for each domestic currency unit.  We begin with an analysis of the effect of a fiscal shock, i.e. an increase in autonomous planned expenditures. Beginning with balanced trade, an increase is autonomous planned expenditures increases output and the demand for imports. This increase in imported goods causes trade and current account deficits and places upward pressure on the general price level and on domestic nominal interest rates.   Therefore, domestic interest rates temporarily exceed the world interest rate level, causing capital to flow into the small economy as investors seek a higher return on their investments. The sudden capital inflows create a capital account and balance of payments surplus, placing upward pressure on the nominal and real foreign exchange rate and E > E*. The increase in the foreign exchange rate makes the purchase of domestic goods relatively more expensive to domestic consumers. This sends the trade balance and current account into further deficits.  Thus, the expansionary fiscal shock has no net effect on output but results in a trade deficit, causing an increase in the foreign exchange rate.


Models of the Effects of Monitoring on Perceptions of Trust, Organizational Justice and Organizational Outcomes

Dr. Isabelle Bélanger, University of New Brunswick, Fredericton, NB

Dr. Jeff McNally, University of New Brunswick, Fredericton, NB

Dr. Douglas Flint, University of New Brunswick, Fredericton, NB



This paper models the effects of privacy concerns under employment monitoring conditions, on the organizational outcomes of organizational commitment, supervisory commitment, and turnover intentions. Two models are presented. The first proposes a mediating role for trust in the relationship between perceptions of privacy and the organizational outcomes.  The second proposes a mediating role for organizational justice in the relationship between perceptions of privacy and organizational outcomes. This study proposes two models to account for the effects of workplace monitoring on privacy, trust, organizational justice and organizational outcomes. The organizational outcomes considered here are organizational commitment, supervisory commitment, and turnover intentions. Two models are proposed to explain the impact of monitoring on organizational outcomes.  The first proposes a mediating role for trust on the relationship between perceptions of privacy and organizational outcomes (see Figure 1).  The second suggests a mediating role for organizational justice in the relationship between perceptions of privacy and organizational outcomes (see Figure 2). Monitoring is watching over what employees do while at work using company time and resources.  Monitoring employees has been justified by employers by the need for security (Oz, Glass & Behling, 1999), health and safety (Kierkegaard, 2005), and the maintenance of efficiency and productivity standards (Oz, et al., 1999).  Monitoring continuously takes place, and has been linked to outcomes such as paced work, fear of job loss, high stress and low morale (Oz et al.1999). Much of the work on monitoring has focussed on e-mail and web browsing (Alge, 2001: Kierkegaard, 2005; Oz et al, 1999). The models proposed here extend this research to consider the effects of trust, organizational justice, organizational commitment, supervisory commitment, and turnover intentions. Monitoring interferes with “the right to privacy which would protect the extent to which one’s thoughts, sentiments and emotions could be shared with others” (Kierkegaard, 2005). Monitoring impacts both customers and employees.  Customers might not want representatives listening to their calls. Moreover, employees might be nervous knowing that their phone calls are monitored.  The models proposed here consider the impact of monitoring on employees’ trust in their organizations and on their perceptions of organizational justice.  Interest in trust has been growing in both academic and practitioner circles in recent years (e.g., Annison & Wilford, 1998; Fukuyama, 1995; Mishra, 1996; Rousseau, Sitkin, Burt, & Camerer, 1998; Shaw, 1997). Trust has been linked to a variety of positive work attitudes, such as job satisfaction and organizational commitment, as well as important work behaviors such as job performance and organizational citizenship behavior (e.g., Aryee, Budhwar, & Chen, 2002; Watson & Papamarcos, 2002). Trust has also been found to be a critical factor in establishing cooperative relationships among organizational members (Bromiley & Cummings, 1995; Kwang & Burgers, 1997; Wells & Kipnis, 2001). Indeed, it has been shown that low levels of trust are typically associated with low levels of cooperation (Gueth, Ockenfels, & Wendel, 1997). Given the relation between trust and important organizational outcomes and the fact that it is essential to successful working relationships, it is not surprising that there has been a resurgence of interest in this topic both by organizational researchers (Dirks & Ferrin, 2002; Gill, Boies, Finegan & McNally, 2005) and by practitioners (Mayer & Norman, 2004). Employee trust in his or her manager has been linked to individual outcomes such as higher job satisfaction (Flaherty & Pappas, 2000; Mayer & Davis, 1999), higher commitment to the organization (Flaherty & Pappas, 2000; Iverson & McLeod, 1996) and decreased levels of employee turnover (Davis, Schoorman, Mayer, & Tan, 2000).  Further, managers’ trust in employees has been shown to increase managers’ inclusion of lower level employees in decision making, which is, in turn, associated with higher productivity and employee morale (Spreitzer & Mishra, 1999).  There is also evidence that higher levels of interpersonal trust ease employee adjustments to organizational change (e.g., Raghuram, Gamd, Wiesenfeld, & Guptaa, 2001). Greater trust between firms involved in alliances is associated with higher performance and satisfaction (Cullen, Johnson, & Sakano, 2000; Mohr & Spekman, 1994). Moreover, trust reduces the need for monitoring and other control mechanisms (Inkpen & Li, 1999; Volery & Mensik, 1998) and encourages other beneficial behaviors such as open communication and information sharing (Sivadas & Dwyer, 2000) between alliance partners. We suggest that trust mediates the relationship between perceptions of privacy and the organizational outcomes of organizational commitment, supervisory commitment, and turnover intentions. 


Strange Bedfellows: SOX and Corporate Profitability

Dr. Gordon Arbogast, Jacksonville University, FL

Dr. Barry Thornton, Jacksonville University, FL



This paper investigates the influence of the Sarbanes-Oxley (SOX) Act on earnings per share for Fortune 500 companies.  SOX was intended to enhance the intensity of corporate governance and to restore public confidence in financial reporting by the firm’s top management. Over the past few years a number of corporate executives have alluded to the high cost of implementing SOX and indicated that it was having an adverse effect on earnings. The average earnings per share (EPS) of a representative sample of Fortune 500 companies is examined both before (2002/2003) and after (2004/2005) implementation of SOX. The results suggest that Sarbanes-Oxley had a significant positive effect on earnings per share. These findings are counter-intuitive to cited executive’s and other analysts’ views that SOX was having a negative impact on a company’s costs and earnings. The Sarbanes-Oxley Act was the most significant securities law change since the passage of the original federal securities laws in the 1933-1934 timeframe (Prentice, 2005).  In 2001 the need for stricter corporate governance measures became evident when the perception of poor corporate accounting began to undermine investor confidence in U.S. publicly traded companies. According to a study conducted by the New York State Society of Certified Public Accountants, the most common transgressions were related to net profit overstatements using a creative variety of fraudulent accounting records affecting revenues, costs, expenses, and special accounts used by firms. The most common deviations from generally accepted accounting principles (GAAP) were found in revenue recognition, reserve accounts, and understatements of debt (Bloomenthal, 2004).  The Enron collapse in 2001 followed a tidal wave of accounting discrepancies and securities fraud; Enron was the poster child for corporate corruption.  Enron’s external auditor, Arthur Andersen, was also co-opted into the fraudulent schemes primarily because Andersen had a significant consulting services business unrelated to the external auditing of Enron (Hitt, Ireland and Hoskisson, 2007).  Other companies soon followed in the wake of Enron: Adelphia, WorldCom, Tyco and HealthSouth. In response, Congress passed the Sarbanes-Oxley Act (SOX) in 2002 to enhance the intensity of corporate governance and thereby restore public confidence (Barrus, Lavelle, Brady, and Weber, 2005).  The Act introduced stricter rules for management’s reporting responsibilities and the scope and nature of the responsibilities of the auditing firm retained by management.  President Bush called Sarbanes-Oxley the most far-reaching reform of American business practices since the time of Franklin Delano Roosevelt. Large corporations viewed this mandatory change in financial reporting standards as costly and non-mission critical. Multi-divisional corporations were forced to form company-wide teams working with similar teams of auditors. William Sinnett of the Financial Executives Research Foundation cites one example where Dow Chemical employees spent over 100,000 hours on meeting the Section 404 mandates and spent over $5 million for the compliance team's labor costs alone.   Many CEOs and analysts cited major increases in costs due to the implementation of Sarbanes-Oxley (Sinnett, 2005). As the deadline for compliance rapidly approached, every publicly traded company in the United States (including those with multi-national operations) felt pressure to focus on Sarbanes-Oxley. Although it was critical to restore public confidence in general, the new standards were perceived to be inhibiting profitable operations. Peter Bible, chief accounting officer at General Motors commented that “people that should be focused on the business (but are) focused instead on complying with the details of the rules" (Solomon & Low, 2004).  Out-of-pocket compliance costs were considered to be significant.  When combined with opportunity costs of resources and the impact to business practices, this new set of rules had the potential to significantly affect business in a major way. Small corporations were particularly affected.  According to Bob Greifield, President and CEO of Nasdaq, "the burden of compliance is onerous, the cost is significant, and it falls disproportionately on smaller companies that are least able to pay.  Our research has shown that the burden on small companies, on a percentage of revenue basis, is 11 times that of large companies” (Wall Street Journal, 2006). The new standards ensure that insider influence is minimized and inappropriate relationships with auditing firms are eliminated. The restrictions on non-audit services clearly reflected lawmakers’ concern that the provision of non-audit services compromises auditor independence by increasing the economic relationship between the auditor and the client. The SEC took this a step further, requiring the full disclosure of all audit and non-audit fees paid to the auditor from February, 2001. Auditors took the position that performing non-audit services helped them gain competencies and capabilities essential to the audit process. The Sarbanes-Oxley Act also addresses the composition of the Board of Directors for corporations.  From a shareholder perspective, the act has provided a dual result. Since more information is now disclosed and more internal control processes have been implemented and enforced, the transparency of accounting processes in publicly held firms has been significantly enhanced.  Investors consider Sarbanes-Oxley to be “good news” allowing better visibility of valid corporate results.


Transnational Corporations’ R&D Localization in a Developing Nation – A Game Theory Analysis

Dr. Chen-kuo Lee, Ling Tung University, Taiwan

Dr. Shao-kai Chou, Ling Tung University, Taiwan

Tzu-yun Chang, Ling Tung University, Taiwan



In the traditional theoretical analysis of transitional corporations’ R&D, developing nations are not considered an internal decision subject. Instead, developing nations’ characteristics are predetermined and included in the framework as a restriction for the transnational corporation’s investment decisions. Apparently, traditional theories concentrate on investors’ behaviors and are short of the analysis on developing nations’ behavior mechanisms and characteristics. Therefore, traditional theories are not sufficient for the authors’ theoretical requirements. By making use of game theory, this study has developed a theoretical framework based upon the creation and distribution of the benefits derived from the investment in connection with the transnational corporations’ R&D localization, and has thus interpreted developing nations’ foreign investment policy and results effectively, and has also formulated the rules regarding the transnational corporations’ R&D localization investors and investment behaviors, as well as the developing nations’ investment behaviors and the related interactions, thereby creating a comprehensive transnational corporation’s investment theory.  As the globalization process accelerated and international competition grew fiercer than ever in the late 1990s, more and more transnational corporations adjusted their strategies accordingly—from technical resource allocation worldwide to global strategic administration. Apparently, transnational corporations have adjusted their global development strategies from market globalization and production globalization to technique globalization and R&D globalization (Reddy, 2000; Amsden, Tschang & Goto, 2001). Actually, international competition nowadays entails technical capabilities and technical innovation as core competency. In this connection, the ability to develop new techniques faster than competitors, and to apply new techniques to new products, are the highlights of competition (Barry, *2005). At the time that R&D costs and risks increase and hi-tech products’ life cycles decrease, more and more international corporations have understood that techniques are extremely important in terms of international competition advantages and, most importantly, that no corporation can obtain all techniques internally (Guellec et al., 2001)  R&D localization refers to a transnational corporation’s transfer of R&D activities to its subsidiary outside home country and participation in R&D activities by home country’s resources. R&D is localized in two methods: (1) to establish an R&D branch in the subsidiary’s host country; (2) to take part in R&D activities in cooperation with the universities or research institutes located in the subsidiary’s host country. The first method works best and is the most important R&D localization method. In the last ten years, a number of transnational corporations have taken the developing nations’ manpower strength, technological capabilities, and scientific fundamental advantages into consideration and have established research institutes around the world to undertake the R&D tasks related to new technology and new products, thereby accelerating R&D globalization process (Reddy, 2000; Von Zedtwitz, Gassmann and Boutellier, 2004). As far as R&D globalization is concerned, the transnational corporations’ overseas R&D institutes play the most critical role (Barry, 2005). In the conventional sense, R&D is considered the core activity that is often undertaken domestically. Therefore, transnational corporations’ R&D activity in a host country means the dramatic changes caused by globalization strategy, not just a matter of R&D resource allocation. Transnational corporations establish overseas R&D institutes via foreign direct investment (FDI), or merge overseas R&D institutes via stock-control or merger and acquisition, or establish R&D institutes under joint venture. That’s how R&D localization has become an irresistible trend.  The study on transnational corporations’ overseas R&D began in 1980s. All researches were implemented systematically and are divided into three categories. The first category consists of case studies with details, such as Behrman and Fischer 1980 and Chen, S.H. 2004). The second category consists of surveys and researches, such as Mansfield, Teece, and Romeo1979; Cantwell 1989, 1995, 1999, 2001; Kenney and Florida1994; Florida1997; Dalton and Serapio 1993, 1995, 1999; and Barry 2005). The third category consists of major sample studies, such as Hirschey and Caves (981; Pearce 1989; Howells 1990; Kogut and Chang 1991; Patel and Pavitt 1991; Teece 1992; Westney 1993; Dunning 1994; Patel and Vega 1999;,Kuemmerle 1998, 1999; Gassmann and Zedtwitz 1999;,and Contwell and Piscitello 2002. Case studies concentrate on the motives and process of transnational corporations’ FDI for R&D, while survey and major sample studies focus on the structure of FDI, especially the R&D investment direction. Most studies concentrate on developed nations, such as United States, Japan, and European nations.  Most researchers developed their theories from the standpoint of transnational corporations’ R&D investors, especially from the individual transnational corporations. In their theories, developing nations are merely treated as background data, not included in the analysis. The transnational corporations’ foremost concerns include: (1) why invest in foreign countries for R&D? and (2) invest in which countries? Apparently, their analysis treated the distribution of revenue derived from R&D investment as a fixed factor, and focused on the maximization of revenue obtained from R&D investment so as to find out the reasons behind transnational corporations’ R&D investment, instead of the R&D investment scale (or quantity). As to the maximization of revenue obtained from R&D investment, the answers can be found in the R&D foreign investment theories. In addition, the maximization topic is not a specific issue in the transitional corporations’ foreign investment theory. Therefore, the transnational corporations’ R&D foreign investment theory aims at individual corporations with emphasis on the solutions to supply-related issues. Apparently, the theory is incomplete and is unable to interpret R&D investment phenomenon sufficiently.


