The Journal of American Academy of Business, Cambridge
Vol. 17 * Num.. 2 * March 2012
The Library of Congress, Washington, DC * ISSN: 1540 – 7780
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Salesperson Attributions: Evaluating the Impact of the Timing of Prior Actions
Dr. Keith A. Richards, University of Tennessee at Chattanooga, TN
Dr. Frank Q. Fu, University of Missouri at St. Louis, MO
Our study examines how salespeople establish their expectancy levels based on the recency of prior events. According to our conceptual framework, expectancy is a function of salespeople’s perceptions of both their short- and long-term performances. Specifically, three types of attributions moderate the impact of the former on expectancy, whereas the impact of the latter is mediated by self-efficacy. In addition, we propose that salespeople’s expectancy estimates positively influence their future performance. Managers will be well served to know how these attributions are formed to improve coaching and goal setting. Marketing and management scholars have long been interested in what motivates behavior. Marketing has primarily been interested in how to motivate consumers to purchase their products (Lazarus, 1991; Bagozzi, 1981) and management has been interested in how to motivate employees to perform at a satisfactory level (Locke and Latham, 2004; Bono and Judge, 2003). As a result of combining these two interests, researchers in both fields have shown interest in salesperson motivation. The study of salesperson motivation has been examined under several theoretical frameworks. Expectancy theory (Walker, Churchill and Ford, 1977) and attribution theory (DeCarlo, Teas and McElroy, 1997; Dixon, Spiro and Jamil, 2001; Dubinsky, Skinner and Whittler, 1989; Johnston and Kim, 1994; Sujan, 1986; Teas and McElroy, 1986; Weiner, 1972) are two primary frameworks used to understand salesperson motivation. In this study, we employ a combined attribution - expectancy theory framework to examine how salespeople evaluate their own efforts and how those evaluations impact their future performance. In spite of the scholarly interest in salesperson attributions and their subsequent expectancy estimates, two particular aspects of these theories have not been fully explored. First, little evidence has been gathered to study the impact of salesperson expectancy estimates on future performance. Salesperson attribution researchers typically measure the formation of expectancy estimates and stop short of measuring future performance. Second, most attribution research treats previous performance as an overall event, making no distinction between short- and long-term performances (DeCarlo, Teas and McElroy, 1997). The exception to this rule is a study conducted by Johnston and Kim (1994) where a performance event was considered within the context of other performance events. However, one limitation of the Johnston and Kim (1994) study was that their experimental manipulations failed in the stable condition. (The stable condition represented consistent performance over time.) So they were unable to fully test their hypotheses. In addition, their examination of the overall performance context did not investigate any differences in the effects of short- and long-term performance perceptions on self-efficacy, expectancy estimates or performance. The goal of this study is to address these two shortcomings in the literature and provide insights into the processes associated with salesperson motivation. The primary interest in attribution theory for sales researchers is to gain insights on how salespersons become motivated to higher performance by their attributions. Given this interest in higher performance, it is surprising to note that future performance has been largely ignored in the attribution literature. The fist contribution of this study will be to conceptualize a model of the impact of salesperson expectancies on a salesperson’s future performance. In addition, self-efficacy will be examined as a mediator between a salesperson’s perception of his or her long-term performance and future performance. Self-efficacy is a well know antecedent to employee performance and is expected to be important in the overall understanding of salesperson motivation.
International Trade and National Stock Market Linkages
Dr. Ilhan Meric and Dr. Jean C. Darian, Rider University, New Jersey
Dr. Gulser Meric, Rowan University, New Jersey
Several previous studies find that the trade relationship between countries is a significant determinant of the linkages between their stock markets. In this paper, we provide additional empirical evidence for this hypothesis by using the correlation analysis and Granger-causality techniques with a sample of eighteen countries from different parts of the world. We find that countries with a high-level of trade relationship between them also tend to have a high contemporaneous correlation and significant lead/lag linkages between their stock markets. However, in our sample, there are also countries that have a relatively low-level of trade relationship but significant linkages between their stock markets. We conclude that trade relationship may be an important determinant, but not the only determinant, of stock market linkages. Stock market linkages between countries may also be affected by factors such as tracing the stock market movements of a world power (e.g., the U.S.) or a regional power (e.g., China), ethnic relationships, historical ties, and economic/political alliances (e.g. NAFTA and EU). Studying the co-movements of national stock markets has been a popular research topic in finance (see: Makridakis and Wheelwright, 1974; Philippatos, Christofi, and Christofi, 1983; Meric and Meric, 1989; Lee and Kim, 1993; Meric et al., 2001; Meric and Meric, 2011). However, little attention has been given to what drives the co-movements of national stock markets. Several empirical studies demonstrate that international trade may be a significant driving force for the co-movements of national stock markets. They argue that countries with more international trade between them tend to have closer linkages between their stock markets. However, the number of empirical studies on this subject is surprisingly small. Vaziri (2002) finds that the higher the trade interdependency between countries, the higher the correlation between their equity markets. In another study, by Darrat and Zhong (2005) examines the impact of multinational trade accords on the degree of stock market linkage using NAFTA as a case study. The study concludes that liberalization of trade among the U.S., Canada, and Mexico strengthened the linkages between the stock markets of these countries. Canto et al. (1986) argue that protectionist international trade policies is predicated on the belief that restrictions would either increase equity values of firms dealing in traded goods or increase employment levels in industries competing with cheap foreign labor. Their empirical findings demonstrate that across-the-board protectionist policies are associated with a decline in the S&P 500 Index and a decline in aggregate employment. Brooks and Negro (2006) explore the link between international stock market co-movements and the extend to which firms operate globally. They find that a firm raising its international sales by 10 percent raises the exposure of its stock return to global shocks by 2 percent.
