The Business Review Journal

Vol. 7 * Number 2 * Summer. 2007

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

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

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Hydrocarbons to Hydrogen Toyota’s Long-term IT-based Smart Product Strategy

Dr. William V. Rapp, New Jersey Institute of Technology, Newark, NJ



The world Expo in Nagoya in 2005 signaled Toyota Motor Corporation’s (TMC) emergence as the world’s leading automobile manufacturer and provided a strategic insight concerning its plans to move vehicle transportation from dependence on hydrocarbons to hydrogen. In addition it showed that in pursuing this evolving strategy the long-term role of hybrid vehicles and the use of embedded IT in combination with organizational IT will continue into the hydrogen era.  There are important connections between the IT activities embedded in the automobile and TMC’s well-researched production system, smart design, and globally based automated consumer ordering systems. This is because the efficiencies of these latter systems will enable TMC to continuously reduce the cost of the hybrid engine, fuel cells and embedded IT faster than its competitors, making them not only the industry’s technology innovation leader, but also the continued cost leader. Toyota’s resulting control over not only the intellectual property related to hybrids on which they will receive expanding revenues as demand for hybrid vehicles grows, but also over the global supply chain in areas such as hybrid engines will cause continuing problems for competitors. The corporate culture that has resulted in TMC’s on-going and well recognized leadership in quality, production efficiency and rapid product development combined with their deep financial resources means these embedded IT product initiatives and their global impact need to be taken increasingly seriously.  Over the last 30 years certain countries have combined the Olympics and an Expo as a way to announce a change in their status on the world stage; examples include Japan’s spectacular economic recovery, Spain’s entry into the EU and China’s emergence as a major global power. (2) So what was the purpose behind the 2005 World Expo in Nagoya? It indicated both TMC’s emergence as the world’s leading automobile manufacturer and provided a strategic insight concerning its plans to move vehicle transportation from dependence on hydrocarbons to hydrogen both as a way to address global environmental concerns, - the Expo’s theme -, and as a way to alter the competitive playing field in automotive transportation.


A Cross-sectional Analysis of Earnout Contracting in Acquisitions

Dr. David R. Beard, University of Arkansas at Little Rock, Little Rock, AR



This research examines a sample of acquisitions in which earnouts are used and contrasts that to a sample of “traditional” acquisitions to explore specific hypotheses concerning agency, informational asymmetry, and the use of an earnout as a means of financing.  Logit analysis is employed to determine the choice between earnout vs. non-earnout transactions.  Tobit analysis is used to examine the proportion of the deal that is paid contingent upon future performance.  The paper ends with a post-acquisition analysis of these transactions. In this paper I analyze the determinants for the use of an earnout.  In addition, I look at the proportion of the contingent payments associated with the earnout contract, relative to the total value of the deal.  Finally, post-merger retention of management and post-merger contingent payments are examined.  In an earnout, the bidder agrees to pay the target an initial amount for the acquisition plus predetermined future payments contingent on the target’s achievement of performance milestones within a specified time period.  The literature has identified various motives for the use of earnout contracting in the acquisition of target firms.  In particular, Kohers and Ang (2000) and Datar, Frankel, and Wolfson (2001) contend that earnouts are relegated to mergers where problems of informational asymmetry and agency are so detrimental that this costly type of contacting must be employed to protect the interest of bidder shareholders and target firms.  In this paper, I examine the use of earnouts through an empirical comparison of a sample of acquisitions involving earnouts to a control sample of traditional acquisitions.  Within each sample, I also examine differences that exist when the target is a private firm compared to a subsidiary of another firm.  I employ a logistic regression to determine the variables that contribute to the choice of an earnout in an acquisition.  Next, within the earnout sample I use a tobit regression analysis in order to examine the determinants of the proportion of the contingent payments relative to the total size of the acquisition. 


Small Business and Globalization

Judy Lee and, Sam Houston State University, Huntsville, Texas

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



The current era of globalization has offered some major challenges for small businesses in the United States. The ease and relative low cost of communications, transportation and marketing world wide have led to significant issues for the small business in the US. This paper will investigate some of these issues and the impact on survival.  The small business in the process of purchasing a new copy machine has dealt with the same copy repairman who sold them their current copy machine for 8 years. The business is happy with the old machine and the repairman provides excellent service anytime, if there is ever a problem with the machine, the repairman is there to fix it usually in a few hours, always within 24. So when it came time to purchase a new machine the business went to their “copy guy” for quotes. He is very familiar with the business, and their price constraints and usage. When the quotes came in and a decision was made on the machine to purchase, a search was made on-line to see the pricing elsewhere and confirm the best price was obtained. The manager was surprised to find that the machine he was planning to purchase for $4100 could be purchased for $2300 on-line. A question arose as to what is happening to the small business man in America? Is he being inched out by the forces of international trade, globalization, technology and the Internet? How can small business in America survive this kind of global pressure? In the instance of the “copy guy”, the manager wants to purchase a machine from him. As a small business he needs these services. If the forces in the market make it impossible for the “copy guy” to compete selling his machines the business will be worse off because of the need for a dependable repair person that will be available within 24 hours. With these issues in mind, the research for this paper delves into the issue of globalization.  Slywotzky, Baumgartner, Alberts and Mousanas (2006) argue that globalization is causing businesses to redesign their strategy as can be seen in the above illustration. Globalization tends to make weak businesses weaker and strong designs stronger.


A Research Framework in Banking Studies: “Researching and Writing Articles a Researcher’s Odyssey”

Dr. Hemant Deo, University of Wollongong, Australia

Dr. Kathy Rudkin, University of Wollongong, Australia



A research framework is an important feature of any academic research since it provides a researcher with an avenue of filtering his or her data to tell a particular story.  Many studies in banking have been researched from data which was filtered through a mainstream, positivist or scientific approach and therefore these studies have not taken into account the social, economic, political and historical factors which are an important component of any academic research.  The aim of this research paper is to bring out the importance of a research framework within case studies and the process the researcher undertakes, in his or her journey to complete the researcher’s odyssey. Banking is considered to be a product of its social environment.  The overall interdependency of banking operations and their environment results in change, which is brought about by a process of mutual adaptation.  To capture the totality in a research study, there is a need to see the inter-connection of social factors (Blumer, 1978; Funnell, 1998; Hines, 1988).  It is maintained in this paper that the philosophical assumptions that underlie mainstream research can be questioned as to their ability to capture interactions with social environments.  For example, by exposing the philosophical assumptions of scientific or mainstream approaches and seeking their implications for what understanding they can bring to real world situations shows us a narrow interpretation of the consequences of banking social reforms.  Not only does such understanding have the potential to improve people’s welfare through making visible the inadequacies of mainstream investigations, it also highlights the issue of “how little we know about the actual functioning of accounting (banking) systems in organizations” (Hopwood 1979, p145).  In the past decade banking research has used a mainstream, positivist or hypothetico-deductive approach and this has led to an emphasis on cause and effect relationships between banking and the environment in which it operates.  Using a positivist research paradigm raises the question can such research bring out or capture the social and political dimensions of banking?  It is argued social and political dimensions have not been sufficiently explained by any banking literature using positivist approaches, which have dominated banking research (Koch & MacDonald, 2003; Moore et al., 1997; Saunders, 2001; Rose, 2002). 


Introducing New Technical Indicators for Financial Markets

Dr. Rajeshwar Prasad Srivastava, Towson University, Towson, MD



This paper introduces two technical indicators for chart analysis of financial markets. One is called Gravity Indicator which gives buy and sell signals. The other is a volatility based stop loss channel which gives stop loss points to control risk and protect profits.  The indicators such as MACD, RSI, Stochastic and moving average crossovers work best in a certain type of markets.  For example, RSI and Stochastic work  best in a choppy market with small oscillations, MACD and moving average crossovers work best in a trending markets. Oscillators (Carr, 2005) like RSI and Stochastic signal over-bought and over-sold conditions too quickly in a trending market. They generate too many false signals.  MACD and moving average crossovers are lagging indicators.  By the time you get a signal in a choppy market, the market turns to the opposite side.  MACD is a difference indicator, so sometimes it turns too quickly in a trending market.  Because of these limitations, we have a variety of indicators but they give contradicting signals in the same timeframe.  This creates uncertainty and fear to take a trade.  This paper alleviates this problem by introducing a single indicator approach which cuts down risk and builds confidence.  The Gravity Indicator (GI) along with the stop loss channel can help in becoming a successful trader. One indicator approach cuts down the level of confusion and fear, and saves time in technical analysis.  This paper discusses when to buy and when to sell; where to place stop loss; how to manage money for maximum return; and how to manage emotions of fear and greed. This presents two case studies, one for an oscillating market and the other for a trending market.  It compares the performance of the Gravity Indicator with two of the most popular indicators MACD and Stochastic in these two cases. The ingredients needed to succeed in trading include:Technical  analysis of markets before making a trade. Risk management by daily monitoring and periodic review.  This paper focuses on technical analysis of price charts, and risk management.  It is based on the assumption that the price is a true representation of supply and demand which drives the market.  Fundamental analysis is important but technical analysis is essential for success. 


Social Return on Investment: Applying Business Principles to Starting and Managing Charitable Organizations

Dr. Thomas Clark, Xavier University, Cincinnati

Dr. Cathy McDaniels-Wilson, Xavier University, Cincinnati



This paper reveals the strategy and leadership required to implement a vision of a major and unique 21st century museum, the National Underground Railroad Freedom Center (NURFC), one which promotes dialogue between Blacks and Whites. Ed Rigaud, Founder of the National Underground Railroad Freedom Center, and Spencer Crew, Ph.D., its Executive Director and CEO, answer questions about the NURFC, a center which opened in Cincinnati in August 2004. It chronicles the struggles and challenges of slaves escaping to freedom—and the continuing impact of slavery in American life. In the course of the interview, they describe three key action principles adapted from business and applied to the management in a nonprofit setting : Social Return on Investment; HOFF, a motivational principle; and Freedom’s Pyramid, an adaptation of Maslow’s hierarchy to racial reconciliation issues.  Race relations in America are more defined by day-to-day experience than by legal barriers. Forty years after legal discrimination ended, Race still divides Americans. Controversies over various charges of police profiling, the celebration of Martin Luther King Day, the display of the Confederate flag on state property, the overturned conviction of those originally accused in the Central Park Jogger trial, and the media’s showcasing differing reactions of Blacks and Whites to the outcome of the O. J. Simpson murder trial all highlight the deep divisions that exist between many Blacks and Whites.  