Vendor Selection by Means of Data Envelopment Analysis

Taqi N. Al-Faraj, King Fahd University of Petroleum and Minerals, Dhahran, Saudi Arabia



Vendor evaluation and selection is one of the most important responsibilities of purchasing managers. Decisions made in this regard are usually of long term commitments and have great impact on the performance and the final product attributes. The trend of focusing on the vendor performance factors and ignoring the vendor capabilities does not reflect the long term commitment between the purchasing firms and vendors. DEA is proposed as a multi input/output methodology for evaluating and selection of vendors. An empirical study is carried out to compare the process of selecting vendors using the current practice and the proposed methodology. The results indicate no significant difference between the traditional and the DEA methodologies. The DEA methodology, however, has the advantage of avoiding the subjectivity of estimating weights to various input and output criteria.  Additionally, vendors who are classified as inefficient by the DEA methodology will be able to identify reference vendors to benchmark against. Organizations in today's global competitive markets struggle to gain competitive advantage in all aspects of their operations. Joint business integration with suppliers (vendors) is an essential aspect of the supply chain that is found useful to both the purchasing and the selling firms. The integration is expected to lead to improved performance of the whole supply chain. This positive effect on joint business outcomes has been studied in relation to supplier alliances by Monczka et al (1998). Collaborative planning, forecasting, and replenishment are all related issues investigated by Barratt and Oliveria (2001).  In a recent study, Peterson et al (2005) have examined the effectiveness of collaborative planning between buying firms and suppliers on the performance of the supply chain. The result found in the study, which is based on surveying purchasing executives whose firms are involved in collaborative planning with suppliers, is simply that effective collaborative planning is dependent on the level of trust and the quality of information shared between firms. They also concluded that performance improvement is expected in the form of increased inventory turns, better on time delivery, improved responsiveness, better quality, reduced purchased price, and/or reduced total cost.  Whether an organization is in manufacturing or service business, and whether the firm is large or small, the selection of vendors is an important issue. Braglia and Petroni (2000) consider vendor selection as the most important phase in the purchasing process. They reason this to the need of periodically evaluating supplier performance in order to retain those who meet or exceed the requirements in terms of several performance criteria. Pearson and Ellram (1995) observed a trend toward a much greater emphasis on quality in supplier selection and retention decision among both large and small firms.  For many firms in today's competitive market and global sourcing the success in business depends on the selection of suppliers. For this reason, many firms are increasingly concerned with the ISO certifications. ISO is found to be useful as a prerequisite for participation in global market and in supplier selection. Curkvic and Handfield (1996) discussed the use of ISO 9000 in supplier quality evaluation. It has been noticed in large organizations that the evaluation and selection of suppliers is a team involvement whereby a number of personnel from different functional areas participate in the process. The decision process involves two basic tasks: evaluation followed by the selection. The evaluation element typically consists of identifying some criteria, attributes, or factors that are relevant to the decision and then rating or measuring each vendor by considering each of the relevant factors. To select a particular vendor, the decision makers in the purchasing organization need to make trade-offs among different levels of the criteria.  Factors or attributes utilized by Mummalaneni et al. (1996) as performance criteria include: on-time delivery, quality, price/costs targets, professionalism, responsiveness to customer needs and long term relationship with the purchasing company. Deng and Wortzel (1995) found the most important criteria in vendor selection to be price and product quality, followed by on-time delivery. On the other hand, Wilson (1994) found that price tends to be less important in the current practices of vendor selection criteria. Quality and service considerations tend to dominate price and delivery criteria. On the other side, Verma and Pullman (1998) point out that although managers say that quality is the most important attribute for a supplier, their actual supplier choice is based largely on cost and delivery performance. Furthermore, Chao et al. (1993) found that the importance placed on different criteria varies in accordance with the differing cultural aspects of a society. A number of methods for vendor evaluation and selection are proposed in the literature. Soukup (1987) suggested using a vendor performance matrix in order to take into account all the relevant information available. Weber et al. (1991) made an intensive review of literature relevant to the vendor selection criteria. Their study was an update of Dickson's (1961) vendor selection criteria. Dickson et al. identify 23 criteria for vendor selection based on questionnaire sent to 273 purchasing agents and managers. Al-Faraj et al. (1993) utilize only the top eight criteria from Dickson's study in a spreadsheet Analytical Hierarchy Process (AHP) model to evaluate and select vendors. Later, Barbarosoglu and Yazgac (1997) gave an application of the AHP to the supplier selection problem. According to Weber's review (1991), the linear weighting model is by far the most utilized quantitative approach to vendor evaluation and selection. In the linear weighting model a weight is subjectively given for each chosen criteria.  A total score for each vendor is obtained by summing up the vendor performance on the chosen criteria multiplied by the given weights. A shortcoming of the linear weighting model is the subjective assignment of weights to the criteria.


A Transatlantic Affair: The Business Relationship of Ireland and the United States

Dennis C. Stovall, Grand Valley State University, Grand Rapids, Michigan



Businesses in the United States are beginning to realize many positive aspects of locating in Ireland.  The two countries have many shared values, with a majority speaking the same language.  In addition, the corporate tax rate of 12.5 percent in Ireland has come to be one of the greatest benefits identified by investors.  Ireland also has a willing, flexible, and productive workforce, and one of the highest levels of economic freedom in the world.  Irish officials have created organizations solely for the purpose of making the transition into the Irish economy as effortless as possible for foreign companies.  With all of this and more, Ireland’s business allure has evolved and caught the attention of corporations such as Amgen and Microsoft.  This shift is the cause of some concern for the American government as a great amount of tax revenue leaves with the companies. Rising numbers of Irish companies also are attempting to break into the American economy, however, they do not have the same resources or benefits that the American businesses receive when expanding into Ireland.  Irish companies face a unique set of obstacles.  Some Irish companies choose to establish contacts to spread the word about their business.  Others utilize trade shows to make themselves known.  But each comes with some form of the same goal: to become a grand success and a leader in its industry in America. As the benefits of becoming corporately involved in the Irish economy increase, so too does the number of U.S. companies placing or expanding their business into Ireland.  The business relationship between the United States and Ireland dramatically increased in 1969 when John A. Mulcahy, a one-third shareholder of Pfizer Inc., convinced Pfizer to move some of its business to his home country of Ireland.  Cork, Ireland, became the city of choice for a new citric acid plant built by the drug company.  Naturally, other companies looked into the reasoning behind this new venture and discovered many attractive qualities of the European country.  With this discovery, many U.S. companies made their way across the Atlantic Ocean to the island nation (Wetzel).  In the past few years relationships have been formed.  A two-way flow of human, physical, and intellectual capital has been established and is intensifying as the Irish-American relationship continues to be built and maintained. The relationship between the United States and Ireland is longstanding and multifaceted.  Due to Irish immigration into America, close to forty-four million American citizens now identify themselves as having some degree of Irish descent.  The flow of people between Ireland and America is steadily increasing as tourism expands, students study abroad, academics go overseas to instruct, and business between the two countries increases (Wetzel). It is this increase in business that is at the forefront of their recent relationship.  As globalization and international business become more prevalent in the world, Ireland and the United States possess the opportunity to work together utilizing the relationship they have built over the years.  The United States Ambassador to Ireland, James C. Kenny, views Ireland as a bridge between Europe and America.  He sees the relationship as one that facilitates international cooperation and that increases the two countries’ involvement in each other’s private sectors.  According to Kenny, over 600 U.S. businesses have operations located in Ireland.  These businesses employ 90,000 people with the investments from these business endeavors totaling more than 55 billion dollars.  These investments by the United States are noteworthy as being five times the amount of U.S. investments in China.  This investment relationship is not one-sided.  Ireland investments in America are more than 25 billion dollars and the companies located in America employ close to 70,000 people.  Kenny recognizes that the interests Ireland and the United States have put into each other stem from the associations created through immigration.  Past generations had many Irish citizens immigrating to America and gaining an understanding of American culture while also providing Americans with an understanding of Irish culture.  This mutual understanding created a pathway to strengthen the ties between the United States and Ireland. (Kenny) Kenny also stresses the contribution that shared values have made to perpetuate the Irish-American relationship.  He says that the values of democracy, respecting basic human rights, respecting the law, tolerance, appreciating diversity, and having a commitment to individual importance, are shared between the two countries.  These shared values lead to connectivity in which business relationships can thrive because the countries are united in striving for the same goals.  This is not to say that Ireland and the United States never differ in their policies.  The governments do disagree over policies and practices, but ultimately they resolve these differences or agree to disagree.  These dynamics are the basis of the transatlantic relationship between Ireland and the United States (Kenny). Another element of the relationship between Ireland and the United States is the commonality of language.  No language barrier must be broken in order for the two countries to communicate or do business (Browne).  This is a definite advantage in today’s Internet-dominated world, with the majority of web sites published in English.  Because of technologies such as instant messaging and live video chats that are enhancing and increasing efficiency within the communication of the business world, the relevance and benefit of a shared language are multiplied significantly.


Fashion Lifestyle Change of Malaysian Shoppers

Dr. Sofiah Abd. Rahman, Universiti Teknologi MARA

Abdul Rahman Abdul Rahim, Universiti Teknologi MARA



Contemporary works on shoppers’ profiling suggest that demographics and lifestyles are the two extensively used profiling variables. While the former has been widely used in Malaysia, the application of the latter is rather limited. This study attempts to rectify this situation and tracks fashion lifestyle changes to an earlier work (Sofiah, 1999). Shoppers were intercepted at the six major shopping complexes in Klang Valley - the most developed region in Malaysia. The findings show that several significant demographic changes have taken place in the makeup of the shopping complexes’ patrons. In turn, several lifestyle statements have moved from their original factors to form other factored solutions while the ‘quality conscious’ and ‘price conscious’ dimensions remain stable, an outcome that augurs well with past studies. Certainly all the above shifts have brought about changes to the local shopper typology.  The biggest cluster of shoppers in the earlier study was made up of ‘Career Women’, however, today, the ‘Young Executives’ segment dominates the market.  Fundamental to any retail strategy decision is customer identification (Lewison, 1994; Hasty and Reardon, 1996; Kerin and Peterson, 2000). It has been widely believed that customer identification using traditional measures such as age, gender, income, and education are deemed insufficient (Mehrota and Wells, 1977; Wind, 1978). To go beyond demographics, practitioners and academicians have made forays into psychology. By 1960s, ‘lifestyle’ research emerged. Lifestyles are defined as patterns in which people live and spend time and money (Lesser and Hughes, 1986; Plummer, 1974; Dholakia, 1999).  Maycroft (2004) sees the term ‘lifestyle’ as a mode of living that results upon making choices between predetermined options – lifestyle choices rather than life choices.  Consumer lifestyle and value are therefore reflected through and influenced their purchasing behavior (Shufeldt et al, 1998; Plummer, 1974; Sofiah, 1999). This concept has taken Malaysian retail scene by storm and it is not uncommon to see retailers incorporating the word lifestyle in their promotional campaigns and even to their store names. While contemporary research works seem to call for lifestyles research to better predict market behavior, profiling exercise based on this orientation is sorely missing in Malaysia. This study therefore, aims to rectify this situation and to provide another avenue for a finer way of profiling and understanding Malaysian shoppers. Additionally, extending on the past research work of Sofiah (1999), this study provides an opportunity to track the changes in the Malaysian shoppers’ profile (if any) over time and predict their future shopping behavior.  Specifically, this research seeks to: 1. To profile the Malaysian shoppers through lifestyle dimensions. 2. To examine the shopping orientations of each shopper cluster. 3. To compare the outcome of this study to the one conducted by Sofiah (1999)  4. To predict trends in shopping orientations of Malaysian shoppers. With over 40% of its total populations are under 20 years of age, Malaysia is indeed a ‘young’ country (Table 1.1). Although their gross income has increased over the years, Malaysians are having less money to spend and by 2010, the disposable income as a percentage of gross is forecasted to drop to –8.2%. Thus, increasingly, price becomes a major equation in consumers’ purchasing equation. Education (Table 1.2) remains a highly important asset in the Malaysian society and a major driver to diversity of lifestyles. The largest chunk of consumer expenditure goes to ‘food’ (Table 1.2). More importantly and on the dramatic rise is the robust appetite towards health goods & medical services. Clearly, Malaysians are embracing the healthy lifestyle culture, a trend in tandem with increasing education level. On the same note, consumers’ lifestyles are getting more diverse as their appetite for ‘other items’ is forecasted to increase to almost 400% by year 2010. Once more, this trend is to be expected as Malaysia strives to be a developed country. Without a doubt, Malaysia is currently among the most dynamic retailing markets in South-East Asia. Total retail sales in 2003 was RM48 billion, spread among 139,960 retail outlets (Table 1.3). Traditionally, Malaysians shop daily. Today, hypermarkets have grown in popularity, especially in urban areas. Thus, indicating the shifts towards weekly shopping and higher spending per shopping trip. It has been said that the only constant thing in life is change. Certainly, the literature review so far proves that Malaysians are no different. Hence, market identification and tracking studies have to be undertaken to segment, profile and predict market behaviour, as acquiring new customers and retaining the existing ones are a vital goal of every customer-oriented organization. Current works on shopper segmentation and profiling suggest that demographics and lifestyles are the two extensively used segmentation variables (Hasty and Reardon, 1996; Kerin and Peterson, 2000; Kamakura and Wedel, 1995; Kopp et al., 1989). Mitchell and Tate (1998) commented, ‘whilst demographics are reliable and easily measured, they are fairly “blunt” targeting tools in highly competitive markets dominated by well-branded and image-conscious goods’. Thus today, demographic data are just used as a beginning point in the measurement of market segments and trends in the market place. In contrast, lifestyle characteristics are able to provide the much-needed answers (of how consumers live and spend time). As such, they (lifestyle characteristics) meet the demands of retail operators for increasingly sophisticated and actionable retailing information.