Application of Capital Budgeting Techniques to Home Mortgage Refinancing
Dr. Gurdeep K. Chawla, National University, San Diego, CA
Organizations have used capital budgeting techniques extensively to evaluate proposals for investments in long-term projects. Individuals can also use these techniques to make decisions about financing home mortgages. The quality of decisions is improved because this analysis takes into consideration a number of variables (e.g., time value of money and tax implications) that might otherwise be overlooked. This analysis also examines short and long-term implications of refinancing home mortgages. This paper offers real world examples to demonstrate the application of capital budgeting techniques which include payback period, discounted payback period, profitability index, net present value, internal rate of return, and modified internal rate of return. Further, these examples were augmented by adding a few scenarios and a comparative analysis. Findings revealed that the conventional wisdom of a 2% difference between the current mortgage interest rate and new mortgage interest rate may not be applicable in the current economic environment. Home mortgage interest rates in the United States have been at their lowest levels in about forty years. This has provided an opportunity for homeowners to refinance their mortgages and benefit from these low interest rates. In fact, home mortgage refinancing has increased tremendously over the past few years. There are a number of reasons to refinance that include lowering monthly payments, shortening the loan period, using equity by cashing out, moving from an adjustable rate mortgage (ARM) to fixed a rate mortgage to lock in lower interest rates, etc. However, the decision to refinance is typically based on an analysis of a limited number of variables (e.g., the difference between current and new interest rates, decrease in the amount of monthly mortgage payment, break-even point (how long it takes to recover the cost of refinancing), reduction in the loan period, etc). Such analyses overlook important factors including the time value of money, tax rates, and their impact on net savings from the new interest rates. This process also limits the number of options the borrowers might be able to consider with a comprehensive analysis. This paper focuses on important factors that should be considered in making mortgage-refinancing decisions. Specifically, these refinancing decisions are studied from a capital budgeting perspective with initial cash outflows, in the form of cost of refinancing, and cash inflows in the form of cash savings. The application of capital budgeting techniques, such as payback period, discounted payback period, net present value, profitability index, internal rate of return, and modified internal rate of return, are also discussed, which provides effective tools to borrowers in making refinancing decisions.
An Evaluation of Flood Irrigation and Compost Use in South Texas Rio Red Grapefruit Production: Are There Economic Values?
Dr. Shad Nelson, Mac Young, Dr. Roger Hanagriff, Dr. Steven Klose, Texas A&M University, Texas
Citrus is grown primarily in the Lower Rio Grande Valley (LRGV) of south Texas using flood irrigation, with approximately 70% of the citrus raised as ‘Rio Red’ grapefruit (Citrus paradisi Macf.). Supplemental irrigation is necessary in this region as annual precipitation is not sufficient to raise citrus in this semi-arid climate. A potential water-conserving strategy for citrus is compost application underneath the tree canopy. A 5-year field study was initiated in 2003 on mature, flood-irrigated ‘Rio Red’ grapefruit trees located in Weslaco, Texas. The objective of this study was to evaluate the impacts of bark-chip compost application on soil physical properties, root development, and subsequent citrus production when applied to the heavier soil of the LRGV. Three main treatments were evaluated: unfertilized, non-composted (UN); fertilized, non-composted (FN); and fertilized, composted (FC) trees. For this study, compost applications did not significantly alter soil bulk density (BD), however, a trend of decreased soil BD was observed as compost application increased, thus an indication that multiple year organic application can improve the physical properties of heavier soils. Increased compost application did significantly increase soil water retention, suggesting its importance for conserving water under the tree canopy. In 2007, a detailed root density study was performed, comparing: 1) a single 5-cm, 2) a single 10-cm, 3) and annual 5-cm (2003-2007) applications of compost with non-composted trees. Root density with annual compost application was 453% higher than with non-composted trees. The bark-chip compost was a very minor contributor of nitrogen (N) to the soil system due to its low N content, however, the highest average fruit yields from 2004 through 2007 came from FC trees. Grapefruit yields from fertilized trees exceeded that of unfertilized trees. The citrus industry in South Texas is ranked third in citrus production in the USA, after Florida and California. Citrus production in the Lower Rio Grande Valley (LRGV) of South Texas is well known for its superior red grapefruit varieties, with Rio Red grapefruit dominating 70% of all grapefruit grown in this region. Irrigation performed by citrus growers in the LRGV is primarily done using flood irrigation, as water is delivered from canal systems diverted from the Rio Grande River. Water scarcity is not an uncommon problem in this semi-arid region as periodic droughts make water conservation an important issue along the Rio Grande River. A cultural practice not commonly performed in citrus production to conserve water is the application of compost underneath the tree canopy. A study by Nelson et al. (2008) evaluated the use of annual compost applications as a means of preserving soil moisture content in the root zone of citrus trees and maintaining Rio Red grapefruit yields under flood irrigation. The results of this multi-year study demonstrated irrigation water savings and slightly higher average citrus yields beyond the first year of compost application. The Agricultural Water Conservation Demonstration Initiative (ADI) project is a coordinated effort between the Texas Water Development Board, Harlingen Irrigation District, South Texas agricultural producers, Texas AgriLife Extension Service (Extension), Texas A&M University-Kingsville, and other agencies. It is designed to demonstrate state-of-the-art water distribution management and on-farm, cost-effective irrigation technologies to maximize surface water use efficiency. The project includes maximizing the efficiency of irrigation water diverted from the Rio Grande River for water consumption by various field, vegetable and citrus crops.
Organizational Commitment in the Wake of Downsizing
Janice M. Spangenburg, Ph.D.