Measuring the Effects of Anxiety and Self-Efficacy on Finance Students

Robert Jozkowski, Eckerd College, St. Petersburg, FL

Dr. Steve Sizoo, Eckerd College, St. Petersburg, FL

Dr. Naveen Malhotra, Eckerd College, St. Petersburg, FL

Morris Shapero, Eckerd College, St. Petersburg, FL



Because of their quantitative content, Finance courses are particularly difficult for business majors.  Math-related material causes many students to become anxious, which can impede their learning and their performance.  Also, students who think they will perform poorly on a task do worse than those who think they will succeed.   The difference is the student’s self-efficacy.  This exploratory study attempted to examine “Finance anxiety” in business students by creating a Finance Anxiety Scale to measure that phenomenon, as well as its relation to the construct of self-efficacy.  The objective of this research was to begin examining whether or not the critical message of finance could be made more accessible to students without diluting the necessarily rigorous nature of the discipline. The results and implications of this preliminary study are discussed, as well as essential future research.  Even though knowledge of finance is considered critical to success in business, studies indicate that many business students have more difficulty with Finance courses than any other business discipline.  Literature suggests that this is primarily due to the quantitative nature of Finance.  Quantitative material causes many students to become anxious.  Anxiety, in turn, is said to impede performance, causing students to fall behind in class and to postpone initiating remedial action. At the same time, reports show that students who think they can perform well on a particular task do better than those who think they will fail.  This paper describes an attempt to measure and assess this Finance-course anxiety.  Furthermore, it examines the relationship between Finance anxiety and self-efficacy--an individual’s confidence in his or her ability to accomplish a task.  Finally, the paper discusses the implications of this exploratory study and suggests necessary future research.  Financial performance is considered the chief indicator of the success of organizational decisions and activities (Thompson, Strickland, & Gamble, 2006). 


The Impact of Workplace Constraints on Organizational Change

Dr. Melissa L. Waite,  SUNY College at Brockport, New York



Theoretical support for relationships between situational workplace constraints, employees’ control over these constraints, perceptions of corporate goal attainment, management trust and procedural justice are proposed. Qualitative data analysis of ten perceived workplace constraints, based on a taxonomy developed by Peters and colleagues (1985), demonstrate employees’ frustration with perceived workplace constraints. Analysis of survey data revealed no significant differences between employees in change-ready and change-advanced groups on their perceptions of, or control over, workplace constraints. However, perception of goal attainment was significantly related to lower levels of workplace constraints. Likewise, significant relationships were found between constraints and trust in management and perceptions of pay fairness. In a survey of more than 9,000 employees, Watson Wyatt Worldwide found most employees lack the skills and authority to do their jobs. Employees know the organization’s goals and their own duties, but fail to get the information or performance feedback needed to perform their jobs, and lack the power to make decisions to satisfy customers (Wall Street Journal, 1997).  The findings of this survey are not entirely surprising. Dating back to the 1980s, Peters and colleagues studied situational constraints, defined as "a situational factor which acts as an obstacle to performance by preventing persons from fully utilizing their relevant abilities and motivation" (Peters, O'Connor and Eulberg, 1985: 106).


Job Satisfaction and Knowledge Management: An Empirical Study of a Taiwanese

Public Listed Electric Wire and Cable Group

Dr. Yuan-Duen Lee, Professor, Chang-Jung Christian University, Taiwan

Huan - Ming Chang, Chang-Jung Christian University, Taiwan



In organization scope, most people discussed and focused on how to inspire employees and what they can contribute based on performance and efficiency on job, not so much cared about the effect on knowledge management. This paper studied staffs’ views of the relationship between employees’ job satisfaction and knowledge management from one leading electric wire and cable group which it has been globalization and benchmarks in Taiwan. Utilizing full 173 staffs in this group of June 2006, the study analyzed the questionnaire responses of 123 staffs. The study adopted ‘job satisfaction’ and ‘knowledge management’ as its two dimensions, and then utilized descriptive statistics and factor analysis to identify the major factors of the dimensions. Canonical correlation analysis is then used to discover the relationship between the dimensions. The study concludes that: (1) the internal recognition of organization is conducive to knowledge management. (2) self-recognition will enthuse over knowledge transferring and sharing. (3) knowledge transferring and sharing will be the competitive advantage for their company in operation and business. The paper concludes with management implications and suggestions for future study. Generally speaking, job recognition is a factor to drive knowledge pool of an organization.  The Taiwanese wire and cable industry has been in existence for more than half of century. Job satisfaction of this business is always overlooked due to it is with much technology and knowledge, but less labors’ force. Electric wire & cable business involves lots of basic technology and knowledge of materials and electricity.


Characteristics of Professional Services and Managerial Approaches for Achieving Quality Excellence

Dr. Jukka Ojasalo, Professor, Laurea University of Applied Sciences, Espoo, Finland



The purpose of this article is to identify the special characteristics of professional services and suggest methods how to manage them in order to achieve quality excellence. The research methodology of this article is based on an extensive literature analysis. Ten distinctive characteristics of professional services are identified. A framework for managing the special characteristics to achieve quality excellence in professional services is suggested.  Professional service quality is, above all, an approach to everything a professional service firm does with or for the client. Whatever a professional service firm does, or omits to do, has quality dimension and direct or indirect impact on the quality of the services provided to clients, as well as on client satisfaction (Kubr, 2002, 723-4). Thus, quality management in professional services includes management of each aspect of professional service which influence directly or indirectly customer satisfaction. Professional services have certain special characteristics. In order to achieve quality excellence in professional service, these characteristics should be considered in the management, in particular. This article identifies the special characteristics of professional services, and also discusses the managerial approaches which relate to these characteristics and which are relevant for achieving quality excellence in professional service.  This section discusses the special characteristics often associated with professional services in the literature. The literature does not suggest any exact or absolute definition of professional services which would draw a sharp line between them and other services.


Feasibility of Taiwan’s Establishing an International Board Market

Dr. Chuang-Yuang Lin, National Taipei University

Dr. Jia-Jhen Liu, Taiwan Hospitality & Tourism College

Shang-Chieh Yang, National Taipei University



In hopes of pushing Taiwan’s capital market into the international arena and carrying out the policy aimed at encouraging returning Taiwanese business to pursue main board listing, Executive Yuan’s Financial Supervisory Commission proposed the idea of an “international board” in 2005. The difference between an international board and Taiwan Depository Receipts (TDRs), which some foreign companies have issued in Taiwan, is that the former are traded in U.S. dollars. Although the topic of luring returning Taiwanese businesses onto the main board has been widely discussed in articles and academic papers, most of the literature has emphasized capital markets and regulations or discussed the matter through case studies, and have lacked a practical approach. This paper reports on in-depth interviews with foreign companies that have issued TDRs in Taiwan in order to analyze the feasibility of  and provide recommendations for the establishment of the “international board.” It also aims to explore the problems that are likely to occur with such a board by identifying the companies’ motivations regarding issuance, performance, and experience. When affiliation TDRs (Taiwan Depository Receipts) are issued in Taiwan, how to push Taiwan’s capital market into the international arena becomes a hot issue for government authorities. Executive Yuan’s Financial Supervisory Commission proposed the idea of an “international board” in 2005. The topic of luring Taiwanese businesses onto the main board has been widely discussed in articles and academic papers. However, most of the literature have emphasized capital markets and regulations, and lack a practical approach.


Extolling the Virtues of Language Immersion in Whole-Family Camps

Dr. Brendan T. Chen, Asia University, Wufeng, Taiwan

Dr. Wenchi Vivian Wu, Chien-Kuo Technology University, Changhua, Taiwan



This study investigated the needs and characteristics of potential campers at whole-family summer language programs using phenomenological methodology. Ten subjects were interviewed to find the preferences of business- and recreation-oriented learners regarding languages, program length and location, cost, and learning styles. The researchers also investigated the skills potential campers expect to learn, reasons for attending, and desired recreational activities. The review of related literature provides an overview of immersion camps, family camps, and content-based teaching, and a model for creating whole-family vacation programming at American-style outdoor lodging camps and/or the additional of recreational activities at immersion culture and language camps is described.  Especially in today’s society, finding a way to successfully spend time relaxing together as a family is important. No matter the country, families in industrialized nations increasingly have trouble finding time to eat a meal together, much less spend quality time relaxing. In addition, most working adults are given only a limited amount of time for vacation; this varies from Europeans’ and South Americans’ four weeks to Americans’ and Asians’ one week to two weeks of paid time-off. As a result, families have to squeeze as much into their vacations as possible.  Most parents want their trips to give their children the best experiences and learning adventures possible in an affordable and economical way.