Research on Operational and Managerial Model of Industrial Districts in Taiwan

Dr. Li-Hsing Ho, Chung Hua University, Taiwan

Chao-Lung Hsieh, Chung Hua University, Taiwan



Since 1960 when the government announced “Investment Incentive Law”, the government has solved the industrial land problem by land tax exemption and simplifying administrative procedures. Thus, the complete supply of industrial land can be regarded as the important policy and tool for the government to trigger the industrial development in Taiwan and stimulate economic growth. Since the establishment of the first industrial district—Liu-tu industrial park, through the aggressive development of nearly half of the century, there have been 56 industrial parks development and planned by Industrial Development Bureau and the developing square has reached up to 35,590 hectare which was 47% of the total industrial park square in Taiwan (79,183 hectare). In early time, with the guiding of government’s planned industry policies, the industrial park development which met the global prosperity not only fulfilled excellent land use benefit and reach the goal of district development, but also create the competitive advantages of land acquisition and low cost for the total investment environment in Taiwan. This article believed that for improving and transforming the managerial mechanism of the industrial park, the total goal of industrial park development and management and the characteristic of industrial park managerial demand should be considered at the same time in order to design a more feasible and efficient organizational operation model. Since the 80s, with the depressing tendency of the world, increasing international competition, rapid change of domestic industry structure and unstable change of political and social environments, the land and labor costs were increased considerably. Besides, due to old and inefficient infrastructure, constant protest of pressure group, improper laws and regulations for the time, administrative efficiency which does not meet the grassroots demands and gradual deteriorating of investment environment, the industry immigration was accelerated and the investment will of domestic and foreign companies was also considerably reduced. The recession of home market (domestic investment) and the competition and replacement of regional economy (Chinese investment) resulted in the unprecedented internal and foreign problems of economic development in Taiwan. The most direct phenomenon reflected was the excess supply of industrial district land. The chain reaction of supply-demand unbalance of industrial parkland led to the crisis of financial deterioration of industrial park development and management funds supporting the expenditures of industrial park development, management and service. Thus, the unmarketable situation of industrial park land resulted in the situation that the development investment could not be returned and the development cost and interest had to be subsidized. Besides, the frequent unbalance of revenue and expenditure on business execution led to fact that the whole fund scale reduced from over 10 billion NTD to several hundred million NTD at present. When facing financial recession and the pressure of conflicts among budgets, the government could not arrange other budgets to respond to the demands of the funds of industrial park development and management; thus, in order to solve the financial problem of industrial park development and management fund through various broadening sources of income and reducing expenditure policies, “reducing expenditure” was the most efficient measure in short term. Therefore, industrial park managerial institutions which were the most proportion of the overall frequent expenditure of the funds became the key point for review and improvement. In recent years, although various suggestions, researches or sample projects with respect to the industrial park service centers operated by local people, corporations or partially by outsourcing (such as sewage plant) have been developing like wildfire, there was still no proper project or actual achievements to solve the managerial problem of industrial park. The key was that the essence of the problem was not recognized and people did not consider the position and organizational operation method of industrial park service centers from the perspectives of customers (and companies in industrial park. The cause and effect related to industrial park development and management can be briefly shown by Fig. 1.


Case Study: Impact of Economic Reforms in China

Doreen M. McGunagle, Capella University



Currently, China’s growth rate is between 7-8% and accounts for approximately 4% of the global economy. What effect does the growth in this country have on its consumers and businesses? The research analyzes the changes in the economy and challenges that still confront China. The pursuit of social justice is an important goal of public policy. To compensate for market failures, the visible hands of the state operate to assure basic needs, protect living standards, confer equal rights, defend the weak, and create the conditions for social solidarity and integration. In many countries, public sector reforms have veered towards smaller governments and leaner welfare to better respond to the demands of global competition. The market, in chasing efficiency, trimming costs, in particular labor costs, and tightening benefits, has prevailed globally. The People’s Republic of China prided itself on being a faithful follower of socialist ideology and its social template, living proof of the superiority of socialism. To achieve the goal of social justice, the party state made use of a number of devices (Wong, 2004). First, there was the careful creation of a socialist institutional framework. This comprised a public ownership system, a command economy, an almighty party-state, an urban work unit system, and rural collectives as the structures that dictate resource mobilization and distribution. Second, its development strategy was geared towards high-speed growth and prioritizing production over consumption. In China, policies that were used to equalize actual living standards included measures to control prices, guarantee jobs, equalize incomes, provide equal access to goods and amenities, and redistribute resources to poor areas. Before the advent of economic reforms, the people enjoyed an equality of living standards and a measure of existential security unheard of in market economies (Wong, 2004).  The Chinese economy had gradually evolved from a planned commodity economy (1979-1983) to a socialist commodity economy (1984-1991), and then to the socialist market economy (from 1992 to present). The evolutionary process of reform over the last few decades has been supported by Chinese leadership’s cautious gradualist approach on reforms. The focus on China’s economic reform efforts has been to eliminate inefficiencies in the old system by promoting decentralization, gradual deregulation, and mercerization. Improvement of trade and investment environment was also an important reform agenda (Kim, 2002). In the first phase of reforms, China had prided itself on the equal distribution between social groups.  During this phase of the reforms, it was considered a win-win for all groups.  During the second phase of reforms, it is considered more of a zero-sum game where some groups will benefit at the expense of others.  This has created a large disparity among the groups with major inequalities.  In developing countries it is difficult for government’s to find a fair avenue of redistribution.  This will also cause unrest in the people so social unrest and conflicts continue to rise (Wang, 2000). In the second phase of reform, China has experienced major unemployment and inequality among social groups.   Even with the annual growth rate in China of 8-9% it is unable to create jobs for the redundant rural labors.  As Wang notes “The bottom 20% of households has found themselves earning less. The second 20% of households was also in very bad shape. The top 20% of urban households suffered some income loss; however most of them actually were able to increase their income” (Wang, 2002). The gap between the poor and rich will continue to become an issue for China.  The reforms will increase the income of the more educated while the poor and uneducated slip farther into poverty.  The income levels of the poor will continue to decline as the wealthy increase their income (Wang, 2002).  The overall approach of China’s gradual transition is remarkable, but the Chinese have paid a price. The process of economic liberalization inevitably hit labor hard. China’s unemployment rate could surge to 15%, compared to the official figure of 3.6% in urban areas. The decades of stability provided by the Central Chinese Party (CCP) have a high price, which was paid by the Chinese majority: a lack of liberty, the perpetuation of an antidemocratic civil society, the institutionalization of corruption at all levels of government, and the consolidation of great social inequality. Social unrest and high unemployment demonstrate that the liberalization policy failed. The rapid growth of foreign direct investment (FDI) has been an important aspect of the overall process of the China’s integration with the world economy. China is now a top recipient of FDI in the world (Li, 2002). The past 25 years of economic reform have seen transformation of labor relations in China, with the widespread adoption of capitalist labor practices by firms of all ownership types. This transformation occurred in the absence of both large-scale privatization and political change, but was part of a gradual yet dynamic liberalization and opening up to foreign trade and investment that occurred across both regions (Gallagher, 2004). Just as economic growth, a successful transformation of labor relations from socialist traditionalism to capitalism is usually associated with radical changes in property rights and political control. China’s transformation without standard knowledge on transition has come under steady uninterrupted rule of the Chinese Communist Party. The distinction between public and private firms in labor practices has blurred in tandem with continuous economic deregulation, increased competition with the domestic economy, and China’s continued economic integration with the global economy. Public ownership as a core characteristic of socialism is increasingly irrelevant for the determination of labor relations (Gallagher, 2004).


A Fuzzy Multiobjective Programming Approach for Supplier Selection in a Supply Chain

Dr. C. Hakan Kagnicioglu, Anadolu University, Eskiþehir, Turkey



Supplier selection is one of the most important decisions given in supply chain management for a company. There are many conflicting and vague objectives and constraints that need to be met at the same time in real life. This makes the decision process more complicated. In this study, a fuzzy multiobjective model is proposed for supplier selection problem. In this model, both the objectives and some of the constraints are fuzzy. Besides, some constraints are triangular fuzzy numbers. For the solution of this model two approaches are used: Zimmerman Approach, Tiwari, Dharmar and Rao’s Weighted Additive Approach. In the second approach weights of the objectives and constraints are determined by supertransitive approximation. Then the results are explained and compared by their advantages and disadvantages. Supply chain management integrates suppliers, manuýfacturers, distributors and customers through the use of information technology to meet customer expectations efficiently and effectively(Vonderembse et al., 2006). Within this management, supplier selection is a critical activity of purchasing management in a supply chain, due to key role of supplier’s performance on cost, quality, delivery and service in achieving the objectives of a supply chain. With changing dymnanics, due to global competition and new technological advances in numerous areas, future researchers interested in strategic sourcing and supplier selection will have many opportunities to explore critical supply chain management issues. The aim of supplier selection process is to identify suppliers with the highest potential for meeting a manufacturer’s needs consistently and at an acceptable overall performance. Selecting suppliers from a large number of potential suppliers with different levels of capabilities is a hard task and inherently a multicriteria decision making problem. Supplier selection decisions are complicated because of the fact that various criteria must be considered in the decision making process. These criteria  may have quantitative as well as qualitative dimensions and may also be conflicting(Bevilacqua et al, 2006). Multiple objective decision making tecniques support the decision makers in the assessment of these multiple criteria. Since all the criteria have different importance, it is necessary to weight these criteria. Since, in many conditions, crisp data are inadequate to model real life situations and human judgements including preferences are often vague and cannot estimate his preference with an exact numerical value, using theory of fuzzy sets is one of the best ways of overcoming the vagueness of the terms(Liang, 2006). Fuzzy set theory presented by Zadeh(1976) has been found widely applications in many areas. Bellman and Zadeh(1970)  suggested a fuzzy programming model for decision-making in fuzzy environments. Zimmerman(1978) first applied the fuzzy set theory concept with some suitable membership functions to solve linear programming problem with several objectives. In this model, the fuzzy goals and constraints are treated equivalently, that is why the model is called symmetric. But, in real business life, the importance of goals and constraints can be different especially for the selection of suppliers. Therefore, the usage of Zimmerman model which is symmetric, may not be appropriate for the selection of suppliers in some situations because of  having unequal importance in the objectives. Consequently, Tiwari, Dharmar and Rao’s(1987) weighted additive model  can be used for the model. Decision makers may provide crisp relative weights for fuzzy goals with corresponding membership functions to reflect their relative importance.  In this study, a fuzzy multiobjective model that has capacity, demand and budget constraints, has been developed for supplier selection problem. The model is first solved by Zimmerman approach a symmetric model, then the model is solved by Tiwari, Dharmar and Rao’s weighted additive model as asymmetric. For the first time, weights used in the model are determined by supertransitive approximation method in order to overcome the inconsistency of binary evaluations. Besides, both of the solutions are compared and discussed. The criteria for supplier selection has been the the area of focus research since 1960s. Dickson(1966) firstly identifies and analyzed the important 23 criteria for supplier selection based on a survey of purchasing managers and showed that quality is the most important criterion followed by delivery and performance history. Different methods have been used for both of these supplier selection problems: linear weighting methods, mathematical programming models and statistical methods. In linear weighting models weights are given to the criteria, the largest weight indicating the highest importance. Weighted linear method of multiple criteria for supplier selection has been used by many authors(Wind and Robinson, 1968, Cooper, 1977 and Mazurak et al. 1985). Some authors proposed the use of Analytic Hierarchy Process to deal with supplier selection problems(Narasimhan, 1983, Nydick and Hill, 1992 and Barbarasoðlu and Yazgaç, 1997). In short, this method circumvents the difficulty of having to provide point estimates for criteria weights as well as performance scores in the basic linear weighting models.


Effects of Expert Collective Efficacy on Hiring Decision Making Under the Informational Asymmetry

Tsang Kai Hung, National Changhua University of Education, Taiwan



Responding to the increasing pressure for organizations to be competitive, human resource departments play an important role. However, the hiring process is more complex today. One reason is that managers who make hiring decision are faced with more environment factors, more information, and less time to (Butler, Ferris & Napier, 1991). Due to the informational asymmetry between interviewers and survey managers, interviewers have information that managers do not, the managers are unable to assess the true difficulty of cases, and consequently they cannot make the right hiring decisions The purpose of this study is to provide a framework to predict how expert team hiring decision-making and collective efficacy can produce successful hiring outcomes. Decision-making has always played an important role in management. Cognitive psychologist Simon (1960) believed that the decision-making setup was the heart of management activities. Decision-making setup techniques allow high-level thinking and most certainly affect hiring outcomes. Decision-making is one of the basic duties and responsibilities of senior managers.. An ideal hiring system should be planned and designed so that aspiring professionals will have room for development in smooth and versatile work environments (Balkin, Gomez-Mejia & Cardy, 1995). Restrictive conditions determine whether enterprise hiring strategies are comprehensive and executable. As a result employee turnover rises and worker dissatisfaction increases. Other flaws in the hiring process bring unsuitable candidates into the company, creating additional problems for human resource management. However, due to informational asymmetry of the recruitment process, organizations adopt criteria such as the “value” and “uniqueness” of a potential employee. Human resource managers often make subjective judgments and hire the wrong people for the wrong jobs due to the information asymmetry that they receive during interviews. The interviewer and the job candidate exchanges ideas but one of them sometimes has information that the other does not. This causes differences in the kind of information they know so either one has advantage over the other (Caillaud & Hermalin, 1993). The weaker side can do nothing but passively receive messages and make the hiring decision -on the basis of those messages. In an environment with highly uncertain market information, hiring decision-making is often insufficient; therefore, organizations in search of profit maximization may rely on experts to make all hiring decisions. The use of these experts not only reduces the amount of wasted time and resources that follow bad hires, it also improves interactions between experts and knowledge application.  Social Cognitive Theory cites the factors in behavior: 1. Efficacy expectation, and 2. Outcome expectation (Bandura, 1986). Self-efficacy refers to the judgments that people make when the need to arrive at a goal. Collective efficacy extends the concept of self-efficacy to the group as a whole. It encompasses the ideas and standards of professional hiring. With sufficient knowledge on information asymmetry, points that need to be placed emphasis on by organization executives or human resource management contents. Policies that need to be corrected and improved should be done to achieve the best results by different types of labor resources within enterprises. In human resource management literature, there are no studies on collective efficacy in hiring decision-making. This study, therefore, has collected primary and secondary data on organization hiring, meanwhile; the literature also contributes to our understanding of human resources. The strategic model for human resource hiring in the high-tech sector has been constructed to compensate for the inadequacies of the hiring process. In decision-making scenarios, enterprise managers frequently refer to their “habits,” “past experiences” or “inspirations.” When the decision-making environment is uncertain, the a non-routine or automatically imitated and special rational setup process is needed  (Pressley, Synder, Symons & Cariglia-Bull, 1989). Following McCormick, Miller, and Pressley (1989) claim that the prerequisites of decision-making setup are “perceptive process” and “thinking.” Thinking affects a person’s ability to perceive and identify a strategy. Baron (1985) believed that “thinking” is a series of independent events that dominate perception and target orientation. In human resource management, the purpose of hiring is to select the most qualified applicants (Durham, Knight, & Locke, 1997). Management uses mathematical model constructions in hiring decisions.