Change has really emerged and has become ubiquitous organizations and society. Never before has radical change been more important to study and understand. Organizations today must be competitive, resilient, and adaptable. This creates a most serious challenge for leadership today that is constantly trying to balance talent amid limited resources. Balancing the requirements of the leadership role with the operational and mission role becomes increasingly problematic especially when a serious change such as downsizing occurs and organizational commitment is affected. In a study by Hodge, Anthony and Gales, 1999), an offering of the reality of change and how this phenomenon has driven decisions that have affected both the structure and the contents. As evidenced for the last decade and beyond since this offering, change has been a very real part of life and has created ways for organizations to transform, develop and fine tune mechanisms that move toward competitive advantage and refinement of practices. Thus, change is ever present and requires methods that engage the entire population- leaders and members and move toward enabling organizational survival. In lean and often uncertain times that are faced by every organization leader today, this is an area that needs to be addressed. To do this effectively more needs to be discovered about the importance of organizational commitment and why leaders much consider this important element in all decisions effecting change and every method employed. This includes all areas of the organization from leaders to members in every role and every specialty. It has to be bottom up as well as top down and transcend every area to be complete and substantive.One of the areas that is vital to understanding the people or human component of organizations lies with individual organizational commitment and understanding this more. Organizational commitment (OC) has become one of the critical success factors of organizations in current times. With all of the changes in organizations, leaders have even more to manage and be accountable and responsible for including the bottom line and how people or employees are figured into the equation. This becomes problematic because leaders are tasked with even more in the daily organizational responsibilities and tasks. It would only seem proper to keep the employee happy, satisfied and feeling the sense of equity. Organizations are comprised of people that bring in talent, ability and experience but why is organizational commitment so vital? The orientation toward the organization as this relates to loyalty, belongingness and evolvement corresponding to attitudes or behaviors of the workforce element (Robbins and Coulter, 1999). One of the serious gaps that exists still with OC is how to keep this element alive and cultivate it to keep employees insure commitment. One of the most astonishing facts is no matter how many exit interviews and orientations programs that have been created to be sound and solid and solicit the inputs of employees, there is still shortsightedness. It would seem that having these important areas of employment and maintenance developed would create a better way to find out what employees need, want and what makes them more motivated, inspired and committed. However, this is one of the areas that still seem to be a gap and could lend further insight into the ways to drive organizational commitment up as well as job satisfaction and other positive outcomes. As mentioned before leaders in organizations today are much more focused on the daily routine and what makes the organization work well and retain visibility in the market or competitive arena. It is not such an issue with the level of wages and the private office, but the way that employees are treated by the supervisor and feel as a member of the team. This seems to have more of an impact on the overall feeling and climate as well as atmosphere in the organization and can lead to the best effort possible for both leaders and members and translate into organizational success.
Teaching Tip: Using Rubrics Across Multiple Business School Student Tasks: A Special Focus on Service
Dr. Gene Milbourn, University of Baltimore
This paper will identify and discuss several seminal models in the quality service literature to include the research by Parasuranan, Zeithami, and Berry on the SERVAL instrument, Hogan and Busch on the measurement of the service personality orientation, and, the work of Paajan and McLellan linking personality orientation to organizational outcomes. A service rubric will be introduced and discussed which is consistent with each of these models. For pedagogical purposes, the paper begins with a general discussion of rubric use in higher education and presents rubrics on Power-Point presentations, oral communication, and case analysis. A rubric is a document that articulates the expectations for an assignment by listing the criteria or what counts and describing levels of quality from excellent to poor (Reddy and Andrade, 2010). A rubric has three features: evaluation criteria, quality definitions and a scoring strategy (Popham, 1997) which stipulate a grading scale for each dimension so that assessment can be thorough and consistent (Stevens and Levi, 2005). Rubrics also allow students to judge the current quality of their work and the ways in which they could develop it further (Brough and Pool, 2005; Huber and Hutchings, 2004). Knight and Tracy (2010) suggest that the rubric provides a framework for identifying the important learning dimension on a topic and it attempts to stipulate a grading scale for each dimension ensuring consistency. The favorable validity and reliability of rubrics has been has been discussed by Moskal and Leydens (2000). In a review of the research of rubric use in higher education, Reddy and Andrade (2010) state that “Rubrics are often used by teachers to grade student work but many authors argue that they can serve another, more important, role as well: When used by students as part of a formative assessment of their works in progress, rubrics can teach as well as evaluate. Used as part of a student-centered approach to assessment, rubrics have the potential to help students understand the targets for their learning and the standards of quality for a particular assignment, as well as make dependable judgments about their own work that can inform revision and improvement” (p. 437). All is not positive however, Kohn (2006) and Wilson (2006) argue that the use of rubrics promote shallow learning because they encourage conformity and standardization. In response, Goodrich-Andrade (2006) and Huba and Freed (2000) content that the quality of the rubric’s construction minimizes many shortcomings. Tables 1 and 2 show two rubrics—one for evaluating a student’s power-point presentations and the second for evaluating a student’s oral report that are used in the author’s School of Business. The Appendix contains a rubric for assessing case analysis projects. The quality definitions are in columns 2, 3, and 4 while the evaluation criteria are contained in the far left column. The scoring is noted in the top roll as shown 3, 2, or 1. Table 1 shows that the important criteria for demonstrating proficiency in a Power Point assignment are background, text-font choice, spelling and grammar, use of graphics, and effectiveness. For each criterion, there are three quality definitions indicating differing levels of accomplishment on the factor. Rubrics provide the opportunity to for instructors and students to discuss, determine, and communicate agreed upon standards greatly reducing ambiguity.
Theory Building Related to Women in Combat
John Gutierrez, Doctoral Candidate, North Central University
Janice Spangenburg, Ph.D.