E-Business Strategies and Models: An Exploratory Study in China’s Securities Industry

Dr. Dan-ming Lin, Shantou University, Shantou, China

Dr. Zongling Xu, Shantou University, Shantou, China

Bin Wang, Sun Yat-Sen (Zhongshan) University, Guangzhou, China



This paper examines strategic issues related to the emerging concept of business model in the context of China’s securities industry. Through a brief literature review, theoretical connections between strategy and business model are proposed, and the key components of business model are identified. A research hypothesis concerning the relationship between e-business strategy and e-business model is then developed by refining relevant concepts. Accordingly, an empirical analysis is conducted, based on an online survey on 57 securities companies certified for online securities businesses in China. Overall, research findings indicate tentative support to the research hypothesis. Theoretical and practical implications are also drawn.  The incoming internet age has witnessed the emergence and increasingly broader diffusion of e-business over the last fifteen years. Among the many industrial sectors equipped with advanced information technologies (IT), the securities industry, with its earlier adoption of electronic networks and digital nature of transactions, has appeared as playing a pioneering role in promoting e-business applications. A growing amount of securities trading is now conducted over the internet, mobile phones and cable TVs. It is estimated that, from 1996 to 2001, the proportion of online securities trading volume had increased from 7% to more than 20% in the United States (U.S. Securities and Exchange Commission, 2001). A similar trend has also taken place in the Asia Pacific region.


How to Improve China’s Enterprise Internal Control System: Based on the Perspective of Corporate Governance

Dr. Jianguo Yuan, Huazhong University of Science and Technology, P.R. China

Chunsheng Yuan, Huazhong University of Science and Technology, P.R. China



Analyzing the relationship between corporate governance and internal control systems, this paper compares the effect of corporate governance on the operational efficiency of enterprise with that of an internal control system. After comparative analysis of the effect of corporate governance and internal control, and considering two factors, namely the managers’ choice under asymmetrical information conditions and their path dependence when making decisions, we find that the primary cause of internal control invalidation is weak corporate governance. We maintain that, in order to improve the validity of enterprise internal control systems, the corporation should strengthen the supervisory system of corporate governance to shield top managers from the temptation of moral hazards. In recent years, a series of important financial report fraud cases involving companies such as Enron Corporation, Global Crossing, and WorldCom has shaken investors’ confidence in the stock market, bringing substantial losses to investors. In the U.S., financial statement fraud (FSF) has cost market participants—including investors, creditors, pensioners, and employees—more than $500 billion during the past several years (Rezaee, 2005). In China, the circulation market value of A-shares has been reduced from RMB 1736.281 billion at the end of June 2001 to RMB 1179.8 billion by July 1, 2005 (Wei, 2006). In recent years in China, the top managers of almost all listed companies were responsible for serious financial report fraud.  What causes this phenomenon? Are companies’ internal control systems disabled or is corporate governance so weak that it disables the function of internal control? In order to find answers to these questions, internal control system research has gradually focused on the relationship and the interaction mechanism that exists between internal control systems and corporate governance.


Test Conflict of Interest in Analysts’ Recommendations from a New Perspective

Luke Lin, National Sun Yat-sen University, Taiwan

Dr. Chau-Jung Kuo and, National Sun Yat-sen University, Taiwan

Dr. David So-De Shyu, National Sun Yat-sen University, Taiwan



Many literatures highlight potential conflicts of interest in the production of investment research coming from the competing roles analysts play in financial markets. The pressures with investment banking business and brokerage commissions may provide incentives for analysts to present positively biased opinions. This paper investigates stock price reaction to analysts’ information reported in a Taiwanese financial newspaper. There are two departments within Taiwanese brokerage firms. The research department is motivated to maximizing commissions by providing timely, high-quality information for their clients. The dealer department, on the other hand, trade assets for their own accounts. These two objectives may generate an alternative conflict. We directly quantify and examine the question of whether two departments have a conflict of interest to each other, using both ratios of forecast error and the change in selling volume. Such an approach of focusing on these two ratios has the additional advantage that investigations are not subject to a conjectural bias from analysts’ characteristic, and has not been carried out before. The result indicates that potential conflict occurs between brokerage firms’ research departments and dealer departments.  In the real world, there is no doubt that individual investors have a weakness in cost-searching and information analysis skills. With the recent growth of mass media, institutionally and professionally recommended information is distributed to people virtually free. But do these recommendations really give investors some useful information?


Manufacturing Competitiveness of Croatia: Results from the MANVIS European Delphi Study

Dr. Lovorka Galetic, University of Zagreb, Croatia

Dr. Jasna Prester, University of Zagreb, Croatia

Ivana Nacinovic, University of Zagreb, Croatia



A MANVIS Delphi study was conducted in 22 European countries in order to asses the current state of European manufacturing. This is one of the biggest Delphi surveys ever conducted in Europe. The results from this Delphi study were predominantly conducted for European policy makers and strategic manufacturing decision-makers. In this work we concentrate on the part of the Delphi survey concerning manufacturing strategies and organization. We chose only this topic because we believe that in this area significant improvements can be made without large capital investments. We intend to compare the Croatian results with the overall European results. That way we can see the similarities and therefore use the recommendations laid out in the MANVIS final report. Also, we will investigate the differences, identify the reasons for these differences and identify possible sources of manufacturing competitive advantage in Croatian setting.  While competitiveness of enterprises has been thoroughly researched by many scholars around the world, competitiveness of nations is a relatively new discipline. Competitiveness of enterprises may be defined simply as the manner in which companies are trying to create and develop a unique comparative advantage. Competitiveness of nations, on the other hand, could be described as an integrative process of all policies in a country in order to have a blueprint to increase prosperity. This would typically include not only traditional economic policies, such as what the Central Bank would be doing in terms of interest rates, but also government policies and policies affecting business and infrastructure, education, research, and more. Some of the most important elements of competitiveness would be issues like education, technology, research and science, where one is preparing the future.


Managing the Change and Risk of Government-Owned Enterprise: An Empirical Study of Taiwan Water Company

Yao-sheng Hsu, Diwan College of Management, Tainan, Taiwan

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

Dr. Hwey-Lin Sheu, Kun Shan University, Tainan, Taiwan



Taiwan Water Corporation (TWC), with water plant combination and year-by-year expansion, unfortunately, has amassed close to a 90 billion NT dollars debt burden. TWC undertook responsible center and set up target value as quantity control index to promote operation performance in 2004. With reasonable budget organization and a base price agreement to effectively control rising expenses, TWC may effectively raise its surplus. For the time effectiveness of organizational change, it is not able to provide the smallest risk review space and seeks profit under the existing system, and without consideration of knowledge economy and of future market change and technology. To look into the future, TWC’s organizational reengineering and time effectiveness has possibilities for improvement. Besides external economic index, multi-operation will produce a management and technology blind point; the existing outsourcing technique may cost TWC its leading business position. Therefore, the time effectiveness and specialty of business development has to pay close attention, as internal profit will be the key of enterprise continuous operation. Regarding government-owned enterprise, the change process confers possible existing risk or uncertainty and expects organizational change for reference. Curiously, however, this recurrent theme of change in government-owned enterprise has not induced a high volume of articles that explicitly address the topic in journals.


A Simple Model of Accounting for and Hedging Employee Stock Options (ESO)

Dr. J. Howard Finch, Florida Gulf Coast University, Fort Myers, FL

Dr. Joseph C. Rue,  Florida Gulf Coast University, Fort Myers, FL

Dr. Ara G. Volkan, Florida Gulf Coast University, Fort Myers, FL



The escalating size of compensation packages to senior managers and investor disillusionment have resulted in growing calls for the expensing of employee stock options (ESO). While initially slow to respond, the FASB has now mandated the expensing of ESO. The two primary methods used to value ESO, the Black-Scholes closed form equation and the lattice model, suffer from several deficiencies. A Simple model for valuing ESO that marks the option expense to market in succeeding financial statement dates and allows for the staggered exercise dates of option holders is available. The model is easy to understand, would have a low cost of implementation, offers a superior estimate of the true cash flow effects associated with the opportunity cost to shareholders of ESO exercise, and allows for the use of treasury stock to hedge the ESO expense that results. Rising levels of CEO compensation and investor unrest led to increasing calls for the immediate expense recognition for ESO in corporate financial statements (Apostolou and Crumbley, 2001 and 2005; Bartow and Mohanram, 2004; Botosan and Plumlee, 2001; Delves, 2002; Doyle, 1997; Mellman and Lillien, 1996; and Moyer and Weihrich, 2000).  While the Financial Accounting Standards Board (FASB) and its predecessor, the Accounting Principles Board (APB), continued to issue documents concerning ESO (APB, 1972; FASB, 1978, 1985, 1986, 1993, 1995, 2002a, and 2002b), strong opposition from firms fearful of negative impacts on their financial position resulted in a stand-off over the ensuing decade.  Finally, in December 2004 the FASB issued Standard No. 123(R) that required firms to recognize compensation costs related to share-based transactions in their financial statements and brought global harmony to accounting for ESO, given the mandates by the International Accounting Standards Board (IASB, 2002 and 2004).  All firms were required to be in compliance with these directives by the end of 2005. 


Equity Valuation Models and Forecasting Capability: An Empirical Analysis of Taiwan’s Commercial Banking Industry

Nan-Chun Tseng, Chung Hua University, Taiwan

Yao-Hsien Lee, Chung Hua University, Taiwan



This paper makes use of various valuation models to assess the intrinsic value of companies in Taiwan’s commercial banking industry.  The results indicate that the P/S model is the best available model for valuation in terms of forecasting capability.  In 1991, the Taiwan Government gave permission for the establishment of 16 new banks, and reduced the existing limitations on establishing branches of foreign banks. Local banks, therefore, enhanced their administrative efficiency as a priority in addressing subsequent difficulties in confronting an open-banking market. In this enhancement process they confronted the challenges of foreign banks and accommodated alternative financial constituent structures. Due to a significant growth in national trade, there has been escalating demand for the services of finance and commercial banking companies in Taiwan. Currently, Taiwan is more concerned about how to spread the geographic location efficiently. This has resulted in the perception that commercial bank-related industries offer valuable investment opportunities for investors in Taiwan.  Obviously, finding the available valuation models stock market analysts use to identify mis-priced securities is an ongoing concern.  In this paper, we will use the equity valuation models presented by Reilly and Norton (2006), Bodie, Kane, and Marcus (2005), and Damodaran (1996) to analyze the investment value of firms in Taiwan’s commercial banking sector. 