Assessment of a State Sponsored Marketing Program to Promote Rural Tourism:  A Case Study using the 2004 to 2005 Texas Yes! Hometown STARS Program

Dr. Roger Hanagriff, Sam Houston State University, Huntsville, TX

Dr. Michael Lau, Dr. Stanley Kelley, Sam Houston State University, Huntsville, TX

Dr. Marcy Beverly, Sam Houston State University, Huntsville, TX



Hometown STARS (Supporting Tourism and Rural Success) began with Texas Department of Agriculture’s (TDA) Texas Yes! program and is a broad-based membership program open to rural communities, businesses and organizations.  It is designed to help rural communities leverage their tourism marketing dollars through a competitive dollar-for-dollar matching reimbursement program open to Texas Yes! community members.  Funded activities have included fine arts festivals, cook-offs, sheepdog trials and cow calling events.  Data was captured by using two survey forms for each event.  Texas Yes! funding was not the only support for these events, yet state funding did play a role in increasing event exposure.  The value of attendance was measured in terms of visitor spending, and the result for 31 events is $9.8 million.  Considering the 17 percent investment share of Texas Yes! funding, ROI for direct and economic impacts are $9.80 and $20.66, respectively.  These economic returns illustrate outstanding returns for state funds and support continued and expanded investment in similar rural community events.  The Texas Yes! Hometown STARS (Supporting Tourism and Rural Success) program was developed to assist rural communities in advertising rural events, thus leading to rural economic development.  Fine arts festivals, cook-offs, sheepdog trials and cow calling were just a few of the unique rural tourism events approved for matching reimbursement funds from the Texas Department of Agriculture’s (TDA) Hometown STARS program.  Hometown STARS began with TDA’s Texas Yes! program in late 2003.  Texas Yes! is a broad-based membership program open to rural communities, businesses and organizations.  The goal of the Texas Yes! program is to highlight and promote rural Texas. Hometown STARS is a competitive dollar-for-dollar matching reimbursement program open to Texas Yes! community members.  Only Texas Yes! members are eligible to apply for funding through the program.  Eligible communities apply for the funds by submitting a tourism event promotion proposal to TDA.  Matching reimbursement funds can be used for the following materials and services to directly promote rural tourism events: Billboards; Brochures; Direct mail; Internet advertising ; Advertising in print, radio and television; Signage; Trade shows ; Web sites.  According to Brown (2002) and Lewis (1998) rural tourism has become a popular destination for tourists.  Lewis predicts that because of this renewed interest in America’s rural communities; tourism in this area should continue to grow.  Nearly two-thirds of all adults in the nation, or 87 million individuals, have taken a trip to a rural destination within the past three years (Travel Industry Association of America, 2001).  A potential reason for this increase in rural destinations could lie in the finding by Lewis which noted that approximately 96 percent of the U.S. population lives on four percent of U.S. land, which provides a great opportunity for tourist destinations to include rural areas.  Many families are finding it more convenient to take shorter weekend trips to rural communities than longer trips to farther destinations. The previously mentioned increased flow of tourism to rural communities creates opportunity for numerous benefits.  Reeder and Brown (2005) affirm that tourism has the possibility of transforming a stagnant rural community into a flourishing tourist location by attracting retirees, entrepreneurs, and young workers; diversifying the economy; and boosting the quality of life with a wider range of goods and services.  Brown (2002) also states that tourism can be an important source of jobs for non-metro communities, especially for those that are economically underdeveloped.  Findings by Dean Runyan Associates (2005) support Brown’s statement.  They found that during 2004, travel spending in Texas directly supported 491,300 jobs with earnings of $13.8 billion and that even though most travel spending and travel-generated impacts occur in the larger metropolitan areas in Texas, travel is essentially more important for many of the non-metro areas in the state.  Weaver (1996) noted that as community leaders struggle to bolster their local economies they are searching for economic and employment alternatives.  For example, Brown (2002) states that tourism can serve as an important source of tax revenues for local jurisdictions.  This statement is supported by the finding by Dean Runyan Associates (2005) that travel spending generated $6.3 billion in local, state, and federal tax revenues.  A corresponding statement by Weaver (1986) notes that tourism can not only result in enhanced employment opportunities, increased income potential for local residents, diversification of the local economic base, and additional tax revenues for rural areas, but it can also raise community visibility, and add cultural opportunities for residents. 


Pricing First-to-Default Credit Linked Notes with the Intersection of Market and Credit Risks

Dr. Chou-Wen Wang, National Kaohsiung First University of Science and Technology



In practice, the first-to-default credit linked notes (hereafter CLNs) can be issued by the special purpose vehicles (hereafter SPVs) and by the protection buyers who own the reference obligations. The first contribution of this paper is to derive the closed form solutions of first-to-default CLNs which are issued by those two entities, respectively. The second contribution of this paper is to prove that the values of first-to-default CLNs issued by the SPVs are higher than the ones issued by the protection buyers, especially for the SPVs that only hold the treasury bonds as collateral. As a recent[JMG1] , it is a better solution for issuing first-to-default CLNs through SPVs. This result is consistent with the cases in practice.  In the 1990s, the financial crises in Latin America, Thailand, Korea and Taiwan forced many financial institutions into bankruptcy. The traditional methods that financial institutions used to control credit risk such as minimum counterparty credit ratings or collateral became out of date. A financial innovation for credit risk management is the credit derivative, which allows financial managers to "short sell" the credit risk for the sake of protecting against credit deterioration in reference obligation. A survey of the global credit derivatives market provided by the British Bankers Association (BBA) in 2002 shows that the volume of credit derivatives will reach $4799 billion in 2004[JMG2] . The percentage of portfolio products (such as collateralized debt obligations) and credit-linked obligations are the second hot product, followed by the credit default swaps, with 22% of market share by 2001 and 26% of market share by 2004. The biggest buyers and sellers of credit protection in the credit derivatives market are banks and insurers, respectively, which manage their loan or investment portfolios to emphasize the immediate transfer of credit risk. So far, there is not much literature on credit linked notes. By extending Merton’s (1974) corporate bond pricing model, (Hui and Lo, 2002) use Merton's (1974) corporate bond pricing model to value the CLNs by incorporating the asset value of the reference entity as an addition variable. However, due to the unobservable parameters such as firm value and the volatility of asset return, their pricing methodology is hard to implement. Another approach is the reduced-form model in which default time is a stopping time of some given hazard rate process and the payoff upon credit event is specified exogenously. This approach has been widely considered by, among others, Duffie and Singleton (1999), Jarrow and Turnbull, (1995, 2000), Lando, (1994, 1998), and Jarrow and Yu (2001). Among them, Jarrow and Turnbull (1995) provide a pricing methodology for vulnerable options and stock option under the condition of credit risk. However, they assume that the hazard function is independent of the interest rate. From the empirical studies, we can find that the credit spread is a  function of the spot rate and market index. For example, Kao (2000) documents that the interest rate level and the Russell 2000 index return have significant explanatory power for change in the credit spread index level and plays an important role in explaining monthly credit spread changes for both investment-grade and high-yield bond indexes. Campbell and Taksler (2003) prove that the equity volatility can explain about one-third of the variation in yield spreads. Janosi, Jarrow, and Yildiray (2002) find that the default intensity depends on the spot interest rate. Huang and Kong (2003) discover that high interest rates and steep yield curves are usually connected with an expanding economy and low credit spread, and that higher interest rate volatility is usually connected with wider credit spread, particularly for high-yield bond indexes. They also found that a higher market index return will diminish credit spreads, and higher equity volatility will extensively widen credit spread. This leads to the conclusion that empirical return (or credit spread) on high yield bonds is a declining function of the market index return and the interest rate is an increasing function of the volatilities of interest rate and market index. For that reason, the hazard process is dependent on spot interest rate and market index, and CreditMatrics, CreditRisk+, and KMV methodologies cannot consist of those empirical results given their constant interest rate assumption.  Consequently, Jarrow and Turnbull (2000) assume that the hazard function is related to the spot rate and volatility of market index to derive the prices of risky zero coupon bonds and single-named credit default swap. Recently, the default model is extended to the multivariate underlying asset case to value a credit swap of the basket type. Duffie (1998) provides the preliminary valuation of a first-to-default type claim that depends on the first default time of a given list of credit events. Kijima (2000) and Kijima and Muromachi (2000) consider the joint survival probability of occurrence times of credit event under the assumption of conditional independence to value the credit default swaps of basket type. However, their pricing models only consider that the hazard function is related to the spot rate. In practice, the first-to-default CLNs can be issued by the protection buyers or by the special purpose vehicles (hereafter SPVs). When the issuer is the SPVs, the proceeds from the noteholders are used to buy some high quality collaterals that are held by the SPVs and hence we presume SPVs have no credit risks. For the general case, they [JMG3] also buy some common bonds as their collateral. The valuations of the notes issued by SPVs are only related to the credit events of reference obligations. In addition, we assume that the protection buyer can transfer the credit risks of reference obligations to the noteholders through the first-to-default CLNs. Therefore, by incorporating Kijima (2000) and Jarrow and Turnbull (2000), the first contribution of this article is to derive the closed-form solution of first-to-default CLNs when the issuers are SPVs and the protection buyers, respectively. The second contribution is to prove that the values of first-to-default CLNs issued by SPVs are higher than the ones issued by the protection buyers, especially for SPVs that are holding only treasury bonds as their collateral. Hence, we demonstrate that it is the better solution for issuing first-to-default CLNs by SPVs whose investment portfolio contains only default-free bonds.


Firm Characteristics and Impact of Stock Market Liberalization: Evidence from South Africa

Dr. Daniel Makina, University of South Africa, Pretoria



Prior research on the Johannesburg Stock Exchange (JSE) of South Africa and other emerging markets has documented that liberalization reduces the cost of equity capital and that the reduction is independent of the sector in which the firm operates, and is permanent rather than transitory. Focusing on South Africa this paper examines the effect of firm characteristics on cost of equity capital following stock market liberalization. Firm characteristics examined included the size of the firm, book-to-market ratio, the leverage ratio and a firm’s unique effective liberalization date. Four main conclusions are obtained. First, the observation that foreign investors prefer large firms is supported. Second, firms with low book-to-market ratios prior to liberalization are preferred contrary to the intuition that firms in emerging markets are undervalued. Incidentally, these firms with low book-to-market ratios happen to be the large firms.  Third, within the category of firms that experienced a reduction in cost of capital, firms with low leverage ratios prior liberalization are in the majority. Fourth, different sets of firms may have their unique effective liberalization date. Models of international asset pricing predict that as capital markets integrate, the cost of capital will decline as risk is globally diversified as chronologically shown in Stulz (1981), Errunza and Losq (1985, 1989), Eun and Janakiramanan (1986) and Stulz (1999c). Empirical studies using market level analysis by Bekaert and Harvey (2000), Henry (2000a), Kim and Singal (2000), and others that have examined emerging stock market liberalization and its impact on the cost of capital support this prediction. Recent work at firm level by Patro and Wald (2004), Chari and Henry (2004), Christoffersen et al. (2004) and Makina (2005) also lends support to this prediction. The capital asset pricing model (CAPM) predicts that two effects will drive the stock price revaluation of each publicly traded firm within a given country (Stulz, 1999a, b, c; Lucas, 1990). The first effect common to all firms is a fall in the risk-free rate of return as a country moves from financial autarky to financial integration with the rest of the world. The second effect is specific to a given firm; the greater the covariance of a firm’s stock return with the local market relative to the covariance of its returns with the world market, the larger the firm-specific component of that firm’s stock price revaluation. Chari and Henry (2004) observe that when countries liberalize their stock markets some publicly listed firms become eligible for foreign ownership and these are termed investible firms, while others remain off limits to foreign investors and are termed non-investible firms. This generates two testable implications for the CAPM theory. Take two firms that are identical except that one is investible and the other is non-investible, for instance. Theory predicts that the revaluation effect on the investible firm would be more strongly related to its covariance structure of returns than that of the non-investible firm. However, the fall in the risk-free rate effect is a common shock to all firms in the economy so that it should be the same across all investible and non-investible firms. Statistically, Chari and Henry (2004) show that an investible firm whose historical covariance with the local market exceeds that of the world market by 0.01 experiences a firm-specific revaluation of 3.4 percent when the stock market is liberalized. In contrast, they find that there is no firm-specific revaluation for non-investible firms. That the common shock is the same for both investible and non-investible firms as predicted by theory is also confirmed. However, Henry (2000b) observes that the impact of this common shock may be ambiguous. If a country is capital constrained before liberalization, the average cost of capital may fall if liberalization results in a net capital inflow. On the other hand, if a country has previously followed policies of financial repression whereby interest rates were kept artificially low, the average cost of capital may increase if the stock market liberalization is accompanied by domestic financial deregulation. Empirically, it has been established that permitting foreign investors to enter the local stock market directly or by allowing local assets to be traded in overseas stock markets, firms in emerging markets are able to access the global pool of capital to undertake profitable investments. Furthermore, Obstfeld (1998) and Stulz (1999b) have shown that the scrutiny of foreign investors, foreign equity analysts, and foreign stock listing standards can help resolve agency problems and effectively transmit higher quality reporting and governance standards to firms in merging markets. Bae et al. (2004) find that information measures typically increase with openness to foreign equity investment, thereby illustrating another beneficial effect of removing capital barriers. In a related study, Bekaert (1995) shows that indirect barriers to foreign investment such as poor credit ratings and the lack of a high quality regulatory and accounting framework are strongly related cross-sectionally with the integration measure. Direct barriers may be of second-order importance; more important are information asymmetries due to poor quality and low credibility of financial information in many emerging economies. The model of Merton (1987) suggests that an indirect barrier such as information costs may affect investor behaviour as they tend to hold stocks that they know and trust. In other words, the perceived risk of stocks they do not know is high. Portes and Rey (2002) show that information flows are an important determinant of cross-border equity transactions. Asymmetric information between local and foreign investors may be an important factor for investment decisions. Roll (1992) suggests that industry factors are primary in explaining international market returns.