As times continue to change in society, in organizations and in the world, the military is also changing and the culture is different and more diverse than ever before with new challenges and new ways to envision the mission and the future. Firmly in that regard the role of women has had an emerging impact over the years. To date, the notion of women in combat has become one of the most discussed areas in the top leadership meetings and will continue to be something that is integrated more and more as our ranks reduce and our mission increases in a number of ways. This paper is designed to discuss a theory on the new challenges surrounding women in combat. In this paper, discussion on scholarly views and types of theory involved in the topic of women on the battlefield will be highlighted to determine the contributions of research toward theory. In addition, discussion of how theory adds to the understanding of women on the battlefield as well as two areas of controversy or unanswered questions relating to the theory in question will be highlighted to provide further insight on the necessity of theory in research toward understanding emerging information. Among the area of concern is that prior to the Gulf War of 1989, the United States military operations consisted of a linear battlefield, with a discernable front line where direct combat with enemies occurred while providing a relatively safer rear area to conduct support operations (Harrell et al., 2007). Previously, on a linear battlefield, women would be relegated to the safer rear areas but with a non-linear battlefield, women have taken on roles consistent with a direct combatant, a role relegated for men and prohibited for women (Harrell et al., 2007). Harrell et al. (2007) conducted a Rand study consisting of a qualitative analysis of women’s participation on the battlefield in Iraq. Harrell et al. (2007) conducted interviews and focus group data to analyze whether the current policy of restricting women in the military as direct combatants is due for a revision or due to changes from a linear to a nonlinear battlefield. The data collection model utilized within this study consisted of a combination incorporating focus groups and interviews and coding the data to quantitative statistics. The demographics of the study incorporated Army personnel who recently returned from a tour in Iraq including command teams and junior personnel. The study consisted of 80 personnel who participated in 16 focus groups including eight separate interviews (Harrell et al., 2007). The findings of the research concluded that women are participating within the spirit of the current policy and that women are not being hindered in the current policy (Harrell et al., 2007). This writer determined that the study utilized a sound methodology to conduct research in support of discussion of women on the battlefield. Since discussion on women in combat references a potentially feminist approach, a pure statistical approach would be difficult to incorporate the human dynamic.
Analysis of ASEAN Economic Change, Consumer Behavior, Marketing Trends and International Trade With NAFTA
Dr. Sinee Sankrusme, Ramkhamhaeng University, Thailand
This study will be taking a detailed look at the status of some of the many nations that comprise the Association of Southeast Asian Nations grouping, which includes Thailand, Brunei Darussalam, Vietnam, Indonesia, Malaysia, Laos, Cambodia, Myanmar (Burma), Singapore, and the Philippines. The purpose of the study is to analyze economic change with ASEAN, consumer behavior, and marketing trends, including international trade between Thailand and ASEAN, Thailand and NAFTA, ASEAN and NAFTA (the North American Free Trade Agreement) using both qualitative and descriptive research methods. The results demonstrate that, as much as these nations expend time and money on mutual cooperation and on fostering trade and economic development between them, the truth remains that they are all very fierce competitors, with many ASEAN member states producing the same goods for export. Vietnam, Indonesia and the Philippines have taken on the manufacture or production of many of these products, especially those from the agricultural sector that have earned Singapore, Malaysia and Thailand considerable foreign investment and sales overseas. International trade between the groups in the ASEAN association is hampered by restrictive and protective trade barriers, tariffs, duties and taxes, which they are trying to find ways to eliminate without hurting their own domestic markets for goods produced in each individual nation. This study focuses on the consumer, his habits and behavior, and what impact this has on each country’s economy and the health of the others. The study will also cover some of the marketing trends, changes and developments member states have had to make as the import and export trade is widely touted as a balancing act which will stabilize and promote both foreign investment and growth in the local economy. Urbanization in each of the ASEAN member nations has exploded, with populations soaring in many of the region’s major cities, such as Jakarta and Surabaya in Indonesia, Manila in the Philippines, Ho Chi Minh City in Vietnam, and Bangkok in Thailand. This has forced changes with regard to all forms of marketing, as consumers are far easier to reach. Television and print media (newspapers and magazines) account for most of the advertising and promotion to gain consumer confidence and to sell them products. The ability of these individual nations to form a solid program of trade and cooperation, one that is uniformly and mutually beneficial, has eluded them for many years. There are nationalistic and economic reasons for this, as each nation strives to capture business and export-related trade from the others. They compete fiercely in the manufacturing sector, for instance in garment production, agricultural production, seafood processing and the manufacture of products their respective populations have mastered. The study will examine each nation individually and then compare the differences and similarities, in an effort to improve the regional cooperation of the ASEAN grouping. The purpose of this research study and country report on the nations that have formed an alliance aimed at fostering commerce and mutual development in Southeast Asia, is to bring to light the many benefits and programs that have emerged during the evolution of ASEAN as a group. The original members were searching for ways of creating economic, social, cultural and trade ties and exchange between them, as well as strengthening the otherwise fragmented trade and commerce policies of the region. In addition, international trade between Thailand and ASEAN, Thailand and NAFTA, and ASEAN and NAFTA are also studied.