CEO Turnover, Board Chairman Turnover, the Key Determinants: Empirical Study on Taiwan Listed Company

Hou Ou-Yan, National Cheng Kung University and Lecturer of Kun Shan University, Tainan, Taiwan

Dr. Chuang Shuang-shii, National Cheng Kung University, Tainan, Taiwan



This study dynamically investigates over time the impact of firm performance, firms’ and top managers’ characteristics on board chairman and CEO turnover of listed companies in Taiwan. And by exploring how the three aspects affect the chairman and CEO replacement process. Incorporating Cox proportional hazard regressions, we find that the probability of chairman and CEO turnover are not uniform under accounting-based performance and market-based performance measures. Importantly, this relationship is significantly clear following adoption of the firms’ and top managers’ characteristics. Upon further exploration, the increased sensitivity of turnover to performance appears to be attributable to the increase in traditional industry, firm size, debt utilization, CEO duality, top managers’ age, top managers’ education following proxy statements.  CEO (chief executive officer) generally tends to change according to a natural evolving process of a company, regardless of the company performance. But many CEOs changing are a common result in response to bad performances right now.  Such turnovers we called “punish”. An effective board of directors who work with respect to supervising and monitoring on CEOs should facilitate such turnovers. Recently, punish showed significant changes because of many companies (WorldCom, Enron, Ferranti International PLC, Cirio, Parmalat, Pollypeck International PLC, Colorol Group, Xerox, Bank of Credit and Commerce International (BCCI), and Maxwell Communication Corporation etc) involved in corporate governance problems, and accounting scandals often run along with the wave through internet and public media.  The purpose of this paper is to cast light on the impact of the key determinants that accounting-based and market-based performance measures on the publication of proxy statements or annual reports of listed firms over the period 1996 to 2005 in Taiwan.


A Wavelet-Based Analysis of MSCI Taiwan Index Futures

Dr. Cherng-Shiang Chang, China University of Technology, Taipei, Taiwan



The dynamics of financial markets (e.g., stocks or futures) are non-stationary and their frequent characteristics are time dependent.  Most do not conform to the geometric Brownian motion from the empirical evidences.  Recently, the wavelet-based time-frequency representations have become an extremely powerful tool for analyzing nonstationary time series in many fields, such as engineering, medical sciences, biology, geology, and so on.  While the GARCH-type models are used to investigate the transmission mechanism of financial markets in much of previous studies, the wavelet methods have received more attention from the economists and financial professionals.  In this paper, we apply the wavelet multiresolution analysis to analyze the nonstationarity (time-dependence) and self-similarity (scale- dependence) of MSCI Taiwan index futures.  The time-scale dependent spectra, which are localized in time, are observed in the so-called wavelet based energy (or scalogram).  Our empirical analyses reveal that most variation of the original return series is captured at the first three scales (d1 to d3).  The sharp movements in the value of returns, which occurs around number 360~370 of the observations, is clearly represented by the energy spike of the wavelet coefficients.  Specifically, a significant portion of the energy is contained at wavelet levels (scales) 1-3.  The dynamics of financial markets (e.g., stocks or futures) are non-stationary and their frequent characteristics are time dependent.  Most do not conform to the geometric Brownian motion from the empirical evidences.  Recently, the wavelet-based time-frequency representations have become an extremely powerful tool for analyzing nonstationary time series in many fields, such as engineering, medical sciences, biology, geology, and so on. 


Total Factor Productivity Growth of Mining and Quarrying Industry in China

 Tianshu Liu, RMIT University, Melbourne, Australia



 This paper estimates total factor productivity growth of Chinese mining and quarrying industry and its sub-industries from 1987 to 2003 and the contribution of TFP growth to industry output growth. The growth accounting method is adopted in the neo-classical production function to calculate TFP growth. Labor input and labor income are calculated from available data with caution. The results show that total factor productivity growth contributed a major part to the output growth of mining and quarrying industry and its sub-industries, while other factors inputs growth, i.e. capital input growth and labor input growth, did not show the equivalent importance as TFP growth. Mining and quarrying industry played a major role in Chinese economic development in the early years of economic reform. In 2003, the industry value added of the aggregate mining and quarrying industry was 7623.51 billion Chinese RMB, sharing 3.43 percent of total GDP in that year. It increased 3210.14 percent from 1986, in which the industry value added was 230.31 billion Chinese RMB. The early 1990s saw the largest growth of industry output of mining and quarrying industry, which was 458.19 percent increased from 1991 to 1995, followed by 125.4 percent increased from 1986 to 1990. On the other hand, the growth rates of mining and quarrying industry output in periods of 1996-2000 and 2001-2003 were below 50 percent, of which 46.18 percent for the former period, and 31.76 percent for the latter period.  Furthermore, the seven sub-industries of mining and quarrying industry, i.e. coal mining and processing industry, petroleum and natural gas extraction industry, ferrous metals mining and dressing industry, non-ferrous metals mining and dressing industry, non-metal minerals mining and dressing industry, other minerals mining and dressing industry, logging and transport of timber and bamboo industry, had a similar growth trend as their aggregate industry category.


Inter-Sectoral R&D Spillovers and Subsequent Knowledge Flows

Yoo-Jin Han, Korea Institute of Intellectual Property, Seoul, Korea



In this research, I explore how much inter-sectoal R&D spillovers affect subsequent knowledge flows by adopting a pooled regression model. R&D activities are dichotomized into financial investment proxied by R&D expenditure and human resources investment proxied by R&D personnel. Knowledge is assumed to be expressed in the forms of patents and papers. In the case of Korea, the paper-based knowledge flow was affected more by R&D spillovers than the patent-based knowledge flow. R&D activities within one nation have been recognized as a tool for transferring knowledge from one sector to another (Griliches, 1998). In addition, knowledge flows caused by the spillover characteristics of R&D activities are considered to be an important factor to enhance economic competitiveness of one nation (OECD, 1996). However, there has not been any sufficient empirical evidence as to how much inter-sectoral R&D spillovers contribute to subsequent knowledge flows. Therefore, in this research, by using a pooled regression model, I intend to measure how much inter-sectoral R&D spillovers affect subsequent knowledge flows. As an illustration, I introduce the Korean case from 1995 till 2000 since in this period, innovation actors such as firms, universities and research institutes started to actively perform R&D.  A “sector” is similar to an “industry” in that it includes a constellation of analogous firms and has its own dynamic (Tirole, 1998; Scherer, 1990; Sutton, 1998; OECD, 2000). Therefore, such institutions as the OECD have indiscriminately used two terms (OECD, 2000). However, a “sector,” in general, encompasses a broader boundary demarcated by the relation between industries based on vertical integration (Breschi & Malerba, 1997; Malerba, 2002).


Relationship between Knowledge Sharing, Knowledge Characteristics, Absorptive

Capacity and Innovation: An Empirical Study of Wuhan Optoelectronic Cluster

Shu-en Mei, Huazhong University of Science & Technology, Wuhan, P.R. China

Dr. Ming Nie, Huazhong University of Science & Technology, Wuhan, P.R. China



The aim of this paper is to explore the role knowledge sharing with customers and suppliers in an industry cluster play in driving innovation among firms. A theoretical model is built on the basis of three constructs: knowledge sharing, involving knowledge interaction with customers and suppliers; the determinants of knowledge sharing, involving absorptive capacity and knowledge characteristics; innovation. A LISREL model based on a sample of Wuhan optoelectronic cluster is used to test our hypotheses. The empirical findings reveal that knowledge sharing with customers and suppliers has a positive influence on firm’s innovation within a cluster. Furthermore, absorptive capacity and knowledge characteristics have a significant impact on knowledge sharing with customers and suppliers. Possible theoretical implication is shown that absorptive capacity plays more important role in innovation than knowledge sharing with customers and suppliers at early evolutionary stage of cluster.  Industry clusters—groups of geographically proximate firms in the same industry —are a striking feature of the geography of economic activity (Krugman, 1991) examined by industrial geographers at least since Marshall (1920). Over the years, the literature on industrial clusters has emphasised their capacity as loci for knowledge diffusion and generation. The importance of clustering for knowledge diffusion and generation was seminally stressed by Alfred Marshall, who introduced the concept of ‘industrial atmosphere’ (Marshall, 1919) and described the district as a place where “mysteries of the trade become no mysteries; but are as it were in the air, and children learn many of them, unconsciously” (Marshall, 1920.).


Production and Allocation Decisions in the Presence of Shortages

Dr. Manohar S. Madan, University of Wisconsin-Whitewater

Dr. Chun-Hung Cheng, Chinese University of Hong Kong

Dr. Jay Sounderpandian, University of Wisconsin-Parkside



Allocation decisions are encountered when a manufacturer of goods has insufficient inventory of finished goods and/or short-term capacity to satisfy total demand to multiple retailers. Very often, the supplier is evaluated on the basis of delivery performance. The criteria for evaluating delivery performance can be either quantity-based measures such as percentage of orders satisfied on time or time-based measures such as average lateness. In this research, we develop a methodology for the producer to find optimal last minute production plans and corresponding optimal allocation of finished good to retailers.  In our approach, we consider two different types of quantity-based performance evaluation measures.  Distribution decisions are an integral part of managing supply chains. We consider a producer supplying finished goods to several retailers.  Specifically, we look at a scenario where the producer is faced with shortage of inventory and short-term production capacity in satisfying total demand.  Faced with shortages, decisions to allocate products to customers and to allocate short term production capacity have to be made.  An interesting problem in such a scenario is to find the optimal last minute production plan and optimal allocations.  Clearly, optimality here depends on which dimensions of distribution performance is the producer going to be evaluated by the retailers.  In this paper, we develop a methodology to find optimal solutions corresponding to a few different cases of quantity-based criteria used to evaluate delivery performance.  According to Cachon and Lariviere (1999), allocation decisions in a shortage environment occur commonly in industries where capacity expansion is expensive and time consuming. Allocation decisions can arise throughout a supply chain.  However, as the retailer’s position in a supply chain is very close to the consumer, customers tend to place the most importance on delivery performance (Handfield and Nichols, 1999).