What Influences Teaching Evaluations?  Evidence from a Major Australian University

Martin Davies, University of Melbourne, Melbourne

Dr. Joseph G. Hirschberg, University of Melbourne, Melbourne

Dr. Jenny Lye, Carol Johnston, University of Melbourne, Melbourne

Ian McDonald, University of Melbourne, Melbourne



In this paper, we examine eight years of Quality of Teaching (QOT) responses from an Economics Department in an Australian University. This is done to determine what factors, besides the instructor, have an impact on the raw average student evaluation scores. Most of the previous research on student ratings has been conducted in the US. One significant difference between US and Australian tertiary education is that, on average, the number of foreign undergraduate students in Australia is 10 times the number in US institutions. We find that cultural background significantly affects student evaluations. Other factors that have an influence on the average QOT score include: year level; enrolment size; the quantitative nature of the subject; the gender of the student; fee-paying status by gender; course of study; the differences between the course mark and previous marks; the quality of workbooks; the quality of textbooks; and the QOT score relative to those in other subjects taught at the same time.  It is widespread practice in tertiary education institutions to use student feedback in the form of student evaluation surveys to evaluate teaching. Such feedback is: 1) used to improve the quality of teaching; 2) used in appraisal exercises including tenure and promotion decisions; and, 3) often an explicit requirement of university administrators. (See, e.g., Kember, Leung and Kwan 2002.)The use of these surveys has often been criticised. It has been argued that students are not the best source from which to obtain data on teaching quality. Students may have different perceptions of what is important in teaching as they do not have the knowledge necessary for its evaluation and consider it a chore (Simpson and Siguaw 2000). They are not necessarily the best judges of their instructors’ performances (Casey, Gentile and Bigger 1997), viewing them “from very limited or even tainted perspectives” (p. 472). Notwithstanding the influence of the instructor, student-specific and subject characteristics can also influence the overall ratings of instructors. These are not, in general, under the direct influence of the instructor. Student evaluations may be influenced by cultural background (Germain and Scandura 2005), students’ thinking styles (Zhang 2004), and students’ learning styles from different ethnic backgrounds (Lucal et al. 2003). In his analysis of evaluation rankings of one instructor in a finance subject, Worthington (2002) found that the age of the student had some influence on the ratings given. He also found that higher ratings were likely to be given by students who were expecting higher grades and were from non-English speaking backgrounds. Aigner and Thum (1986) found that students expecting high grades in subjects tended to give higher ratings than students expecting lower grades. Boex (2000) found a positive correlation between student grades and instructor ratings. Similar conclusions have been drawn by Greenwald and Gillmore (1997), Mason, Steagall and Fabritius (1995) and Nelson and Lynch (1984). Isley and Singh (2005) found the gap between the expected grade relative to the incoming cumulative grade point average of students to be an important determinant of student evaluations. Ting (2000) and Williams and Ory (1992) found that class size is not a very important determinant of student ratings. However, an Australian study conducted across four disciplines found that students in larger classes gave lower ratings (Neumann 2000). A 20-year study of education subjects found that changes to subjects over time – including increases in class sizes and the use of sessional staff – were followed by lower evaluation scores from students. Bedard and Kuhn (2005) found a large, highly significant and nonlinear negative impact of class size.  Typically, the results of student evaluations are reported by using simple summary statistics including the raw average score. It is common practice for the raw average of the question relating to teaching effectiveness to be compared across instructors. In many instances, this average is compared to a particular benchmark value. Such a practice implicitly assumes that any potential mitigating factors (e.g., the effect of student or subject characteristics) have no affect on student evaluation differentials, or that such differentials cancel out in all cases.  The major contribution of this paper is to determine how these various factors influencing instructor effectiveness have an influence on student evaluations in Australian universities. A significant difference between US and Australian tertiary education is that, on average, the number of foreign undergraduate students in Australia is 10 times the number in US institutions. Table 206 of the Digest of Educational Statistics (2004) shows that between 1996 and 2002, only 2.2% of US undergraduates (on four-year programs) were categorized as “Nonresident Aliens” and only 3.6% of all US tertiary enrolments in 2002 represented foreign students. No doubt this varies between institutions and courses of study. In the data used in this study, 24.6% of students on average, in every subject, are foreign born. Thus, a much larger segment of students in any subject come from different educational backgrounds than one would expect to find in any of the US universities on which these earlier studies are based.


Enhancing Student Learning with only a Click

Dr. Leonard Presby, William Paterson University, Wayne, NJ

Dr. Claire Zakheim, Yeshiva University, NY, NY



The role of a professor is to help students learn. In one’s classroom, it is admirable if one can motivate and engage their students. Unfortunately, this may not be easily attained since the majority of all college faculty still teach their classes in the conventional lecture mode. An alternative and/or supplement to traditional lecture is active learning. This paper shows how implementing one approach of active learning, which incorporates a response system, helped engage students in learning the subject matter of a Quantitative Methods course as well as access their knowledge. It provided valuable feedback to both students and professors. "Active Learning" is anything that students do in a classroom other than merely passively listening to an instructor's lecture. This includes everything from listening practices which help the students  absorb what they hear, to short writing exercises in which students react to lecture material, to complex group exercises in which students apply course matter to "real life" situations and/or to new problems. "Techniques of active learning", then, are those activities which an instructor incorporates into the classroom to foster active learning. It is student-centered instruction, rather than the traditional lecture-oriented, provides a technique to inspire and engage,  discuss, explain, debate, or brainstorm. In short, it is employed to  maximize the classroom learning environment. Active learning techniques are helpful because they deemphasize lecture. Research has shown the importance of the instructional techniques that involve alternative assessments. Lord (1994) hypothesized that traditional teaching techniques do not stimulate active larning. Gahr(2003) reported positive effects wirth active learning. O’Sullivan and Copper (2003) found by using active learning higher student learning resulted. Teachers recognize the importance of having students construct knowledge while they are in the classroom (Nicol and Boyle 2003) You can use discussion questions and group exercises, as well as problem-posing and -solving sessions, to get your lecture points across in a meaningful and memorable way.Do college students tend to prefer active learning techniques? It would seem so because they are engaging and fun. How do you begin using active learning techniques in the classroom? How do students learn? There are a number of techniques of active learning. While most of us use questions as a way of prodding students and instantly testing comprehension, there are simple ways of tweaking our questioning methods which increase student involvement and comprehension. Five commonly used techniques which are used but I would shun and AVOID are Asking, Voting, Other, Involved and Delay. 1. Asking. This involves asking questions during the course of a lecture. Typically, the instructor chooses a particular student, presents her with a question, and expects an immediate answer.  If the "chosen" student cannot answer the question presented, the instructor chooses another (and another) until the desired answer is received. Research on the learning benefits of questions has shown that the learning environment can be improved by as much as 150% by the application of various questioning approaches. The use of appropriate questions have proved to (1) engage the learner (2) focus the learner on specific objectives (3) help the learner practice retrieval and application of information to answer questions (4) provide opportunities for feedback allowing students to understand why they missed specific questions (5) provide opportunities for repetition within the learning process.This method has come under criticism, based on claims that it singles out students (potentially embarrassing them), and/or that it favors only a small segment of the class (i.e., that small percentage of the class who can answer any question thrown at them). In addition, once a student has answered a question they may not pay much attention as it will be a long time before the teacher returns to them for a second question. 2. Voting: This method provides instructors with a means of testing student comprehension without the waiting period or the grading time required for written quizzes. Students are asked questions and instructed to signal their answers by holding up the appropriate number of fingers immediately in front of them.  3.  Other Students Summary: In order to promote active listening, after one student has volunteered an answer to your question, another student is to summarize the first student's response. Many students hear little of what their classmates have to say, waiting instead for the instructor to either correct or repeat the answer. Having students summarize or repeat each others' contributions to the course both fosters active participation by all students and promotes the idea that learning is a shared enterprise. Given the possibility of being asked to repeat a classmates' comments, most students will listen more attentively to each other. 4. Involved: Here students are asked to become actively involved in creating quizzes and tests by constructing some (or all) of the questions for the exams. This exercise may be assigned for homework and itself evaluated (perhaps for extra credit points). In asking students to think up exam questions, they are encouraged to think more deeply about the course material and to explore major themes, comparison of views presented, applications, and other higher-order thinking skills. Once suggested questions are collected, the instructor may use them as the basis of review sessions, and/or to model the most effective questions. Further, you may ask students to discuss the merits of a sample of questions submitted; in discussing questions, they will significantly increase their engagement of the material to supply answers. Students might be asked to discuss several aspects of two different questions on the same material including degree of difficulty, effectiveness in assessing their learning, proper scope of questions etc. 5. Delay: Rather than choosing the student who will answer the question presented, this variation has the instructor waiting before calling on someone to answer it. The wait time will generally be 15 seconds-but it may seem interminable in the classroom


Great Leaders Know That All Change Must Start Both at the Top and the Bottom: The Whole Human System Must Change

Dr. Michael Ba Banutu-Gomez, Rowan University, Glassboro, New Jersey



A true leader always has a vision; knows where he/she wants to go and how to get there. ­ He/She values others' skills and experiences and builds teams that make use of them.­ He/she courageously accepts responsibility for problems and is able to clearly communicate the mission, goals and objectives of his/her organization.  A great leader is willing to challenge the Status Quo while trusting and empowering people. He/She uses obstacles to create a positive future; is consistent: willing to set an example of sacrifice for the good of the next generation.  The primary task of Leadership is to establish and maintain “intimacy” (caring) because disciplined unselfishness comes about only through close social relationships.  Traditional sources of intimacy such as the family, the club, the neighborhood, life-long friendships, Mosque and church are all presently threatened by modern life-styles in today’s global world.  Intimacy is essential for healthy individuals and thus, a healthy society.  Once a society de-values intimacy, its young people will not develop a sense of community responsibility.  These young people will go on to produce the next generation that will have a permanently diminished sense of community.  This will soon result in a society solely comprised of individuals with no or only tenuous social ties to each other. By and large, leadership is an influence process and not dictatorship.  For that reason, they take time to first establish understanding and true commitment at the highest levels of their organization first.  The most important attribute a leader must have is integrity.  A leader with integrity provides consistent responses that show a sense of equal respect for everyone.  This fosters “family” type relationships between people.  A leader who behaves consistently exhibits the integrity necessary to nurture the growth of trust.  The first task of leadership in any organization is to establish and maintain TRUST because the success of an organization is determined by the willingness of individuals to make personal sacrifices.  Before the objective of commitment to the development of a less selfish, more cooperative approach to working together can be achieved, there must be understanding which comes from the open expression of opinions, feelings and ideas through a process of public debate and group analysis.  The first step in creating an organization philosophy is for leaders to conduct a Cultural Profile Audit.  Leaders should set an example during these discussions by critically examining the organization’s current, actual operating philosophy, business strategy, citizen goals and the values they place in people.  A way to do this is to examine the most recent 5 key decisions in order to discover what principles were consistently applied.  A sufficient level of trust must be established first to facilitate honest questioning of assumptions on the part of everyone.  The first task for a leader is to set an example by openly disagreeing with others and actively working to create an environment where different opinions are welcomed.  Leaders should establish a discussion process that reflects the egalitarianism, openness and participative ness that are the objectives of the change to take place.  Leaders set an example when they facilitate the growth of trust which needed to implement this type of discussion process by positively accepting criticism.  Though it will be painful, any nation or group of people who trust one another to expose their deepest weaknesses, is a nation/group that can successfully implement change.  It is only by examining all organization practices that one can uncover the roots of current organization behavior.  In order to deal with change, everyone must be open; that means being willing to investigate and question each other’s work as well as to appreciate the feedback others give in response when they look into one’s own work. Change requires Leaders to demonstrate a willingness to expose their weaknesses to members; in other words, a willingness to reveal themselves so completely those members may find human weakness there.  This teaches members that their Leaders are ready to acknowledge that everyone has weaknesses and it proves that all will be accepted in spite of their weaknesses.  When nothing needs to be hidden, a tremendous energy is released. Skillful leaders do more listening than talking; they observe the pattern of interaction in the group, citizens and know when to intervene.  Skillful leaders utilize frequent periods of silence to give everyone time to process the preceding discussion which will allow the true issue or conflict to arise in their conscious mind.  Good leaders teach citizens group dynamics to all organization members so they can recognize group and citizens interaction patterns.  Everyone must learn to see when a group is moving too quickly, how some behaviors interfere with group process, and how to stay on course. THE BEST LEADERS TEACH LEADERSHIP.  Members should be taught how to provide leadership that facilitates identifying issues, finding the roots of conflicts and creating solutions to problems that everyone can support.  Good leaders communicate with their behavior more than their words and then make sure they recognize and reward positive results of members’ efforts immediately.  They solicit suggestions from members, as a group, citizen and move quickly to implement helpful ones immediately.  Good leaders set an example by being prepared to address tough questions during regular question and answer sessions with members about how the organization is doing, its successes and problems, and other important work-related issues. 