Measuring the Economic Potential of Utilizing Sweet Potato Production in Small Animal Forage and Crop Production System: A Systems Approach
Dr. Greta Schuster, Dr. Steven Lukefahr, Professor, Dr. Kim McCuistion, Dr. Roger Hanagriff
Texas A&M University, Kingsville
While major research efforts on sustainable, small-scale production systems have been the focus at the international level, there has been little focus in the United States. In general, economists assume that small-scale operations such as rabbit production are not viable as an agriculture business in the U.S. because rabbits are usually raised in small numbers as a backyard activity. However, in recent years the demand for locally produced foods increases disparity of income, and development of farmers markets have increased the potential for smaller scale production systems. Also, a rabbit as 4-H projects for children is a popular activity at present in the U.S. With the increasing world population there is an increased demand for food. Rabbits because of their prolific nature and ability to utilize a wide range of forages are a good protein source and income for small-scale producers (Cheeke, 1986). In the United States, North Carolina and California have the highest production followed by Mississippi, Louisiana, Alabama, Arkansas, Florida, New Jersey, and Texas, with a total of 23,845,000 total pounds of sweet potatoes produced in 2010 (USDA, 2011) Proximate analyses revealed that both SP leaves and vines had numerically the same or higher CP but lower gross energy than commercial pellets. NDF and ADF values were numerically higher for pellets compared to SP leaves. However, NDF values were more similar between pellets and sweet potato vines, although ADF values were somewhat lower for pellets compared to sweet potato vines. ADL was numerically lower for pellets compared to SP leaves. Also, leaves compared to vines had numerically higher CP, gross energy, and ADL, and lower NDF values. Present values on chemical composition of SP leaves and vines are in general agreement with numerous literature reports. Traditionally in Europe, rabbits are largely fed forages from plots and garden “wastes” (e.g., husks, leaves, peelings, roots, and vines). The manure is also recycled as compost as inexpensive fertilizer for the family garden. Presently, global consumer interest is rapidly growing in both natural and organic food products. While major research efforts on sustainable, small-scale production systems have been the focus at the international level, there has been little focus in the United States. In general, economists assume that small-scale operations such as rabbit production are not viable as an agriculture business in the U.S. because rabbits are usually raised in small numbers as a backyard activity. However, in recent years the demand for locally produced foods increases disparity of income, and development of farmers markets have increased the potential for smaller scale production systems. Also, a rabbit as 4-H projects for children is a popular activity at present in the U.S. The objective of our study was to develop a sustainable feeding system involving diets for growing rabbits based on sweet potato (SP) forage that could be of potential benefit to small-scale farmers. With the increasing world population there is an increased demand for food. Rabbits because of their prolific nature and ability to utilize a wide range of forages are a good protein source and income for small-scale producers (Cheeke, 1986). Raising meat rabbits using locally grown forages can be a sustainable goal for family food production. Considering current economic conditions in the economy, many Americans are now planting gardens, and there is a growing demand for rabbit breeding stock. In fact, during World War II, a record rabbit population existed in the U.S. because much of the domestic beef and pork supplies were exported to support our troops (Templeton, 1968). Many families combined their “victory garden” with raising rabbits to produce enough food to eat. Rabbit meat is low in cholesterol (Lukefahr, et al., 1989).
The Motives Driving Activity-Based Costing Adoption: An Empirical Study of Saudi Firms
Mohammed Al-Omiri, Umm Al-Qura University, Saudi Arabia
This study aims to study the diffusion of Activity-Based Costing (ABC) systems among Saudi firms. In particular, the paper considers the issue as to what are the motivations behind adoption of ABC systems. A survey of 256 companies was conducted to ascertain the motivations behind ABC systems adoption. The survey was conducted employing a detailed twelve-page questionnaire sent to a random sample of 1,000 companies. Data were derived from 326 returned questionnaires including 75 from business units that had adopted ABC. The motives behind adoption of ABC systems was based on Abrahamson’s four perspectives namely the efficient choice perspective, fad or fashion motives, and forced selection motives. The motivations were formulated by asking the respondents to indicate the degree of importance attributable to each motive in the decision to adopt ABC on a scale of 1 to 7. The study provides evidence that three deficiencies relating to existing costing systems were the dominant motives for implementing ABC: the existing system did not provide useful information to management; it was necessary to update the existing costing information system; the existing costing system was not reliable. These were followed by a group of motives relating to the changing environment (competitive, manufacturing and cost structure). The least important motives relate external pressure groups (e.g. external auditors, consultants and government/regulatory pressures) and fad/imitation motives. Recent years have seen the emergence of technologies that facilitate swift transfer of up-to-date information and ideas in national and international situations. There has also been intense national and global competition arising from the growing interconnectedness of economies and businesses as well as from large advances in global communication. The diffusion of innovation processes plays a major part in creating this modernisation and development. The diffusion of information involves the transfer or imitation of management principles, management techniques, accounting approaches, technologies and scientific ideas. Activity-Based Costing (ABC) arose in the 1980s from the increasing lack of relevance of traditional cost accounting methods, activity-based costing (ABC) system is a “system that focuses attention on the costs of various activities required to produce a product or service” (Langfield-Smith et al., 1998, Glossary, p. 1). Activity-based costing (ABC) was designed with the objective of providing managers with accurate activity-based cost information by using cost drivers to assign activity costs to products and services. Proponents of ABC argue that it provides accurate cost data needed to make appropriate strategic decisions in terms of product mix, sourcing, pricing, process improvement, and evaluation of business process performance (Cooper & Kaplan, 1992; Swenson, 1995). During the late 1980’s and 1990's a considerable amount of attention has given to ABC in accounting journals, particularly the practitioner oriented journals such as professional accounting journals. During this period consultants also extensively marketed and publicized ABC systems. Despite the considerable publicity that has been given to promoting ABC systems the survey evidence suggests the adoption rate has been fairly low, being approximately 15% of the companies surveyed by UK studies (Innes et al., 2000; Drury and Tayles, 2000).