The High Frequency Responses of Australian Financial Futures to Monetary Policy Announcements

Dr. Xinsheng Lu, Northwest A & F University, China

Dr. Xuexi Huo, Northwest A & F University, China



This paper examines the high frequency responses of Australian financial futures to monetary surprises using intra-day futures data.  Using the event-window method with tick data to control for the endogeneity issue between market interest rates and the cash target rate, our empirical findings support that first, monetary policy announcements impact significantly not only on the short-term interest rate futures, but also on longer-term Treasury security futures markets. Second, the most significant responses of these markets occur in the event-window which contains the policy announcement. Third, a weak relationship between monetary surprises and the movements of stock index futures is also identified.  This paper examines the high frequency responses of Australian Treasury security yields and stock index futures to monetary policy announcements using intra-day futures data from Sydney Futures Exchange (SFE). A large number of studies have tried to assess the effects central banks’ monetary policy announcements and actions on asset prices of fixed income securities using lower frequency data such as daily (e.g. Cook and Hahn, 1989; Kuttner, 2001; Demiralp and Jorda, 2004), weekly (Piazzesi, 2005) and even monthly data (Evans and Marshall, 2001). The main drawbacks of those studies with lower frequency data include: a) There is a potential endogeneity problem associated with monetary policy announcement effects, i.e, not only does a monetary announcement impact on financial asset pricing and market volatility, but also information on financial asset pricing and market volatility could enter into the central bank’s reaction function.


The Entrepreneurial Health Care Manager: Managing Innovation and Change

Dr. Kristina L. Guo, University of Hawaii-West Oahu, Pearl City, HI



This paper describes the process of entrepreneurship and specifically focuses on two perspectives of entrepreneurship as (1) the creation of innovation and (2) the creation of change.  Using these two important perspectives, this paper argues that the entrepreneurial manager in health care organizations should create innovative strategies and manage change in order to enhance organizational survival in the current complex and turbulent health care environment. Health care organizations are challenged by the increasingly complex forces in the health care environment.  Challenges include rising health care costs, competition, the impact managed care, aging of the population, cultural and ethnic diversity, and increased consumer demands for higher quality of care and better outcomes.  As organizations attempt to survive and grow under these conditions, they seek creative ways to manage change and innovations. Health care managers in these organizations believe that success depends on their abilities to grasp opportunities and form strategies when making rapid, flexible and innovative decisions. The process of exploiting opportunities and developing innovations is one aspect of the concept of entrepreneurship. The exploration of entrepreneurship as applicable to the health care field is believed to be crucial to the success of health care organizations (Guo, 2003).  For instance, one perspective on entrepreneurship focuses on the creation of innovation.  It is necessary in the turbulent health care environment for managers to perform entrepreneurial activities which involve the generation of innovative strategies to preserve organizational stability. At the same time, entrepreneurship can be seen as a creation of change by which managers constantly must meet the demands of the organization in order to enhance survival.


Survivors in the Market Economy: East German Companies after Transition

Dr. Erik A. Borg, Sodertorn University College, Sweden

Dr. Frank-Michael Kirsch, Sodertorn University College, Sweden

Dr. Renate Åkerhielm, Sodertorn University College, Sweden



The East German transition to Market Economy became a selection process for former DDR companies. Most companies did not survive the transition to the market economy. However, some have survived and are able to compete in the market economy after the transition. Studying these companies renders evidence of what is approved by customers in the competitive markets in the global economy. The research into the survival of East German companies provides and insight into companies facing competition in a market economy, and suggests how market forces influences the functioning of enterprises. Six hypotheses have been developed to account for essential reasons why some East German companies have survived, and why and how they are capable of marketing products and services in the competitive market economy. The transition to market economy has had many consequences to East German companies. The productivity of the former DDR was substantially lower than that of the West. At the time of the reunification, the companies of Eastern Germany were not competitive, due to high production cost. West German wage levels and working conditions, and the West German institutional model called Model Germany, was transferred to Eastern Germany at the time of reunification (Wiesenthal 2003). The cost of production rose in East German companies after unification.  The companies of the former DDR faced competitive market forces at an early stage of the transition, but did not have the benefits of lower production costs as their Eastern European neighbors. At the time of transition it was argued that Western Germany inherited a competitive and well-developed industrial state at the time of transition. This optimistic notion turned out not to be the case.


Subculture Formation, Evolution, and Conflict between Regional Teams in Virtual Organizations –

Lessons Learned and Recommendations

Hugo M. Latapie, Independent Consultants, CA

Vu N. Tran, Independent Consultants, CA



This paper focuses on the impact of subculture formation, evolution, and conflict within a large-size virtual organization with multiple remote collaborating teams.  As consultants we were brought in to turn around a failing inter-site development project.  Exploring the root causes of this failing project was among the first steps that we took.  Using team emails, exit interview records of those that quitted and one-on-one interviews with remaining members, we deconstruct the underlying cultural factors that led to the near demise of the project.  The lessons from this case study shed further light on the challenges of development high performance virtual teams.   We also provided some recommendations to address these challenges.  A key challenge in the development of a performance team is the development of its underlying teamwork culture (LaFasto & Larson, 2001). Teamwork culture of a team is a set of shared belief and assumptions on how team members go about getting work done collaboratively, e.g., how team identifies, communicates and resolves problems together.  Teams that cannot collaborate, i.e., having weak teamwork cultures, at best, can not achieve the level of team-productivity that goes well beyond the sum of those generated by individual team members working alone.  At worst, teams that cannot work together will fail together.  According to LaFasto and Larson, “when teams do get off track, the problems rarely have anything to do with technical expertise or content knowledge.  Rather, teams experience their difficulties in the fundamental social competencies of working together effectively and productively (LaFasto & Larson, 2001; Larson & LaFasto, 1989).” F


 Cultural and Environmental Factors: Their Effect on the Home Buying Behavior of First

Generation Asian Indian Immigrants

Dr. Shashi Dewan, Winona State University, Rochester, MN

Shashi K. Dewan, Coldwell Banker at Your Service, Rochester, MN



The real estate buying behavior of people is a factor of the culture and environment that they belong to. It is important to understand these cultural factors and nuances to serve real estate clients better. This paper applies consumer behavior model to understand residential real estate buying behavior of Asian Indian first generation immigrant in United States.  According to the 2000 Census, about 1% of the U.S. population, almost 1.7 million people, is of Asian Indian descent (also referred to as Indian Americans), a jump of 105% from 1990. In 2005, the population has increased to 2.3 million, and their population is expected to triple by 2050 (AREAA, 2006). Indians are found to be the largest Asian American group in Midwest, Northeast and South in the United States. Average age of first and second generation Indians is 31years as compared to 35years for the general population (AREAA, 2006). Median family income for Asian Indians is $70,708 more than the national median income of $50,000. This group of the U.S. population is the most successful Asian group in United States, reporting top income, high education (64 percent have at least a bachelor’s degree), working in professional jobs (59.9 percent are in management, medical, or other professional occupations) and good English speaking ability (75 percent of the group speak English) (Saran, 1985; Watanabe and Wride, 2004;  ).  Three fourths of this group is first generation immigrants, born outside the U.S. Many of these people voluntarily immigrated for better opportunities (Watanabe and Wride, 2004; Fenton, 1988}.  Seventy percent of the naturalized group is homeowners.


Experience of Partnership, Experience with a Partner, Interpersonal Complicity:

What Impact on Success in a logistic Partnership?

Dr. Franck Brulhart, Aix-Marseille University, France



One can note an increasing popularity of cooperation practices, for several years, in academic literature as well as in the practice of organizations. In spite of this unproved popularity and the many advantages of traditionally recognized co-operative practices, the levels of performance obtained are very heterogeneous. Consequently, it appears legitimate and necessary to question ourselves about the elements which are likely to increase the capacity of the partnership to achieve its goals. On this topic a more precise problem holds our attention: the part played by experience in the operation of the logistic partnerships and finally in their success. We distinguish three aspects of experience and three potential sources of learning in the management of the partnerships: that resulting from the accumulation of experience of co-operation with multiple partners, that resulting from the accumulation of experience with a particular partner, finally that resulting from the interpersonal experience of the actors of the partnership. Our results, based on an investigation carried out by questionnaire, suggest that partnership success is significantly and positively associated with the experience of partnership management, the experience of joint work and the interpersonal complicity. On the other hand, our results reveal an unexpected negative relation between the duration and depth of the relationships and the success of the partnership. One can note an increasing popularity of cooperation practices, for several years, in academic literature as well as in the practice of organizations. (Kale and al, 2002).


The Basel II Capital Accord and Operational Risk Management; Status and the Way Forward

David Häger,  University of Stavanger, Norway

Dr. Lasse B. Andersen, University of Stavanger, Norway

Dr. Terje Aven, University of Stavanger, Norway

Frode Bø, SpareBank 1 SR-Bank



The Basel II New Capital Accord implores national regulatory authorities to require financial institutions to formalise their efforts to manage operational risk. The Basel II accord establishes three approaches for management of operational risk, the Basic Indicator Approach (BIA), Standardised Approach (SA) and Advanced Measurement Approach (AMA), where AMA is the most extensive of the three. A substantial effort has been directed towards establishing methodology that satisfies the strict requirements of the AMA, and especially quantification of regulatory capital. In this paper we review and discuss this methodology and the corresponding risk management regimes. We conclude that the regulations and prevailing current practices put emphasis on risk identification, monitoring and measuring using traditional statistical analysis of hard data. The approach results in a limited ability of proactive risk management as the data are scarce and not forward looking. We suggest a shift of focus in the management of operational risk. A framework is introduced that put emphasis on the analysis of the probability of loss events occurring, rather than their consequences. The analysis is based on causal modelling, visualising loss scenarios and their causes, instead of traditional statistical analysis of historical data. A broad risk perspective is adopted in which risk is defined by the combination of possible consequences and associated uncertainties, acknowledging that management of operational risk has to see beyond the calculated probabilities and expected values. The proposed framework satisfies the AMA prerequisites, and we believe that it also represents a competitive edge, well suited for identification of risk drives, evaluation of mitigating actions and risk informed decision-making.  Within the framework of the Basel II New Capital Accord (BIS, 2006) operational risk (OR) is treated with the same formality as Credit and Market risk.