Identifying the Effect of Firm Size on Financial Performance of SMEs

Dr. Nermin Ozgulbas, Baskent University, Turkey

Ali Serhan Koyuncugil, Capital Markets Board of Turkey, Turkey

Fikriye Yilmaz, Baskent University, Turkey



This study aims to identify the effect of firm size on financial performance of the small and medium enterprises (SMEs). The study covered 697 SMEs listed in the Istanbul Stock Exchange (ISE) between 2000 and 2005. Financial performance measurement was based on ratio analysis and relation between size and financial performance was analyzed by means of Chi-Square Independency Test.  Based on findings it was determined that firm size affected financial performance, and that financial performance of medium-sized SMEs was better than that of other enterprises.  Roles of SMEs in economic and social development differ in such a manner as to reflect varying economic and social characteristics of countries. With resilient structures SMEs have become popular enterprises in the world economy.  SMEs are considered an important element for economic growth in the USA, Japan, and the European Union. SMEs not only contribute to the economy by providing goods and services as independent economic units, but also complement development of large-scale enterprises by functioning as “related industry” for such enterprises. In addition, they provide significant contribution to the economy by creating new jobs, differentiating products, and promoting entrepreneurship and innovation.  A strong SME sector helps achieve many important socio-economic objectives of a country. For example: SMEs are the biggest source of low cost employment. SMEs help in regional and local development. SMEs respond to market fluctuations more easily. SMEs help achieve fair and equitable distribution of wealth. SMEs are key drivers for value-added exports. SMEs assist in fostering a self- help and entrepreneurial culture in the country. SMEs support and complement large scale industries ( When overall world economy is considered it is noted that SMEs, which constitute 95% of total enterprises in the world, account for 66% of total employment and 55% of total production (OECD, 2004). According to 2002 General Industrial Workplace Census of Turkish Statistics Institute SMEs account for 99.89% of total enterprises and they employ 3 million individuals in average. SMEs produce 77% of total employment and 38% of total added value in Turkish economy. As for status of ownership in SMEs  80.6% of SMEs are sole proprietorship, 13.6% are limited company, 2% of them are joint stock corporations, 1.7% are ordinary partnership, and 1.1% are included to other category. This suggests that legal status of most of SMEs is either sole proprietorship or limited company (SIS, 2003). In order for Turkey to be successful in the world economy where globalization trend has been growing it needs to integrate with the world economy. Negotiations with the EU for full accession started in 2005 seem to have accelerated Turkey’s integration with the world, in particular with the EU. Because of their resilient structure SMEs are able to meet different demands in differentiating markets and at the same time they can create new and innovative economic fields of activities. SMEs are the driving force of industrialization, as they are so resilient and innovative to adapt to new production methods and techniques, and new marketing strategies Nevertheless, SMEs need to asses their current conditions and characteristics to strategically restructure themselves to gain competitive power, and build strong financial capabilities.  The economic context in Turkey has made the situation particularly difficult for SMEs in recent decades. An inflationary economic climate and increasing public sector debt have led to lack of confidence, a series of financial crises, a sharp rise in real interest rates and marked depreciation of the Turkish Lira. SMEs’ problems may have been greater in Turkey than they are in other OECD countries in view of very unstable general economic conditions in the past, which have strongly distorted government policies and programs in this area and have made it difficult to achieve the desired results. When studies, which emphasize that access to financing and financial management problems are the most important problems of SMEs in Turkey, are examined one could summarize the most striking problems emphasized in such studies as follows:  Sariaslan (1994) and Karabiyik (1998) determined that the most important problems of SMEs in Turkey were insufficient financing resources and incorrect financing decisions. In studies conducted by Ozgen and Dogan in 1997 and Akbulut in 2000 similar problems were observed. The above-mentioned authors stated that although SMEs take a great part in Turkish economy their share in total loans lend by financial institutions accounts only for 4 to 5 percent, that they are not able to utilize existing financing methods to finance their investments, that they are not able to obtain long-term loans, and that they barely use such modern financing techniques as leasing, factoring, and capital market tools. Muftuoglu (1998) stated that SMEs have a large share in total investment and manufacturing and production, and Calipinar (2001) stated that SMEs account for 99.5 percent of total number of firms operating in manufacturing sector and have a large share in total employment, they both agreed on that SMEs have significant problems in accessing to and obtaining financing, and forced to finance their operations merely by means of the equity they have. And, Akgemici (2001) and Gurak (2001) concluded that SMEs experience financial failures and low performance, and even have to run out business due to economic instability, lack of government supports, and professional management. In the study conducted by Yucel (2001) it was stated that although problems that SMEs encounter in creating and accumulating financial resources are important using those resources at hand in a planned and appropriate manner to realize goals of the firm are more important.


A Study on South African Corporate Business Failures

Dr. Marolee Beaumont Smith, University of South Africa, Pretoria, South Africa



The purpose of this study was to identify and analyse reasons for South African corporate business failures from a lender’s perspective. The survival of a business depends on successfully managing the local and international environment in which it operates. A number of local and international factors affecting the business environment of South African firms were discussed. Empirical research was undertaken in a specialised division of one of the big four lending institutions in South Africa. Personal interviews conducted with institutional experts and analysis of actual business failure cases revealed that the principal causes of corporate business failure were inadequate management planning and control, failure to respond to changing circumstances and lack of focus on core business. Some of the critical success factors for corporate turnaround included generation of positive cash flow, effective communication at all levels, exercising prompt decision-making and an acceptable level of mutual trust between lender and corporate business. In recent years the world has been rocked by spectacular bankruptcy and corporate governance scandals. The failures of Enron and WorldCom during 2001 and 2002 represent the biggest business failures in US history. In the past three years telecommunications, energy and Internet companies represented the majority of the victims while in South Africa, failures were evident in small banks, information technology and investment companies. Once a corporate failure has occurred, the impact is well publicized and the effects are far-reaching. In South Africa, however, for unknown reasons, not many facts are published about the nature, size and effects of corporate failures (Robertson, 2003). The purpose of this study is to investigate reasons for corporate business failure in South Africa from the lender’s perspective and to identify critical success factors for corporate turnaround. The scope of the study comprises local corporate businesses with a minimum annual turnover of  R4 million. The survival of a South African corporate business requires managing the local and international environment within which it operates. Of critical importance is constant scanning of the environment to identify threats and opportunities with a view to implementing strategies that capitalise on opportunities or utilising defensive tactics to counteract threats. Three significant local environmental factors that impact South African corporate businesses are black economic empowerment (BEE), the developing country and emerging market factor, and corporate governance.  The impact of international environmental factors on South African corporate businesses has become more prevalent in recent years. As communication and trade barriers have decreased, so international business transactions have increased among corporate businesses across the globe.  Empirical research was undertaken within one of the big four lending institutions in South Africa. The investigation was conducted in a specialised division of the institution that assists corporate businesses experiencing potential insolvency to turn around their businesses in order to avoid business failure. The first phase of the research encompassed semi-structured interviews with expert personnel in the specialised division. The second phase involved scanning and analysing data on actual reasons for failure from a sample of cases of failed businesses drawn from the institution’s information records.  This paper is concluded with a discussion of the findings of the study. This study examines, in particular, factors pertaining to the South African environment, and, to a lesser extent, to the international environment and the corresponding impact on a South African corporate business. Three significant local environmental factors impacting local corporate businesses are identified in this study:  black economic empowerment (BEE), the developing country and emerging market factor, and corporate governance.  The international impact on the South Africa corporate environment is also briefly considered.  An environmental factor with a huge impact on the way that South African corporate businesses operate is that of black economic empowerment (BEE). The reason for the emergence of the BEE factor is summarised below:  “For historical reasons, control of the economy has been concentrated primarily in the hands of white South Africans. It is Government policy to actively promote a more equitable distribution of wealth, in a free market context, by actively supporting and favouring the economic empowerment of historically disadvantaged persons (HDPs) in the grant of Government tenders and procurement contracts and licenses and by rendering financial and other assistance to HDP private business.” (Werksmans, 2005). BEE is governed by the BEE Act. The purpose and objectives of the BEE Act are to establish a legislative framework for the promotion of BEE, empower the Minister of Trade and Industry to issue codes of good practice, publish transformation charters, establish the Black Economic Empowerment Advisory Council  and to facilitate broad-based BEE.  In terms of the BEE Act, “black people” is a generic term that refers to Africans, Coloureds and Indians.  “Broad-based BEE” refers to the economic empowerment of all black people, including women, workers, youth, people with disabilities and people living in rural areas, through diverse but integrated socio-economic strategies. According to the analysis of Fig. 1, we can clearly find out that the unbalance of revenue and expenditure of industrial park managerial funds was not the cause of the problems of development and management in industrial park; it was actually the result. Therefore, the measure to improve the shortage of the funds should start from the directions of budget arrangement and financial control. When proceeding with financial control, it is necessary to review the budge and fund operation of industrial park managerial institutions which has the most proportion in expenditure. However, it is certainly not the primary and core goal. The reason is in that if we define the critical issues of industrial park development and management on solving the financial problems of the funds, all of the reforms will be trapped into the cost thinking and we will neglect the importance of value creation. In other words, the reform and key points of industrial park managerial mechanism should not focus on cost reduction; instead, it should lead all of the actions by the thoughts of upgrading value (customers’ satisfaction) and follow a set of feasible execution project to actually improve the investment environment and reach the goal of attracting the companies’ investment and promoting long-term economic growth.


Improving Quality of Work-Life: Implications for Human Resources

Dr. M. Akdere, University of Wisconsin-Milwaukee, Milwaukee, WI



Family is defined as a group of individuals living under one roof and usually under one head (Merriam-Webster Dictionary, 2005). Work is an essential part of people’s lives in providing livelihood for families. Therefore, family and work cannot be separated from each other. However, there are emerging problems around work and family, and these problems need to be approached holistically as they are closely interconnected, and inevitably affect each other. Furthermore, these problems have significant impact on organizational ability to attract and retain skilled people, achieving higher levels of production, employee satisfaction and morale, innovation, and teamwork (Gurvis & Patterson, 2005). The issue of “work-life quality” has become critical in the last two decades due to the increasing demands of today’s business environment and family structure. This, in fact, has been the case for many professions and fields. As a result of rapid globalization, companies are under great pressure to compete and remain profitable. This pressure is translated at the employee level as increased work hours and job-related stress. Consequently, organizations are seeking ways to address the issues around achieving quality of work-life to retain their workforce and attract the most talented potential employees.  Using a Human Resources approach, the purpose of this paper, thus, is to review and examine existing issues and challenges related to work-life balance, and provide examples of how organizations should respond to help employees achieve quality of work-life as it impacts both the workplace and home. Traditionally, a Human Resources approach to quality of work-life has been supporting employees in their daily work-life challenges and advocating on their behalf, calling organizations to assume corporate social responsibility. However, this paper argues that research and practice in the field should move beyond this diagnostic stage and begin to explore the potential to link theory and practice to resolve these issues through involving the parties—employers and employees—on both ends of the equilibrium. The issue of quality of work-life has often been associated with theories related to work and family systems. However, these theories usually treated these two systems independently Clark, 2000). As our understanding of work and family life evolved, researchers came to conclude that work and life of an employee are closely connected in that what happens in one of them—either positive or negative—significantly impact the other. Therefore, a holistic theory with a broader approach to the issues surrounding quality of work-life issues is needed. Therefore, this paper will use Clark’s work/family border theory (2000) as the basis of discussion. Developed as a remedy to the criticisms and gaps of previous theories on work and family, Clark’s work/family border theory explains how individuals manage and negotiate the work and family spheres and the borders between them in order to attain balance (p. 750). Clark identifies two domains—work and home—in her theory to show differences between work and home. These domains are determined by borders, which are lines of demarcation (p. 756).  These borders are characterized by a number of factors that impact them: (1) permeability—the degree to which elements from other domains may enter; (2) flexibility—the extent to which a border may contract or expand; (3) blending—occurs when significant amount of permeability and flexibility occurs around the border; and (4) border strength—determined by permeability, flexibility, and blending. A third component of Clark’s theory involves border crossers, people making frequent transitions between work and family domains. A final set of actors in this interaction involves border keepers and other domain members as work and family activities are generally carried out with others. Table I illustrates the propositions that Clark’s (2000) work/family border theory makes (p. 765).  Quality of work-life is defined as an approach or method in which specific techniques and approaches are used for improving work (Ford, 1973). Emerging socioeconomic changes shape family dynamics. Today, for example, dual-earner families represent nearly 50% of families in the labor force in the U.S. The traditional breadwinner/homemaker family accounts for less than 20% of families.  Seventy percent of mothers with children work at least part-time (Frey, Abresch, & Yeasting, 2001, p. 11). The dramatic increase in the percentage of women in the labor force around the world—including some of the regions and countries that have traditionally been dominated by males in the workplace—means that families are reexamining traditional divisions of labor around paid work, housework, childcare, elder care, and community service, which are closely related to the issue of quality of work-life. Managing a household and a family is an important and a time-consuming job. Employees, especially parents of at-home children, have always had family responsibilities that have, at times, conflicted with workplace demands. However, two factors—more families with both parents in the workforce and more single-parent families—have increased the possibility for conflict between family and work (Hertz & Marshall, 2001). The increase in the proportion of women working or looking for work that began after World War II has been one of the most significant social and economic trends in modern U.S. history. According to Bureau of Labor Statistics (BLS), in 1940, 28% of American women were in the workforce. This rose to 40% in 1966, 51% in 1979, and 60% in 1998. In 1940, one in four workers was a woman; by 1998, almost one in two workers was a woman (Frey, Abresch, & Yeasting, 2001).


Case Study: A Young Entrepreneur Going Global

Dr. Falih M. Alsaaty, Bowie State University, Maryland



This is a case study in international entrepreneurship intended to convey the strategic vision, business expertise, and managerial style of a young Jordanian-born entrepreneur named Ahmad Taha, who arrived in the United States in the early1990s to study engineering and ended up an accomplished dealer and exporter of second-hand restaurant equipment. Mr. Taha was an outstanding planner, a calculated risk taker, and a team player. His strategy was to “go global” to take advantage of market opportunities and, simultaneously, satisfy customer demand. He capitalized on the “Re-use and Re-cycle” movement, and the trend toward frugality.  Few young people in the United States could fully understand the meaning of the phrase “a land of opportunity” as Mr. Ahmad Taha, a Jordanian-born entrepreneur. For the past several years, he had steadily been cultivating market opportunities, both domestic and foreign. He had been mining a profitable niche that many shrewd business people were unaware of. Mr. Taha, a dealer and exporter of second-hand restaurant equipment, arrived in the U.S. in 1990 with his family – his parents and two siblings. His arrival in the country was unplanned and unexpected. While he was a freshman at the School of Engineering in Amman University, Jordan, his father, a specialist in fish farming in the Ministry of Agriculture, was appointed for a three-year term as an economist at the International Bank for Reconstruction and Development (the World Bank) in Washington, DC. It should be noted that the Bank typically offers this kind of in-house residency to foreign government officials as part of a long-standing arrangement with member countries. Upon arrival to the U.S., Mr. Taha enrolled in an engineering college in Arlington, Virginia and, at the same time, was offered employment in the college’s mechanical engineering laboratory to work for 20 hours a week. The library and the laboratory soon became indispensable destinations for his daily activities, where he spent long hours working and studying. The experience in the laboratory was especially invaluable, for he gained practical knowledge of various machines and equipment, an expertise that is critical in the line of business he would choose as a career in later years. Mr. Taha was always an outstanding student, whose strategic intent was to excel, and his motto was “excellence is the mother of success”. In college, he was an able organizer, and a team player, often coordinating students’ activities for class projects and other group assignments. He also had a profound sense of responsibility and dedication, traits that earned him the confidence of his peers and professors alike. Mr. Taha, upon graduating from college in 1994, joined the faculty of a middle school in the area, to become the lead teacher for mathematics. His aim was multi-faceted. First, he wanted to gain work experience in the United States. Second, he longed to save money prior to heading back home to Jordan to join his family. Third, he hoped, with his educational background, to land a good-paying job in the private sector. He was fortunate enough that the Arlington school district was at the time facing an acute shortage in qualified teachers, a situation that led the district to facilitate his sponsorship for work authorization. It is worth noting that the Northern Virginia region in the 1990s experienced economic development boom, an influx of high technology companies, and waves of immigrants. The teaching environment was conducive, and enjoyable. As he later recalled, the principal was considerate, the staff were helpful, and the teachers were friendly. He felt however that the students, though polite and kind, weren’t as serious as their Jordanian counterparts. He attributed the dissimilarity in attitudes to the cultural nuances between the two groups, and the absence of rigid educational policies in U.S. schools. While the Jordanian students whom he knew were generally reserved and coy, his students were demanding and straightforward. He also noticed that American students, to a large extent, wanted to grasp the totality of topics studied to discover the logic embodied in relationships. Jordanian students, on the other hand, were expected to commit to memory lectures delivered, or books studied, if they were to succeed in school. Under such educational practices, inquiries about, or discussion of, class materials weren’t always encouraged or welcomed.  Whatever the case might be, Mr. Taha had exhausted his interest in teaching after spending five years of devoted professional service. He came to the conclusion that his mission as an educator was near completion, and that he should explore other venues in life, particularly opportunities in the private sector; government jobs, he reasoned, were structured and stifling. But he wasn’t ready to quit good-paying, full-time employment without having first secured a better alternative. He dreamed of freedom of movement, flexibility of working hours, and the power of making important decisions.  Toward the end of his career in education, he was assigned to perform administrative duties in school, in addition to teaching and counseling. It seemed that the school’s principal had his eye on Mr. Taha to become his future deputy. At about the same time, Mr. Taha was approached by a friend and was offered the opportunity to join forces with him in opening up a restaurant that specializes in Middle Eastern cuisine. The friend, who was a manager at a Pizza Hut franchise and had extensive experience in the fast food industry, informed him that the proposed venture required a total investment of $90,000- $100,000, and that, with good luck, the annual return might reach as high as 50% of the original investment. The friend emphasized that the local market was receptive to a different kind of food, that potential customers were ready to pay for a unique dining experience, and that the financial risk for the project was minimal. As a result of an extensive local market assessment, Mr. Taha came across a bundle of restaurants serving, in addition to domestic food, a wide range of international delicacies, including Afghan, Chinese, Indian, Italian, Japanese, Korean, Mexican, and Vietnamese. Each of these shops offered a unique menu designed to appeal to a particular segment of society. He observed a lack of Middle Eastern offering, despite the growing number of immigrants from that part of the world in Northern Virginia. On the basis of his findings, Mr. Taha accepted the suggestion of a partnership on condition that his friend assumed the day-to-day responsibility of managing the enterprise in return for a mutually agreed upon annual compensation package. In late 1999, they entered into a formal agreement specifying the division of labor between them, and their share in the joint venture.   