Absurdity in Print Advertising: Its Impact on Brand Name Recall and Alcohol Warning Label Recall
Dr. Leopoldo Arias-Bolzmann, Professor of Marketing, Universidad Adolfo Ibanez, Chile
The presence or absence of an absurd image was manipulated in a simulated print advertisement for a fictitious brand of wine cooler. As predicted in the hypotheses, absurd images enhanced the recall of the brand name and reduced the unaided recall of an alcoholic beverage warning label. Results are discussed in terms of the role of absurdity in advertising communications. Absurd images frequently appear in advertisements (Stern 1988, 1990). In this paper absurd ads are defined as incongruously juxtaposing pictorial images, words, and/or sounds that viewers perceive to be irrational, bizarre, illogical, and disordered. For example, ads for Camel cigarettes portray a dromedary, cigarette dangling from his mouth, participating in sports and wearing fashion clothing. Or, consider the British Airways ad in which dozens of shoes are shown flying into the sky. Other examples include the Energizer Bunny (bunny playing a drum), the Coca-Cola Polar Bears (bears drinking Coke), and the California Raisins (dancing raisins). No study has specifically counted the percentage of ads that use absurdity. Despite the common use of absurdity in advertising by practitioners, until Stern's (1990) conceptual work, which related the absurdity construct to literature and drama, the topic area has received little attention from academic researchers. Arias-Bolzmann and Mowen (1992) have pioneered empirical research on the subject of absurdity, followed by Arias-Bolzmann, Chakraborty and Mowen (2000), and Arias-Bolzmann (2003). Their research, among other aspects, indicates that marketers are also interested on the effect of absurdity on brand name recall. Thus, the current study relates absurdity to traditional theories found in the consumer behavior literature. In addition to implications for theory, the results are relevant to advertising managers as well as public policy makers, referring to potential distraction of consumers from the mandatory warning labels. The paper will first discuss the construct of absurdity. After defining absurdity, the paper will link the construct to previous theoretical work in psychology and marketing on the impact of pictorial information on consumer responses. Results from an experiment will then be presented, in which the presence or absence of an absurd image in a print ad was manipulated. After presenting the results of the study, the advertising and public policy implications of the research will be discussed. The definition provided in the introduction is based upon an extensive literature review that spanned the intellectual history, origins, and explanation of the concept of absurdity. The concept of absurdity has roots going back to the field of philosophy in the early 1800s. It has since been discussed in the disciplines of art and literature. As the field continued to mature, the concept has been adopted by advertising practitioners. Esslin (1969) suggested that absurdity is the basis for the subtlest form of deceptiveness, because it disrupts conventional notions about meaning by questioning its very existence. The term "absurdity" was coined to define a type of modern drama in which characters behave irrationally, where causal sequences of events are illogical, and where incongruous juxtapositions of people and things occur. In the marketing literature, a conceptual paper from Stern (1990), related the contemporary dramatic movement of "theater of the absurd" to marketing strategy. She discussed absurdity in terms of a standard dramatic framework consisting of theme, action, characters, language, setting, and tone.
Effects of Newcomers Traits on Gaining Political Knowledge of the Organizations
Dr. Amr Swid, New York Institute of Technology, Manama, Bahrain
Political knowledge, involving the informal network of power and interpersonal relationships in an organization, is an often-overlooked dimension of learning how to fit into a new organization (Chao et al, 1994; Taormina, 1994). Moreover, newcomer research has been conducted independently of individual newcomer personality differences. To extend previous research, the present research examines the Big Five personality traits of newcomers and political knowledge as an immediate outcome of the process of newcomer adjustment. A 3-wave longitudinal study of 439 newcomers in 7 organizations examined Big Five personality traits as antecedents of political knowledge of the organization. The results suggested that among the Big Five traits, openness, neuroticism and conscientiousness were positively related to apolitical knowledge of the organization. Overall, the results suggested that the Big Five are one of the key determinants of organizational political knowledge. Outcomes of adjustment are distinguished based on existing theory and research into proximal and distal categories where the proximal might also be called indicators (Saks & Ashforth, 1997a). The separation of proximal and distal outcomes is an important way to improve our understanding of adjustment. Research has neglected outcomes directly relevant to adjustment theory (Bauer et al, 1998; Fisher, 1986; Saks & Ashforth, 1997). Researchers bemoan the frequent use of broad work attitudes such as organizational commitment and job satisfaction as newcomers’ adjustment outcomes. Newcomers are primarily interested in resolving questions of how to act and how well they match the new environment. The current research focused on an outcome that is more direct, i.e., “proximal” to the adjustment process. Chao et al (1994) considered politics as a proximal outcome of socialization since it was argued that politics can be further used to examine other distal outcomes. For example, individuals who are well socialized in organizational politics may be more promotable (distal outcome) than those who are not socialized in politics. On the other hand, few recent studies have examined the role of personality traits as related to expatriate adjustment (Huang et al, 2005; Shaffer et al, 2006) these studies have most often been adjuncts to larger and more complex adjustment models in the international domain. Therefore, the overall legacy of research on the effect of newcomers’ personality traits in their adjustment to a new organization and more specifically political knowledge of the organization is unclear. Another potential reason is the lack of consensus regarding the choice of which personality traits to measure. The current study seeks to explore the specific role that personality traits might play, and this work will be grounded in contemporary personality theory, especially work connected to the so-called Big Five personality traits (Digman, 1990; Barrick and Mount, 1995). For instance, Teagarden and Gordon (1995) found that open-mindedness was related to expatriate adjustment, while de Vries and Mead (1991) suggested the personality trait of curiosity was a factor in the level of adjustment. However, both of the two traits may belong to the construct of ‘Openness to experience’ in the Big Five framework (Barrick and Mount, 1991).Therefore, it is argued that to move beyond isolated personality traits and to consider the broad factor structure of personality traits is a more appropriate method for examining the effect of personality traits on the adjustment of newcomers. Unlike roles, which describe well-defined and structural components of the workplace, organizational politics are the informal power relationships between individuals and departments (Drory & Romm, 1990; Kacmar & Baron, 1999). With greater understanding of the organization and on-going observation of new organizational members, there is a gradual unfolding of the tacit structure of decision making as newcomers passes through a series of inclusion boundaries through radical moves (Schein, 1978).