Asian and Western Market Research Differences and Similarities

Dr. Shawana P. Johnson, President, Global Marketing Insights, Inc. Independence, OH



In 2005 and 2006, the National Oceanic and Atmospheric Administration (NOAA’s Satellite and Information Service) contracted with Global Marketing Insights, Inc. to provide a comprehensive review of the international remote sensing market for aerial and spaceborne sensors focused on Canada, the United States, Europe and Asia.  Over 1,547 online surveys and 250 personal interviews were completed by the Western respondents in 2005. The Asian study produced 408 surveys and 50 interviews in 2006. The online surveys produced sophisticated statistics and the personal interview questionnaires provided qualitative inputs and support of the trends discovered in the statistics.  Although the study time periods were the same and the size of the sample population was similar, the Asian response was much lower in comparison to the West.  Although the client (and the research team) were delighted by the response rate from Asia it was interesting to discover the differences and similarities in the research techniques utilized between the Western and Asian studies.  The surveys were very technically oriented (as was the sample population) and the surveys were in English and Chinese.  Over 20 countries were targeted and Table 1 below highlights the response rates by country.  Currently the most popular methods of market research in Asia are traditional methods such as door-to-door, central location and focus groups.  Phone surveys are gaining acceptance as a larger percentage of households acquire them. Cellular phones are driving this trend. Phone surveys are currently used in business-to-business studies. More advanced techniques such as panels, and omnibus studies are making progress. The widespread use of computers are making e-mail surveys feasible, particularly in business-to-business studies.  Since the target audience of this study were so highly technical and were business oriented online surveys were utilized in hopes the response rate would be higher than online surveys utilized for Asian consumer market research.  It was somewhat difficult to adapt one market study from the West to the same industry in Asia even though the industries are the same. 


A Configuration Form of fit in Management Accounting Contingency Theory: An Empirical Investigation

Dr. Cadez Simon, University of Ljubljana, Slovenia



The study aims to further our appreciation of management accounting in their organizational context by building on the premises of contingency theory. The fundamental tenet of contingency theory holds that company performance is a product of an appropriate fit between the structure (management accounting system) and context (contingency factors). In this paper, an integrative contingency model of management accounting is advanced and empirically assessed. It is the issue of fit that is central to contingency theory and in this study a configuration-contingency form of fit is tested via cluster and profile deviation analysis. The configuration form was used becouse it takes a holistic view of fit and seeks to examine the effects on performance of internally consistent multiple contingencies. The results appear to support the central proposition of contingency theory. A sophisticated strategic management accounting system is not automatically associated to superior performance, rather superior performance is a product of an appropriate fit between the identified contingent factors and a management accounting system.  The study has two main objectives. The first objective is to further our appreciation of management accounting in their organizational context by advancing a contingency-based management accounting framework. Contingency theory posits that organizational structures and systems are a function of environmental and firm-specific factors (Anderson and Lanen, 1999; Haldma and Laats, 2002; Chenhall, 2003). In this study, four factors have been noted as potentially carrying significant implications for management accounting system design.


The Impact of Media Spokeswomen on Teen Girl’s Body Image:  An Empirical Assessment

Dr. Victoria Seitz, California State University, San Bernardino



The media is a highly influential element in teens’ lifestyle, behavior, self-esteem and purchase decisions.  The portrayal of beauty and perfection of teen idols can put pressure on teenagers to become the ideal image.  As a result many teens are suffering from eating disorders and lack of self-esteem.  Hence, the purpose of this study was to examine the impact of media spokeswomen on teenage girls’ perceived body image.  Data was collected via self-administered questionnaires from a random sample of 100 girls.  Findings suggest that most teen girls have a celebrity/peer actor idol, and that respondents are self-conscious regarding their body shape and weight.  The study confirmed that media spokeswomen play an essential role in teens’ perceived body image and that marketers should be more cautious in the images presented to young girls.  Adolescence is often the time of accelerated mental and physical growth for female teens.  Moreover, this is the time when girls are increasingly confronted with expectations to conform to female gender role prescriptions (Johnson, 1999).   According to Basow and Rubin (1999), the ideal female image in America is thin and attractive, yet with a full body shape. As teen girls feel the pressure to be accepted in society, and by their peers, physical appearance takes on an important role in that process. Females are exposed to supermodel-like images everyday via TV and magazines that affect their body image perceptions, purchasing behavior, and self-confidence.  At such a vulnerable age, teen girls are most heavily influenced by these images than any other age group (Andersen and DiDomenico, 1992). 


Economic Factors, Firm Characteristics and Performance: A Panel Data Analysis for United Kingdom Life Offices

Yung-Ming Shiu, National Cheng Kung University, Taiwan



This article examines panel data evidence to investigate the linkage between insurer performance proxied by investment yield and several economic and firm-specific factors in the United Kingdom life insurance industry. The empirical results indicate that investment yield is positively related interest rate level, but negatively related to interest rate changes, reinsurance dependence, assets held to cover linked liabilities and instability of asset structure. An insurer’s operations fall into two main categories: underwriting and investment. Because they offer many investment-related products such as with-profits polices, life offices’ investment performance plays a key role in meeting their obligations to policyholders. Previous literature includes studies concerning the relationship between performance and both economic factors and firm-specific characteristics. Based on annual data from 1985 to 1995 for 1,593 United States (US) life insurance companies, Browne, Carson and Hoyt (2001) identify important economic and market factors and insurer-specific characteristics related to life insurer performance. In their paper, company performance is positively related to firm size, liquidity, bond portfolio returns, whereas negatively related to unanticipated inflation. Adams and Buckle (2003) examine the determinants of operational performance in the Bermuda insurance market using panel data for the period from 1993 through 1997. A two-way random-effects model is estimated. They find that operational performance is positively correlated with leverage and underwriting risk, whereas negatively correlated with asset liquidity. Since the duration of their liabilities generally is long-term, life offices invest most of their funds in long-duration assets to mitigate balance sheet risks.


Multinational Firms’ Foreign Direct Investment

Dr. Hilmi Nathalie, International University of Monaco, Monte Carlo, Monaco

Dr. Ketata Ihsen, Georgia Institute of Technology, NW Atlanta

Dr. Safa Alain, University of Nice Sophia-Antipolis, Nice, France



This study combines several economic scopes: management, strategy and macro-economics. It tries to understand the surrounding environment, from home and host countries’ viewpoints, which encourages MNCs’ FDI. The incentives can motivate their location choice, but the latter also depends on their objectives. After a look at the three major entry modes (wholly-owned mode, international joint venture and contractual mode) and the subjacent strategies, the paper deals with the different impacts on the source economies and the receipt countries. Those last twenty years, the development of cross-border flows has contributed to a growing interrelation between the countries. Globalization represents this phenomenon, including the increasing financial flows. Foreign direct investment (FDI) is the most interesting way for a country to increase its total investment capacity. Multinational companies (MNCs) are the major FDI providers. They adapt their strategies to their objectives and to the conditions prevailing in an internationalized world economy. This paper aims at studying why FDI are attracted by certain locations (section I), what MNEs’ delocalization strategies are (section II) and how MNCs’ FDI influence the economies of home and host countries (section III). When corporate managers decide to invest in high returns regions, they have several motives: growth motive when they look for new markets, solution to protection in importing countries, a way of saving transportation costs, escape from exchange rate fluctuations, prevention against market competition, and costs reduction thanks to cheap foreign labour.


Short and Medium-Term Determinants of Current Account Balances in Middle East and North Africa Countries

Dr. Aleksander Aristovnik, University of Ljubljana, Slovenia



The main aim of the paper is to examine the empirical link between current account balances and a broad set of (economic) variables proposed by theoretical and empirical literature. The paper focuses on the Middle East and North Africa (MENA), an economically diverse region, which has so far mainly been neglected in such empirical analyzes. For this purpose, a (dynamic) panel-regression technique is used to characterize the properties of current account variations across selected MENA economies in the 1971-2005 period. The results, which are generally consistent with theoretical and previous empirical analyses, indicate that higher (domestic and foreign) investment, government expenditure and foreign interest rates have a negative effect on the current account balance. On the other hand, a more open economy, higher oil prices and domestic economic growth generate an improvement in the external balance, whereas the latter implies that the domestic growth rate is associated with a larger increase in domestic savings than investment. Finally, the results show a relatively high persistency of current accounts and reject the validity of the stages of development hypothesis as poorer countries in the region reveal a higher current account surplus (or lower deficit).  The current account balance is an important indicator of any economy’s performance and it plays several roles in policymakers’ analyses of economic developments. First, its significance stems from the fact that the current account balance, reflecting the saving-investment ratio, is closely related to the status of the fiscal balance and private savings which are key factors of economic growth. Second, a country’s balance on the current account is the difference between its exports and imports, reflecting the totality of domestic residents’ transactions with foreigners in markets for goods and services.