Utilizing Skandia Navigator System and Ohlson Model to Evaluate the Intellectual Capital Performance for Taiwan Electronic Corporations

Jui-Chi Wang (Amanda), Hsing-Wu College, Taiwan



When a company develops the intellectual capital infrastructure and investment, the market value of the company will appreciate and increase its book value several times since intellectual capital is the core differentiator and driver of that company. This study will examine the relationship between intellectual capital and market value in the Taiwan electronic industry.  The intellectual capital approach of Skandia Navigator System was reviewed for its intellectual capital indicator selection.  Furthermore, the Ohlson model was utilized for the framework of this study. The research subjects and periods are publicly traded companies in the Taiwan electronic industry from 2002 to 2004. The secondary data is from Taiwan Economic Journal Data Bank and Taiwan Stock Exchange Market Observation Post System.  The descriptive statistics and multiple regression statistical methods are employed and data is tested using SPSS 12.0 statistics software application.  The results of this study indicate that there is significant relationship between (1) human capital and market value of the company (2) customer capital and market value of the company (3) innovation capital and market value of the company and (4) intellectual capital and market value of the company.  In order to be successful in a highly global competitive environment, the key is to utilize more intellectual capital resources and less physical and financial assets.  More and more companies are starting to pay attention to intangible assets because they can create greater value than from the company’s physical assets. With the economic knowledge diffused at the end of the 20th century, companies have emphasized intrinsic human resource capital and knowledge technology rather than financial information.  Lynn (1998) indicates that many companies have announced successful experiences from intellectual capital management and assessment by using strategic methods.  For example, Skandia Insurance Company developed the Skandia Navigator System in 1995 in order to manage its intellectual capital. Marr (2004) emphasized the importance of intellectual capital measurement for most 21st century companies and the capabilities and core competencies of the companies should be enhanced through intellectual capital. The rapid technological innovations have changed the business environment for the electronic industry worldwide over the last decade.  As such, pioneers could lose their innovation advantage due to the low cost of production provided by subsequent entrants.  Therefore, staying within the fierce competitive industry, a company needs to realize that it must not only provide a qualified product to maintain the market position, but it also needs to know how to utilize its intangible intellectual capital for more effective and efficient value creation in operational business circumstances.  Since intellectual capital is intangible, yet important for a company, how can we measure it?  The purpose of this study is to examine the relationship between intellectual capital and company market value in the Taiwan electronic industry. Thomas A. Stewart, received the International Knowledge Management Awareness Award in 1996, defines intellectual capital: “In a sentence: Intellectual capital is intellectual material, knowledge, information, intellectual property and experience that can be put to use to create wealth. It is collective brainpower. It's hard to identify and harder still to deploy effectively. But once you find it and exploit it, you win.” (1997). Intellectual capital is intangible assets and hidden value of a company.  What does not show on financial statements is invisible value of human resources, creativity, competence basis, information systems, organizational infrastructure, customer relationships, and research and development. In an economic knowledge century, the gap between financial statements and market value of a company has been enlarged with existing but non-listed intellectual capital.  The accounting report, especially questioned in America and Europe, cannot provide adequate information and true value of a company to its investors, financial analysts, and in the situation of mergers and acquisitions. McPherson (2001) developed a measurement of intellectual capital asset, and then applied the examination to cash flow, products, services and reputation respectively of a hotel organization, but empirical test results did not provide the satisfied outcome because of the difficulties of evaluating intellectual capital. Leliaert, Candries and Tilmans (2003) describe intellectual capital as the intellectual property, value of brand and patents and also introduce Skandia’s intellectual capital evaluation model and discuss the application of quantitative ratios in the model.


Malaysia: Islamic Money Market Instruments

Nuradli Ridzwan Shah Mohd Dali, Islamic University College of Malaysia, Sembilan, Malaysia

Abdul Ghaffar Ismail, Universiti Kebangsaan Malaysia, Malaysia



Central Bank of Malaysia established the Islamic money market in 1994 to cater to the needs of the Islamic Banks by managing its excess and deficits funds in short term investments. The Mudharabah Interbank Investment (MII) was the first instrument introduced. The number of instruments developed increased from year to year to include a single or multiple Islamic contracts from mudharabah (profit and loss sharing), musyarakah (partnership), murabahah (mark up cost), bay bithaman ajil (deferred payment sale), bay ad dayn (sale of debt), and bay al inah (instantaneous sale and purchase). This is an introductory paper to the Islamic money market with the aim of understanding the overall process of the instruments and the Islamic contracts used in the sale and purchase of securities in the primary and secondary interbank money market. The money market where medium and short-term instruments are being traded is dissimilar from the debt and capital market, which dealt with long-term investments. An increase in the number of money market instruments in the Islamic money market increased the Islamic bank’s exposure to a wide range of risks such as credit, operational, profit and liquidity risks.  We will attempt to explain the process of Islamic money market instruments and the possible Islamic contracts used in the sale and purchase of securities in the primary and secondary interbank money markets. The Islamic money market was established to avoid interest, uncertainty (gharar) and gambling (maisir) as promulgated by the Shariah divine laws. There are 10 instruments discussed in this paper consisting of various types of instruments such as Mudharabah Interbank Investment, Islamic Interbank Clearing System, Sale and Buy Back Agreement, Islamic Accepted Bill, Government Investment Issues, Islamic Treasury Bills, Cagamas Mudharabah Bond, Islamic Certificates, Islamic Private Debt Securities and Ar-Rahnu Agreement.  In the conventional interbank market, much of the money is lent overnight, i.e., on a day-to-day basis, or on weekends for three days. Banks with deficits will lend from banks with a surplus on an overnight basis to mitigate the liquidity risk and to maximize the banks’ return on idle funds. However, quite a lot of money can also be borrowed for very short periods of time other than overnight—seven days, fifteen days, or for almost any amount of time up to twelve months (Osman, 2001). Daily normal bank operations can often leave a bank in a surplus or deficit financial situation. Surplus must be invested and deficits must be financed to ensure that cash is not idle while adhering to the minimum reserve requirement as set by the central bank.  Banks with surplus money will invest excess cash in the interbank market while banks with deficits will borrow money in the interbank market. Thus, the interbank money market enables domestic credit institutions to make available to others (mainly banks) excess central bank balances or where necessary to borrow, such balances in order to add to their own liquidity using a cheap source of funds. However, this practice is clearly not sanctioned by Shari'ah rules because it is trading in balances (cash money) with central banks.  Lending and borrowing without interest (Qardh Hassan) is promoted in Islam with the aim to assist those in need. Interest is prohibited but profit sharing is acceptable in Islam.  Therefore, the Islamic Interbank uses the mudharabah concept and its instrument, Mudharabah Interbank Investment (MII).  MII refers to a mechanism whereby a deficit Islamic banking institution (investee bank) can obtain monies from a surplus Islamic banking institution (investor bank) based on the Mudharabah (profit sharing) concept. The rate of return is based on the rate of gross profit before distribution for investment of 1-year of the investee bank. The profit rate is unknown and not predetermined as in interest-based money markets. Only the profit sharing ratio not the profit rate will be predetermined by the surplus and deficit banks. The principal invested shall be repaid at the end of the period, together with a share of the profit arising from use of the funds by the investee bank (IIMM). The process of MII is illustrated below: Banks with excess reserves can invest their excess in the interbank money market and deficit banks may capitalize on this surplus using the mudharabah concept.  In this case, surplus banks will be the rabbu mal and deficit banks will be the entrepreneurs. The profit sharing ratio between the rabbu mal and the entrepreneur will be determined and, for example, a ratio of 70:30.  The rabbu mal or the surplus bank will receive 70% profit while the deficit banks will receive 30%. Another way to derive the profit and loss sharing ratio for the rabbu mal is by dividing the rabbu mal expected return by the entrepreneur expected return. The profit-sharing ratio for the entrepreneur is the difference.  Islamic Interbank Cheque Clearing System is a cheque settlement system for cheque deposits and withdrawals between Islamic commercial banks.  The central bank of Malaysia is the intermediary in settling the net differences between the banks. The money market instruments are created when participating banks are in deficit or surplus. The surplus will be invested by the central bank to the deficit banks.  For example, let’s assume there are only two banks in Malaysia. If bank A’s customer Y pays a customer Z from Bank B with a cheque for RM100,000 for the purchase of a car, the accounting treatment for the above transaction is as follows:


Relationships among Personality Traits, Job Characteristics, Job Satisfaction and Organizational Commitment - An Empirical Study in Taiwan

Su-Chao Chang, Ph.D., National Cheng Kung University, Tainan, Taiwan

Ming-Shing Lee, Ph.D. Candidate, National Cheng Kung University and Lecturer, Far-East University, Taiwan



 Within this research, we use path analysis to explore the relationships among personality traits, job characteristics, job satisfaction and organizational commitment. A questionnaire survey is utilized to focus on banking industries, service industries and manufacturing industries for empirical study. A total of 1350 questionnaires were sent with 562 valid questionnaires received. Among them, 43 replies were from banking industries, 149 replies were from service industries and 370 replies were from manufacture industries. Based on the study results, we make five conclusions: 1) employees with positive personality traits have a positively significant influence on job satisfaction; 2) job characteristics have a positively significant influence on job satisfaction; 3) job satisfaction has a positively significant influence on organizational commitment; 4) employees with positive personality traits  have a positively significant influence on organizational commitment; and 5) job characteristics have a positively significant influence on organizational commitment.


A Study on the Relationship between Corporate Governance Mechanisms and Management Effectiveness

Chung-Cheng Hsu, Ling Tung College and Ph.D. Student, Da-Yeh University, Taiwan

Ming-Jian Shen, Chin Min Institute of Technology and Ph.D. Student, Da-Yeh University, Taiwan

Ming-Chia Chen, Ph.D. Student, Da-Yeh University, Taiwan

Chin-Fang Chao, Ling Tung College, Taiwan



 This research mainly examines the effects of corporate governance on management efficiency using the SEM methodology to conduct tests. Management efficiency is calculated using Data Envelopment Analysis (DEA). The measuring variables for management efficiency are total production efficiency, allocative efficiency, technical efficiency, scale efficiency, and pure technical efficiency. Specifically, this research finds the effects of corporate governance variables on management efficiency for groups with different levels of information transparency and the significant differences in component factors for groups with different levels of information transparency. This research conducts path analyses of various dimensions for the high and low information transparency groups. Tests and comparisons find that in path analyses, the effects of shareholding structure on management efficiency, board supervisory structure on the proportion of remuneration of directors and supervisors, shareholding structure on the proportion of shareholding of directors and supervisors, and management efficiency on allocative efficiency are significantly higher for the high information transparency group than for the low information transparency group. In path analyses, the effects of shareholding structure on the proportion of shareholding of managers, board supervisory structure on the proportion of independent directors and supervisors, management efficiency on technical efficiency, management efficiency on scale efficiency, and management efficiency on pure technical efficiency are significantly higher for the low information transparency group than for the high information transparency group.


How E-Business Leadership Results in Customer Satisfaction, and Customer Lifetime Value

Mohammed M. Nadeem, Ph.D., National University, San Jose, CA



 The objective of this study is to provide organizations an understanding of the strategic role of customer satisfaction, and how it can be used as a vital marketing tool for customer life time value through E-Business leadership.  The main research question addressed by this study is why an organization should place customer value at the center of what it does to direct its long and short-term projects, and why should it use customer satisfaction instead of value?  This study also explains why companies must change their own behaviors to leverage customer lifetime value. Various issues are considered including, how does the customer value affect the process of e-marketing, and how does the return on customer entails in a growing networked economy. An in-depth review of theory, research, and practice is undertaken to understand the relationships between return on customer, customer satisfaction, and customer lifetime value.  The study also explains how the e-business leadership strengthens the integral role technology plays in leveraging organizations bottom-line by focusing on return on customer.  


Applying Innovation Jump Model to Evaluate the Value of the Firm Under Uncertainty

Ching-hsien Chiu, Ph.D. Candidate, National Sun Yat-Sen University,

and Lecturer, Far East University, Taiwan



 This paper presents a decision model using the real options approach for evaluating the innovation jump growth smart-phone business in the face of economic uncertainty and three jump events. Furthermore, this paper considers the effect of uncertainty after investing a smart-phone project to determine the optimal threshold for implementing the investment project. Additionally, the differences between the real options approach, innovation jump Diffusion and the net present value method are discussed. Numerical analysis of the smart-phone market using innovation jump diffusion is more consistent with the observed investment data than similar analysis using the net present value method and ROA for supporting the investment decisions in the face of uncertainty and innovation jump. From the result of sensitivity analysis and numerical example is, (1) increasing price uncertainty will increase the threshold and delay the timing of smart-phone investment. This is consistent with the results of real option view. (2) A higher fixed cost (invest cost) leads to higher threshold. (3) The higher Poisson jump parameter, the threshold is lower. (4) A higher discount rate (elasticity parameter, drift and the volatility), the threshold is lower.