Product Placement in Online Games: An Exploration into Thai Gamers’ Attitude
Dr. Chatpong Tangmanee and Dr. Jadtana Rustanavibul
Chulalongkorn Business School, Chulalongkorn University, Bangkok, Thailand
Marketers have been more attentive to advertisement in online games. Product placement via movies or news reports have been recognized; however, little is known about the placement in online games, especially in the context of Thai online gamers. This study thus attempts to (1) report the profile of Thai online gamers, (2) explore their attitude toward in-game placement, and (3) analyze their awareness and product recall. Based on the 253 number of usable questionnaires, Thai online gamers are mainly young, male students, spending 2-9 hours a day playing the games. They perceived congruence between game content and in-game placement and did not object to have commercials in the games. Although 86% of the samples were aware of in-game placement, their product recall is fairly low. In addition to extending insight into online advertisement in the context of Thai gamers, marketers could arrange a more proper marketing plan based on these results. One of advertising tools, product placement is a marketing technique through which firms could tangentially display their marketing messages through different channels. Television viewers may have noticed a can of soda on an anchor’s desk during a news broadcast or an instruction on how to brew coffee using a new coffee maker in one soap opera. 65 percent increase in sales of one of Hershey’s products were from product placement in the famous E.T. movie (Karrh, 1998; Gregorio & Sung, 2010). Indeed, the placement in entertainment media is an important alternative to attract one’s attention since advances in communication technologies have made it far difficult for marketers to deliver message via traditional media (LaFerle & Edwards, 2006; Lee & Faber, 2007). While the Internet may have been the marketers’ choices, the decline in general online advertising efficiency, such as the numbers of click on banners, urges them to consider new areas on this virtual word. Consequently, product placement has expanded to cover the realm of online games (Lee & Faber, 2007; Kureshi & Sood, 2009; Nelson, et al., 2006). The product placement in online games could be classified into two major categories: advergaming and in-game placement (Apperley, 2006; Chambers, 2005; Edery, 2006; Faber, et al., 2006). Advergame is the practice where firms develop a game associated heavily to products or services. For example, Cheetos snacks had created two advergames in 1992 in order to draw the target’s attention (Wood, 2006). In-game placement is the practice where firms present their product campaign as decoration in a computer game. For example, players of SWAT5 may encounter a display of a poster of Tripping the Rift hanging on the game’s wall (Smith, 2007) or Ford and Nike agreed in 2007 to display their commercials in four most popular video games including Nintendo’s Wii or Sony’s playstation (McCormick, 2007). These two product placement techniques are much similar in terms of applying computer games for marketing purposes. However, the main difference is that advergame is the specific game intended to draw audience’s attention to the product while in-game advertisement engages players in online games that have product message appearing in a few scenes of the games. Considering the general concept of product placement in which marketing messages are delivered as part of television programs, news reports, movies, or soccer match, the in-game placement idea is theoretically similar to the concept of product placement than advergame (Lewis & Porter, 2010; Apperley, 2006; Dahl, et al., 2008). As such, in-game advertisement is the study’s focal interest. Previous research has contended the reason that in-game placement contributes to success in advertisement (Kuresgi & Sood, 2009; Lee & Faber, 2007; Nelson, et al., 2004, 2006). First, the presentation of the product message is not the main interest. Gamers still attend to the game consciously. They are then likely to perceive the message with no serious objection (Lee & Faber, 2007). They are even able to have moderately high product recall (Glass, 2007). Second, since the message display is rather peripheral, gamers will not develop negative reaction toward it. Based on Lee and Faber’s (2007, p. 75) arguments, should gamers easily recognize the message content, “[it could] activates [their] skepticism …, which can [then] serve to counteract and limit persuasive effects”. Third, interactivity between players and game they play and that among players present a unique opportunity to in-game placement, as compared to traditional placement. Games are thus more lively and more persuasive (Hang & Auty, 2010; Kureshi & Sood, 2009).
The Role of Training and Development in Controlling Workplace Stress
Dr. Sami A. Albahussain, University of Dammam, Saudi Arabia
This research focuses on the use of training and development to control stress. Employees are an important resource to an organization that whenever anything happens to them, the performance of an organization is affected. Employees are affected by various factors emanating both form the work environment and their home environment. They are therefore prone to stress. An organization can improve its performance by reducing work-related stress that affects employees in many ways. However, this study focuses on training and development as a means of reducing employee stress hence improving organizational performance. The study would focus on the various sources of stress for employees and the ways that they can be avoided. The study would utilize a qualitative research methodology with a deductive approach. Both structured and semi-structured interviews would be used to collect data from sampled employees from Saudi Railway Organization. The findings of the study confirm that training and development helps employees reduce stress at work hence improving their performance and the performance of the organization. Saudi Railway Organization founded in 1976, is an independent public entity by the board of directors in support of the government. The organization earlier was Saudi Arabia Railway Corporation. As a new organization, there were many expectations from them. The market hoped for better transportation of passengers, goods and shipment services within the urban centers and across the neighboring countries. This means of transport aims at improving the economy, social networking, agriculture, industry development, and commercial activities in Saudi Arabia (Saudi Railways Organization, 2009). The organization reported accidents, delays, and complains from the employees. There arose different views from the management that makes decisions on the responsibility of their employees to reduce these challenges. They discovered that their employees are under stress due to the problems they face in their workplace and in their personal affairs. The organization aims to ensure customer satisfaction through their employees’ interaction and create a good image in the country by empowering their employees. This will help the organization to achieve their objectives of profit maximization through employee practices and operations. In 1976, Saudi Railway Organization established a training centre and in 2003, it was under the directorate general of human resource. This was an effort of the organization to dedicate its employees to training and career development. Currently, there are more than 1400 employees of the organization undertaking training programs that include train operation and supervision and English language programs. The organization engages in various cooperative training programs arranged by local universities, colleges, and institutes (Saudi Railways Organization, 2010). The organization wanted to know whether their efforts were of great help to their employees in improving their working conditions. The research will help create a better relationship between the organization management and its employees. Both will become aware of their expectations and the ways to improve the performance of their duties. The study will come up with strategies that will determine whether training and development is effective enough to control strain that leads to stress at the workplace, and other actions to take as an organization to ensure they minimize stress in the organization. This research is important to both the organization and the employees. The experts and professionals of the organization support the research by giving out their views on their experiences.