Competitive Performance and International Diversification: Hypothesis of Internal and

External Competitive Advantages of Firms

Dr. Alfredo M. Bobillo, Valladolid University, Spain

Dr. Felix López-Iturriaga, Valladolid University, Spain

Dr. Fernando Tejerina-Gaite, Valladolid University, Spain

Ilduara Busta-Varela, Copenhagen Business School, Denmark



The internal and external competitive advantages of firms across different phases of internationalization depend on the resources used by industries for their financial development and growth. These advantages, as well as the influence of internal owners, facilitate the access of firms to foreign markets. This study attempts to clarify the relationship between those resources and firm’s advantages, as well as to analyze the relationship between international diversification (or degree of internationalization) and firm performance in Germany, France, the U.K., Spain or Denmark. Our results support a curvilinear relationship between the degree of internationalization (hereinafter DOI) and firm performance that is articulated in three stages in the presence of industry reputation, technological and distribution barriers and also showing high transaction cost. These findings point to a cyclic process in the firm’s international expansion, where overcoming such barriers and developing governance and coordination mechanisms to minimize transaction cost becomes the main challenge of the firm in order to compete at the worldwide level. Diversification represents a growth strategy and has a great impact on firm performance (Chandler, 1962; Ansoff, 1965). In a later development, different studies looking for a link between performance and international diversification (or degree of internationalization) show divergent results. In some cases, results evidence a positive linear relationship, whereas in others they show a negative linear, U-shaped or even inverted U-shaped relationship.  How to explain these apparently conflicting results? Some authors like Contractor et al. (2003) suggest that the absence of a quadratic term in the equation would explain why initially only a linear function was found.


Impact of Non-Financial Rewards on Employee Motivation: A case of Cellular Communication

Service providing sector of Telecom Industry registered under PTA in Islamabad

 Dr. Syed Tahir Hijazi, Adeel Anwar, Muhammad Ali Jinnah University, Islamabad, Pakistan

Syed Ali Abdullah Mehboob, Muhammad Ali Jinnah University, Islamabad, Pakistan



This study explores the relative impact of different Non-Financial rewards on the motivation level of the employees. Questionnaire was developed for the purpose of data collection. The sample was selected as the six major players of the Cellular Communication Service Providing Companies registered under the Pakistan Telecommunication Authority (PTA) and who are carrying their operations in Islamabad. Regression Analysis was used to investigate the collected data. The results show that the Overall model is significant but individual coefficient values are highly insignificant except few values that mean the factors considered for study are the major factors to motivate employees. It is also proven that all the studied Non-Financial Rewards do not have positive impact on the employee motivation individually. Work it self, Decision Autonomy, Participate Management and peer relationship are positively correlated with motivation while others do not.  All the ways and means through which employees are compensated in return of their contribution to achieve organizational goals can be termed as rewards. Managing the rewards can be considered as one of the important features of Human Resource Management. Importance of designing and developing the adequate policies and procedures can not be negate because it enables organizations to compensate their employees equally, frequently, consistently and fairly. Proper implementation of these policies and procedures plays an important role in attracting and retaining the right employees. Rewards can be classified into two broad categories: Financial Rewards (those rewards that are given in monetary terms and have some monetary value as well) and Non-Financial Rewards (those rewards that arise from work itself and working environment and do not have any monetary value).    


Analysis and Forecasting of the Development of Banking: the Estonian Case

Dr. August Aarma, Tallinn University of Technology, Estonia

Dr. Jaan Vainu, Tallinn University of Technology, Estonia



The main purpose of the paper is to test the possibilities of treating a bank as an enterprise that produces services and for which the same laws are valid (at least in Estonia) as for other enterprises. As Estonia is a small country, the banks here can be considered small or medium-sized, despite the high profitability of their enterprises. Banks and other financial institutions compose a unique set of business firms whose assets and liabilities, regulatory restrictions, economic functions and operation make them an important subject of research. Banks’ performance monitoring, analysis and control deserve special attention in respect to their operation and performance results from the viewpoint of varioust audiences such as investors/owners, regulators, customers, and management. This paper presents two econometric models the prognostication ability of which is very good. In addition, whether the development of the Estonianbanking agrees with R. Solow´s theory of balanced growth is considered. The first commercial bank (Tartu Commercial Bank), on the territory of the former Soviet Union, was established in Estonia in 1988. This bank went bankrupt and was liquidated in 1992–1993. As there was a great demand for banking services by the emerging private sector, the maximum number of commercial banks operating simultaneously in the small Estonian banking market was 42 in 1992. Some of them were liquidated during the banking crises in 1992–1994 and in 1998–1999, and some of them were merged into larger commercial banks.  Up until 1997, the development of the Estonian banking sector was characterized by a rapid nominal growth of total assets and loan portfolios.


Share Repurchases: Evidence from Thailand

Dr. Chaiporn Vithessonthi, University of the Thai Chamber of Commerce, Bangkok, Thailand



This paper presents the empirical results regarding stock return reactions to common stock repurchase programme announcements of listed firms on the Stock Exchange of Thailand (SET) between 2001 and 2005. The findings suggest that announcements of common stock repurchase programmes are significantly associated with positive abnormal returns. There is also evidence of possible information leakage prior to the announcements. More specifically, the abnormal return on one day prior to the announcements is positive and significant. As mentioned in Ikenberry, Lakonishok and Vermaelen (2000), in the United States between 1996 and 1998 there were nearly 4,000 announcements of share repurchase offers amounting to $550 billion. The use of common stock repurchase in the United States and many countries has grown rapidly since the mid-1990s, yet historically, common stock repurchase in Thailand was not allowed until December 2001 when the Stock Exchange Commission adopted a new regulation allowing firms listed on the Stock Exchange of Thailand (SET) for the first time to repurchase their shares. In the finance literature, several studies (e.g., Dann, 1981; Lakonishok and Vermaelen, 1990; Peyer and Vermaelen, 2005; Stephens and Weisbach, 1998 Vermaelen, 1981) find positive relationships between share repurchase and abnormal returns and typically anchor their work to U.S. firms, yet, relatively little has been known about share repurchase in the international context (Ikenberry et al. 2000).


DIY or 3PL: Study on the Third Party Logistics of Petroleum Producing Industry of China

Dr. Qi Ying and Hong Yan, The Hong Kong Polytechnic University, Hong Kong



With the professional advantages of third party logistics (3PL), outsourcing logistic activities to 3PL companies has recently become a trend in various industries. The oil industry in China is investigating and testing the possibility and feasibility of outsourcing its supply logistics functions in order to reduce high logistics costs and achieve operations efficiency. However, concerning the specific characteristics of oil production logistics, such as high value of products and production tools, large scale, and highly specialty, it may not be proper to leave all oil production related logistics activities to 3PL service providers. This research evaluates the issue from the economic point of view. Other impacting factors, such as social, cultural and political issues, are not considered. We explore the characteristics of oilfield industry and logistics activities, and suggest an evaluation framework for analyzing logistics services in oilfields. We especially address these three features—value, volume and specialty. Related operations data and parameters were collected from an oil field in China for analysis. The total cost of self service logistics (referred to as “DIY”, for Do It Yourself) and the total cost of “3PL” are compared against different classes of production materials, as well products. The analysis clearly indicates that logistics services for different materials or products can be handled in different ways.  Petroleum, as an essential energy resource, plays a strategic role in China’s economical growth and political stability. In 2004, out of the total of 3.86 billion tons of crude oil in the world, 4.51% (175 million tons) of it came from China. In contrast, China accounted for 8.19% of the world’s total oil consumption in 2004, as the second largest oil consumer in the world.. This paper takes a typical oilfield in China for research.


Globalization and the Environment: Evidence from China

Dr. Yang Zhang, University of Macau, Macau, China

Xiuli Yang, Shenyang University, China



Globalization has become an irreversible process and environmental degradation is an issue too costly to ignore. Accordingly, this research attempts to investigate the environmental impact of globalization in China.  We find that in spite of a negative composition effect and a detrimental impact through scale effect, the resultant rise in income can enhance the capability and willingness of nation to protect environment. Trade and investment liberalization may furnish domestic firm with better access to and stronger incentive to adopt new and “greener” technologies to stay competitive in global market.  We also argue that the interaction between government, firms and consumer society matters and may affect the determination of environmental policy and subsequent environmental performance.  Globalization, commonly understood as the process of increasing interdependence among countries and their citizens and signaled by rising trade liberalization and increasing foreign direct investment, has social, cultural, political and economic dimensions. Debates over globalization has been going on for some time; a long peacetime of expansion, low unemployment rates and rapid growth in real income are generally seen as the fruits of globalization while climate change, rapid depletion of natural resources and increasing inequality in the world distribution of income are among globalization’s negative externalities. In recent discussions the most apparent divide between the two views pertains to globalization and environment. Critics assert that globalization is detrimental to environment mainly based on the pollution-heaven hypothesis (Walter, 1982). This hypothesis suggests that globalization allows firms to take advantage of cross-country differences on national environmental regulations and that falling trade barriers induces pollution-intensive industries to relocate to countries with weaker environmental regulations.


The Integration of Business with Entrepreneurship as a Subject to Enhance Entrepreneurial Competency

Dr. Tshepiso I. Ngwenya, Tshwane University of Technology, Pretoria, South Africa



It is regrettable that, after leaving the academic arena, most graduates are unable to create employment on their own or to be absorbed into the labour market. Taxpayers’ money is used to sponsor graduates’ studies, but, unfortunately, most of those graduates cannot plough back the proceeds into the nation. For example, after completing their degrees, graduates tend to not to have any employment opportunities or create some for themselves. This raises the question of whether what is being taught at tertiary institutions is relevant to market needs and to graduates becoming good entrepreneurs or obtaining employment. Does the content of the subject entrepreneurship help and equip students, not only to cope, but also to excel in the face of commercial challenges?  The aim of this study is to integrate higher education (HE) with the business environment to obtain either employment- or self-employment-related results. It includes a comprehensive literature review, questionnaires, and interviews conducted with university students, lecturers, the management of the Tshwane University of Technology and industrialists from various companies in Pretoria. The findings suggest that there is indeed a huge need for a lecturing update to be done to help students to become successful entrepreneurs or economical employees in the working environment. The integration of business with HE institutions is critical to enhance competency, commitment and interpersonal and other valuable skills that are needed in the labour market or are essential for becoming a successful entrepreneur.