Recreational Demand for Tuskegee National Forest:  A Non-Market Valuation

Ellene Kebede, Ph.D., Mudiayi Ngandu, Ph.D., John Schelhas, Ph.D., and Doris Batalia, Graduate Student,

Tuskegee University, AL



 The demand for outdoor recreational activities has been increasing in the United States and is a significant part of the lifestyle in the South over the last few years.  Forest recreational opportunities are available on public-owned forests, and some provide amenities such as, drinking water, electricity, flush toilets, and sewer at each campsite. Some charge a form of service fee.  Tuskegee National Forest (TNF) is the smallest of four of Alabama’s national forests that serves visitors from the surrounding counties but does not provide amenities. However, the public demand has not been assessed. The purpose of this study was to use non market valuation methods to estimate the visitors’ demand and willingness to pay for such amenities, if they were to be provided as well as to assess the different recreational activities in TNF.  Visitors’ data were collected and regression analysis was employed to estimate the recreational demand. The result suggests that there is a demand for the TNF.  The visitors who come from distance are more willing to pay entrance fee than the visitors from closer proximity.


Socioeconomic Profile of Students of Human Resources in Turkey and Their Occupational Expectations

Dr. Harun Demirkaya, Kocaeli University, Gebze, Kocaeli, Turkey



 One of the most important results of the processes of information society is that it has radically changed the way we look at human resources. Man who produces and works with information has assumed a synergic role combining all other resources. This phenomenon has brought human resources to the foreground. Parallel to global developments, human resources management is rapidly developing in Turkey. It is becoming a part of strategic management, and HR managers are climbing to the top of organizations.  The results of a recent research conducted on students of Human Resources Program at Gebze Vocational School of Kocaeli University, which is the first undergraduate school in the field of human resources in Turkey, highlight the process of professionalization of human resources management, training and education of professionals, and the future of this profession.   Today our world is passing through the processes of information society brought about by tremendous developments seen in information and communication technologies. Concurrent with those developments globalization, which eliminates borders in terms of free movement of goods, services and information, has taken competition from national to international dimensions.


The Foreign Exchange Rate Fluctuations on Export-Oriented Taiwan Companies

Yi-Wen Chen, Hsing Wu College, Taiwan, R.O.C



 This study offers a concise exploration of the effects of foreign exchange rate fluctuations on Taiwanese export-oriented companies.  In contrast to the findings of studies on the impact of foreign exchange rate fluctuations on Western corporations, research on corporations in Taiwan reveal the significance of the government in influencing the effects of the foreign exchange rate fluctuations in the region.  Furthermore, the integration of the country’s economy with regional and world economies also plays a significant role in shaping the corporations’ susceptibility to foreign exchange rates.  Because of the interventionist position of the government, most corporations in Taiwan are extremely cautious in managing their risks by relying on domestic sources to fund their domestic investments.  Furthermore, they largely rely on the government to mitigate the effects of exchange rate fluctuations.  Only minorities of Taiwanese corporations obtain foreign debt, and even fewer corporations hedge their currency exposure.  Therefore, it is evident that the financial derivatives market in Taiwan is still comparatively weaker than in the West.  Nonetheless, through ongoing reforms and the liberalization of the financial sector, corporations in Taiwan might learn to manage their risks by using hedges instead of depending on the government to deal with foreign exchange rate changes.


Examining Ethical Intentions of Individual Employees of Taiwan from Theory of Planned Behavior

Miao-Ling Fang, Southern Taiwan of Technology University, Taiwan



 This study attempts to better understand the ethical considerations of employees facing ethical dilemmas.  The theory of planned behavior (TPB) provided a basis for the theoretical framework of this study. This work examines the influence of independent variables on the ethical intentions of individual employees.  In predominantly Chinese relationally oriented society, interpersonal activities in Chinese culture are heavily influenced by the closeness of personal relationships.  This study therefore argues that moral dilemmas are resolved based on considerations of the relationship between the moral agent and the people whose interests are affected by the decision.  While adopting a scenario methodology, this investigation designed a scenario to explore the influences on the ethical decisions which workers may be asked to make. The study was conducted in a field setting using the survey methodology.  The subjects were employees of domestic enterprises throughout Taiwan, and a sample was collected from current full-time workers of private enterprises.  One thousand questionnaires were distributed, and 690 useable questionnaires were returned.


Financial Crises in Turkey and the Effects of Politic Administrations on Economic Equilibrium

Dr. Birgül Þakar, Kadir Has University, Istanbul, Turkey



 Political administrations have laid the grounds for an economic crisis in Turkey. In this study, the emergence of an economic crisis in Turkey and the developments after the crisis are chronologically examined and an explanation is offered as to the cause and effect relationship between the political administration and economic equilibrium in the country.  Because of the political administrations in place before the 2001 economic crisis in Turkey, the country’s market conditions that before the 2001 economic crisis can be characterized as follows: high prices of consumables, high interest rates, current account deficits, budget deficits, structural defects in government finance, rising inflation and fixed currency applications, rising government debt, declining savings rates and increased dependency on foreign capital stock. Entering into the conditions of crisis during a time when the exchange value of the country’s national currency was rising, speculative finance movements and shrinking of foreign currency reserves happened due to expectations for devaluation and because of foreign investors resistance to financing national debt, and a financial risk occurs.  During the February 2001 crisis and immediately following, devaluation and reduction of value occurred in Turkey’s stock market. While changing over to the system of floating exchange rates in the midst of this crisis, the effects of the crisis on the real economy are discussed in this study. Administered politics include financial reforms, such as the rearrangement of banking systems. These reforms followed with the provision of foreign financial support. There have been winners and losers in the imbalance of income distribution, which has recently become more evident in Turkey’s fragile economy.


Obesity as a Factor in Workforce Productivity, Economic Costs, and Options for Remedies

Vince Luchsinger, Ph.D. and Lee Richardson, Ph.D., University of Baltimore, MD



 Increasingly, obesity has become a topic of interest for some time in our society from standpoints of esthetics, health, ergonomics, and accommodation in the workplace. A recent announcement by the U.S. Center for Disease Control and Prevention in Atlanta signaled strong concern over the extent of overweight and obese population. Further, a recent study by the Trust for America’s Health has shown obesity to be rising in the country while a national policy paralysis threatens to make the problem worse. Based upon longitudinal studies, the impact of excess weight on wellness, shorter life spans, and productivity sounded an alarm for many in the health, public policy, and corporate communities.  This work will review the development of the issue of obesity, and it’s impact, especially on organizations and the workplace. Discrimination issues will be included.  Economic costs will be a major objective for study. Further, alternatives for dealing with obesity will be explored.


China’s Capital Account Liberalization: Issues and Options

Dong Zhiyong, Ph.D., Peking University, Beijing

Yang Jiamu, Renmin University of China, Beijing


Capital account liberalization is a difficult thing. It is like fire. You do not want to play around with it. You want to heat your house, but be careful that you do not burn yourself.’ The explosive growth of international capital flows and international financial transactions is one of the most profound and far-reaching economic developments of the late twentieth and early twenty-first centuries. Few countries are unaffected.   Capital account liberalization remains one of the most controversial macroeconomic policy options to emerging economies. Although, in a significant number of cases, financial liberalization, both domestic and international, appears to have been associated with costly financial crisis, and in some regions and some periods, progress toward capital account liberalization was reversed, the re-impositions of controls were not sustained (IMF, 1998a). Even countries that have shown a willingness to re-impose controls in times of crisis have sought to return to the path of capital account liberalization and restore their international capital market access when conditions permit. Johnston and others (1998) similarly note that although the pace of liberalization slowed in 1997, and some of the Asian countries most directly affected by the crisis re-imposed a variety of restrictions on capital account transactions, the recent rise in volatility in emerging markets did not trigger a generalized resurgence of capital account restrictions.


Small and Medium Enterprise’s Benefits of Next Generation e-Business Platforms

Volker Hoyer, SAP Research CEC, St. Gallen, Switzerland

Till Janner, Peter Mayer, Marta Raus, and Christoph Schroth

SAP Research CEC and University of St. Gallen, St. Gallen, Switzerland



 In this work, we propose a novel e-Business architecture that takes into account the specific needs of small and medium-sized enterprises (SMEs). The envisioned system supports collaborative and evolutionary modeling, semi-automatic negotiation and finally execution of business processes and ensures true interoperability through a common semantic repository. Potential business partners are enabled to easily retrieve each other and initiate business relations in an extremely intuitive manner. With the help of the Balanced Scorecard approach, we thoroughly investigate economic benefits SMEs will experience when participating at this system. The analysis highlights advantages regarding five different perspectives: SMEs may capitalize from reduced operating costs and improved gains (financial perspective), increased customer satisfaction and retention (customer perspective), faster and more efficient internal processes (internal working process perspective), improved supply chain integration (supply chain perspective), and technological advancements (system benefits).


A Test of the CAPM on a Small Stock Market

Stefan B. Gunnlaugsson, MSc, University of Akureyri, Akureyri, Iceland



 The relationship between risk and returns is an important subject when studying capital market efficiency.  It is obvious that investment in riskier assets such as stocks should generate a higher return than investment in less risky assets.  It was not until the CAPM was developed that academics were able to measure risk and its return.  CAPM is based on the assumption that asset returns are linearly related to their covariance with the market’s return.  The CAPM assumes that assets with higher systematic risk have a higher return than do assets with lower systematic risk, and that assets with the same systematic risk should give the same return. The CAPM also implies that there is no relationship between firm-specific risk and returns because specific risk can be eliminated through diversification.  In this article, we present the result of a study of the validity of the CAPM on the Icelandic stock market.  This study starts in January 1999 and ends in May 2004.  The results are surprising.  They indicate that the CAPM has worked well in the small Icelandic stock market and that it, or the beta coefficient, does explain returns better than on larger foreign stock markets.  There was a strong relationship between the beta coefficient and stock returns in this research. Further, the stock returns with high betas were higher than one would expect according to the CAPM.  Therefore, the SML was steeper than one would expect according to the CAPM.  Like the CAPM predicted there was no relationship between firm-specific risk and returns. 


Student Integrity

Kevin Mason, Ph.D., Arkansas Tech University, AR



 Academic dishonesty may invalidate student performance assessments (Gomez, 2001) and may also lead to unethical behavior in the business environment (Maramark, 1999).  Therefore, academic integrity is a matter of concern for educators, students, and society as a whole (Bushweller, 1999; Wilson, 1999).  This exploratory study examines students propensity to commit questionable academic behaviors are their perceptions concerning these acts.  Academic integrity, defined as an adherence to a code of academic values (Merriam-Webster, 1997), is a matter of concern for educators, students, and society as a whole (Bushweller, 1999; Wilson, 1999).  For educators, students’ academic dishonesty leads to the invalidation of their work (Gomez, 2001).  In addition, those students with academic integrity often suffer as they compete for grades and jobs with fellow students who ‘make the grade’ by unethical means (Bushweller, 1999).  Academic integrity may also serve as a surrogate for the character of society and, thus, to the extent that integrity diminishes, unethical practices by business and institutional leaders are likely to increase.


The Impact of Disconfirmation and Customer Satisfaction on Experimental Choices for Broadband Services

Con Korkofingas, Macquarie University



 In recent years there has been disenchantment with the performance and relevance of customer satisfaction models in applied business contexts. An expected utility framework overcomes many of the weaknesses and provides a possible relevant solution. This paper applies a designed stated choice experiment to broadband services using a three-stage approach. The first stage sets product expectations and determines choices. The second stage introduces a product experience for one of the alternatives while the third stage asks respondents for a post experience choice between competing alternatives. The impact of expectations, performance and disconfirmation and satisfaction on future choices is estimated using a contingency tables and a binary logit model and contrasted with pre-experience choices. Overall, the actual performance of the broadband service is important in determining satisfaction with the service which in turn influences brand choice. Customer Satisfaction/Dissatisfaction (CSD) studies emanate from studies of life and work satisfaction in psychology and behavioural studies of the 1950’s. Initial studies (Cardozo, 1965); (Olshavsky and Miller, 1972); (Anderson, 1973) attempted to model the determinants of single equation CSD functions. Evolution of CSD modelling involved application of multi-equation models to link complex pre and post-purchase behaviours involving expectations, attitudes and future purchase intentions. (Bearden and Teel, 1983); (Hellier, Guersen et al. 2003); (Oliver, 1980); (Oliver and DeSarbo, 1988); (Oliver and Swan, 1989); (Swan and Trawick, 1981); (Teas, 1993);. In recent times, CSD models have been used as the basis of service quality evaluations and as integral components of customer relationship systems (Bolton and Drew, 1991); (Johnson and Gustafson, 2000); (Spreng et al,. 1995) ;.(Taylor and Baker, 1994)


Automobile Industry in China and India:  Backgrounds, Trends and Perspectives

Dr. Hyun-Sook Lee, International Consultant, Mexico City, Mexico

Dr. Beverlee B. Anderson, California State University San Marcos, CA



 Strategic alliances and joint ventures are growing in importance in the automobile industry.  The partnerships can be between competitors, suppliers, component manufacturers, and distributors, among others. This exploratory study analyzes the automobile industry in two developing countries, China and India. The countries are choosing different approaches to develop their auto industries.  China requires foreign firms participate in joint ventures with local companies, while India encourages direct foreign investment.  Even though both countries are similar in many respects, the Chinese auto industry has grown substantially faster. India, however, expects both its demand and production to see rapid expansion within the next few years.  A large number of industrial manufacturers are forming various types of alliances in a bid to improve their competitive position (Zineldin and Dodourova, 2005).  The number of strategic alliances has almost doubled in the past ten years and is expected to increase even more in the future.    Murray et al (2005) explained that many firms are consolidating their supplier base and developing strategic alliances with key suppliers to achieve strategic goals that range from cost and risk reduction to new skills or knowledge acquisition.  Thorelli (1986) defined strategic alliances as interorganizational governance structures that exist between markets and hierarchies.  Alliances are expected to create more value than 'go-it-alone' approaches, especially when the capabilities of the partners are combined in such a way that the competitive advantage of either the alliance or one or more of the partners is improved (Borys and Jemison, 1989).  Thus, alliances provide access to complementary assets without requiring the investment or long-term commitment to those assets as in acquisitions (Ireland and Hitt, 1999).  For the automobile industry, there are several cases of strategic alliances among competitors.  The partnership between Renault and Nissan (Durand and Sebag, 2005) was a confirming example cited by Ghosn (2005),  that partnering globally is an opportunity.  An equal relationship makes two winners; learning through difference is essential. Different cultures can be preserved provided there is a common yardstic


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