The Impacts of Relationship Marketing Tactics on Relationship Quality in Service Industry

Dr. Yi Ming Tseng, Tamkang University, Taipei, Taiwan



This research explores the effects of relationship marketing (RM) tactics on enhancing relationship quality in the services industry. Through data from banking, airlines, and travel agencies, we discuss five types of relationship marketing tactics and how they influence the customers’ perceptions about long-term relationships.  We also include customers’ inclination toward the relationship as a mediator into the model to help the framework more completely. Research findings support that tangible rewards, preferential treatment, and memberships are effective in developing customers’ long-term relationships, and behavioral loyalty is also influenced by relationship quality.  Relationship marketing has been conventionally defined as "developing," "maintaining," and "enhancing" customer relationships (Berry and Parasuraman 1991).  What are the effective methods for developing and keeping these relationships and how they work may be complex questions. Relationship marketing tactics are methods that can be actually executed for implementing relationship marketing in practice.  We would like to propose and discuss five main kinds of relationship marketing tactics in the service industry and construct the relation model of these tactics and other relationship marketing concepts. These efforts will be helpful in yielding insights in the field of relationship marketing. Our research goal is to understand if the application of relationship marketing tactics will be helpful for developing a long-term transaction relationship.


Profit and Cost Efficiency of Philippine Commercial Banks Under Periods of Liberalization,

Crisis and Consolidation

Santos Jose O. Dacanay III, University of the Philippines, Baguio City, Philippines



This paper examines the profit and cost efficiency of commercial banks in the Philippines from 1992-2004, covering periods of financial liberalization, crisis and consolidation.  Two-stage procedure is employed.  The first method involves the estimation of profit and cost efficiency using the stochastic frontier approach.  Results indicate that profit efficiency slowly decreased from a mean score of 92% in 1992 to 84% in 2004 while cost inefficiency hovers around 11% to 12% from 1992 to 1998, and then jumps to 14% to 15% from 1998 to 2004.  Efficiencies are found to be inversely related to asset size.  Off-balance sheet services are found to be cost-absorbing, and substitute for traditional banking products.  Elasticities of the costs of labor and deposits are found to be negative, providing evidence for the use of more and low-cost labor and the abundance of deposits as cheap source of funds.  In the second stage, regression shows profit efficiency scores of universal banks are significantly higher than plain commercial banks, suggesting scope economies from expanded and equity investment activities of universal banks.  Foreign banks are more cost inefficient due to higher personnel cost.  Modest improvement in bank efficiency after liberalization in 1994 is registered but cost inefficiency increased in the aftermath of the Asian financial crisis. 


The Use of Collectivist and Individualist Culture as an Indicator for Finding Patterns of International Tourists

Dr. Veerapong Malai, Bangkok University, Thailand



This paper examines how cultural effects on preference types of tours. The individualism - collectivism dimensions were used for culture illustration.  One of our primarily interests is in looking at how to model cultural impacts.  Tourists make decisions to select types of tours based on their culture. Data were collected from 600 tourists across three Asian and three Western nationalities (Japanese; Hong Kong Chinese; Thai; Germans; British; and from USA). For practitioners, this study suggests that managers could use the framework as a guide to examine how tourists in different foreign markets would respond to their selections.  Due to the eruption of economic crisis in late 1996, one of the government’s priorities was inevitably the amendment of economy.  Presently, tourism is one of the fastest growing industries in the world.  From the numerous instruments, tourism industry became one of the proposed means.  Income renders from such industry became the major source of income for Thailand subsequent to the economic downturn.  Earning from tourist industry has increased from 2.3 hundred thousand million in 1997 to 3 hundred thousand million in 1998, which is the increase of 8.9% annually.  Moreover, the tax refund for tourists policy further benefited the nation as the number of tourists entered into the Kingdom of Thailand increased from 7.76 million in 1998 to 8.58 million and 9.5 million in 1999 and 2000 consequently. 


Demographic Change, Bank Strategy and Financial Stability

Dr. Stefan W. Schmitz, Oesterreichische Nationalbank, Austria



The purpose of this article is to disseminate the main results and the ensuing financial stability implications of the FINMA-program on “Ageing and its implications for banks and bank strategy”. The first question that arises is whether demographic change is of relevance for banks and financial stability, at all. The paper answers this question in the affirmative. It then goes on to analyse the impact of demographic change on the environment in which banks operate (i.e. economic growth, interest rates, and residential real estate markets) and on the level and composition of household demand for bank services and products. It summarises how banks might adapt their strategies in response to demographic change. Finally, it draws the potential implications for financial stability. The purpose of this article is to disseminate the main results and the ensuing financial stability implications of the FINMA-program on “Ageing and its implications for banks and bank strategy”. The objective of the programme was, first, to discuss the impact of negative population growth, increasing longevity and migration on banks and bank strategies over a horizon of up to 20 years; and, second, to draw conclusions concerning the stability implications for the banking system. It consisted of an issue paper (Wood 2006) and two workshops on “Ageing and its implications for banks and bank strategy” in April and September 2006, respectively. The first one was devoted to the impact of demographic change on the banking environment (i.e. on economic growth, real interest rates, and residential real estate markets) but also included a presentation on demographic projections for Austria and the EU and presentations on the impact of demographic change on banks.


Measuring the Effects of Employee Orientation Training on Employee Perceptions of

Quality Management: Implications for Human Resources

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

Dr. Steven W. Schmidt, East Carolina University, Greenville, NC



This empirical study examines employee perceptions of quality management at three different time periods. New employees at a large United States manufacturing organization were surveyed regarding their perceptions of their organization’s quality management practices before they attended a new employee orientation training, immediately after the new employee orientation training, and a month after the new employee orientation training. A description of the study, as well as findings and conclusions, are presented.  “Quality is the goodness or excellence of any product, process, structure or other thing that an organization consists of or creates.  It is assessed against accepted standards of merit for such things and against the interests/needs of producers, consumers and other stakeholders” (Smith, 1993, p. 241).  The importance of quality in organizations today cannot be overemphasized.  An important aspect of Smith’s (1993) definition above is the idea that the concept of quality means different things in different organizations.  Although definitions may vary from organization to organization, many researchers agree that effective quality initiatives of any sort involve every employee in the organization.  Many also agree that training and communication are important factors in organizational efforts to improve quality (Mandal et al., 1998; Goodden, 2001; Hansson, 2001).  “Orientation is the planned introduction of new employees to their jobs, their coworkers, and culture of the organization” (Cook, 1992, p. 133, quoted in Blackwell, 1997). Most organizations offer an employee orientation training program coordinated by the human resource department (Blackwell, 1997).


Value at Risk in Fixed Income Portfolios:  A Comparison Between Empirical Models of the Term Structure*

Dr. Pilar Abad, Universidad de Barcelona, Diagonal, Barcelona, Spain

Sonia Benito, Universidad Nacional de Educación a Distancia (UNED), Madrid, Spain



This work compares the accuracy of different measures of Value at Risk (VaR) of fixed income portfolios calculated on the basis of different multi-factor empirical models of the term structure of interest rates (TSIR). There are three models included in the comparison: (1) regression models, (2) principal component models, and (3) parametric models. In addition, the cartography system used by Riskmetrics is included. Since calculation of a VaR measure with any of these models requires the use of a volatility measurement, this work uses three types of measurements: exponential moving averages, equal weight moving averages, and GARCH models. Consequently, the comparison of the accuracy of VaR measures has two dimensions: the multi-factor model and the volatility measurement. With respect to multi-factor models, the presented evidence indicates that the mapping or cartography system is the most accurate model when VaR measures are calculated (5%). On the contrary, at a 1% confidence level, the parametric model (Nelson and Siegel model) is the one that yields more accurate VaR measures. With respect to the volatility measurements, the results indicate that, as a general rule, no measurement works systematically better than the rest.  In this paper we compare the empirical multi-factor model of the Term Structure Interest Rate according to their ability to assess the risk of a fixed income portfolio, i.e., in terms of the accuracy of the Value at Risk (VaR) measures built from them. The models we have included in the comparison are: (1) regression models, (2) principal component models and (3) parametric models, in particular the Nelson and Siegel model. In addition, the cartography system used by Riskmetrics is included. Table 1 summarizes the main features of these models. 


The Effect of Government Performed R&D on Productivity in Canada: A Macro Level Study (1)

Rashid Nikzad, University of Ottawa, Canada

Golnaz Sedigh, University of Ottawa, Canada

Reza Ghazal, University of Ottawa, Canada

Frederick Kijek, National Research Council Canada (NRC)



The contribution of the public R&D on the productivity of a country was always an important question. This paper estimates the effects of government and higher education R&D on the labor productivity of Canada at the macro level. Moreover, the paper investigates how the shares of public R&D changed during last decades in Canada. The main finding is that government R&D and higher education R&D have positive and significant effects. In this paper, we study the impact of the R&D performed by the government, higher education and business sectors on the labor productivity of Canada for the period of 1981-2004. The study is based on the model developed by Coulombe and Acharya (2006). Our data sources are Statistics Canada, Penn World Table, and SourceOECD. In addition to finding the effects of R&D performed by business, government, and higher education sectors, we study how government R&D funds have been distributed among different fields and sciences.  The structure of the paper is as follows. The next section consists of the literature review on the effect of R&D on productivity and the role of the government in R&D. Section 2 presents some facts about the shares of business, government, and higher education R&D expenditures of Canada. Section 3 introduces the model and presents the econometric results. Section 4 concludes.


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