Privatization and Endogenous Mode of Market Competition in a Mixed Duopoly with Quality Differentiation
Dr. Ya-Chin Wang, Department of Finance and Banking, Kun Shan University, Taiwan
Making an extension from a standard vertical structure, we construct a mixed duopolistic model with quality differentiation by taking market competition and privatization policies into account. The major finding is that no matter whether the public firm is a higher-quality provider or a lower-quality provider, the government has incentives to practice privatization. The management implications of the result are that the strategy of privatization will affect the decision making on quality investment and market competition, which will then result in different surplus shifting between the public firm, private firms and consumers in the multi-stage game. As in Matsumura (2010), privatizing the public enterprises ends up with a success to the society in viewing of social welfare. This result is different from the outcome in Lutz and Pezzino (2010), which shows that the nationalization is always social desirable, regardless the type of short run competition and the quality ranking in equilibrium. The critical element is that we endogenize the mode of market competition. In many countries, a public-owned firm often plays an important role for their economies. In oligopolistic structure, when public and private firms compete with each other in the same market with different objective functions, it becomes a type of mixed oligopoly. Mixed markets exist in lots of industries such as telecommunications, electricity, postal, public transportation, heavy manufacturing industry, etc. As a result, the economic models of mixed oligopoly have received considerable attention in research. The major focus of the study in the literature, e.g. Bös (1986), Cremer et al. (1989), De Fraja and Delbono (1989, 1990), and Anderson et al. (1997), was to see welfare implications in the industry. As argued in industrial organization (IO) theory, the equilibrium outcome is highly sensitive to the mode of market competition (quantity or price setting). Singh and Vives (1984) and Cheng (1985) showed that price competition leads to higher quantities and lower prices than quantity competition in differentiated-products environments. More recently, Häckner (2000) and Zanchettin (2006) demonstrated the classical result that Bertrand prices are always lower than Cournot prices owing to sensitivity to the number of firms and demand (product quality) asymmetry between firms. If the decision maker lacks information about the exact mode of competition, polices based on the wrong beliefs can be harmful for the firms and welfare Furthermore, with the trend of economic liberalization, public firms gradually stride toward privatization. This is evidenced by the applications of these models to partial privatization by Matsumura (1998), to endogenous order of moves by Pal (1998), and to the location choice by Matsushima and Matsumura (2006). Privatization is primarily to adjust the role of the government in economic operations so as to facilitate social welfare. According to a broad definition of privatization, it can be divided into: ownership transfers (see Lee and Hwang, 2003; Beladi and Chao, 2006; Lin, 2007), management style changes (see. Barros, 1995; Chang, 2007) and market openings (see Fjell and Pal, 1996; Han and Ogawa, 2007).
Improving Behaviour Scores Using the Dual Scoring Matrix
Mei-Hung Ho, National Taiwan University, Taipei, Taiwan, R.O.C.
The credit scoring model is the most successful statistical model used in finance business. However, while the model has been actively developed for credit granting and portfolio management, most past researches have simply used the one-dimensional credit scoring model to segment customer risk. This study aimed to combine the banks’ internal behavior scoring model with the external credit bureau scoring model to construct the dual scoring model for existing credit card accounts. The predict power of this dual scoring model are obviously better than the one-dimensional internal behavior scoring model or the external credit bureau scoring model separately. Moreover, for further portfolio management and supervisory, we designed credit strategies that encompass credit limit management, card renewal and collection actions, which can in practice generate even greater benefits. The credit scoring models have been actively developed to evaluate customer risk, and different credit scoring models have been applied to different stages of the credit cycle. Application scoring models can assist banks in deciding whether to grant credit to new customers based on those customers’ characteristics (for example, age, education, marital status, and so on) (Chen and Huang, 2003). In a similar vein, behaviour scoring model can assist banks as they analyse the consumption behaviour of their borrowers and predict the likelihood of their customers defaulting on their loans in the future (Setiono et al., 1998). Based on scoring models, banks can strengthen their risk control mechanisms, reduce their losses arising from bad debts, and increase their operating profits. The recent global financial tsunami, which was triggered by the U.S. sub-prime housing market crisis in 2007, spread to the field for consumer spending. The banking industry responded by gradually ‘tightening its belt’ by issuing fewer credit cards and extending less credit. For the banks, they reduced the credit line, raised the cut-off score for issuing cards, closed risky card accounts, limited the increases in the amounts that existing customers could borrow, and increased the penalty fee imposed on loans unpaid by the due date. At the same time, as they faced increasing losses, the banks reduced the various kinds of rewards for using credit cards, and raised interest rates on revolving credit. But for the maximal benefit purpose, the banks should give the right offer to the right customers. For example, high risky customers should get the negative credit offer while low risky customers should not. For these reasons, establishing a more accurate credit scoring system to strengthen risk management became all the more an important and pressing issue. The approaches that have frequently been used to construct credit scoring models include linear discriminant analysis (Altman et al., 1994; Jo et al., 1997; Kim et al., 2000), neural networks (Desai et al., 1996; Zhang et al., 1999; West, 2000; Mahlhotra and Malhotra, 2003; Tsai and Wu, 2008), classification and regression trees (David et al., 1992; Li et al., 2004; Feldman and Gross, 2005; Lee et al., 2006), and logistic regression (Steenackers and Goovaerts, 1989; Laitinen and Laitinen, 2000; Westgaard and Wijst, 2001; Dinh and Kleimeier, 2007). All of the studies referred to above used a one-dimensional approach to construct the credit scoring model. In recent years, however, the literature has proposed to use a combined approach or a combined score approach to enhance the predictability of the one-dimensional credit scoring model. Altman et al. (1994) compared the respective abilities of linear discriminant analysis and neural networks to segment and predict distress. Although the predictability of these two approaches exceeded 90% for both the training sample and the holdout sample, the researchers still recommended that the combined approach be adopted in the future to provide more accurate predictions. Lee and Jung (2000) compared the predictability of the logistic regression and neural network models in relation to the credit of both city and rural dwellers. Their results indicated that, in regard to city dwellers, the logistic regression provided better predictability, whereas for those living in the countryside, the neural networks provided better predictability. They also mentioned that efforts could be made in the future to move toward both combined approaches to increase predictability.
Product Management in the World Pharmaceutical Industry
Dr. Dragan Kesic, University of Primorska, Slovenia
We emphasize world pharmaceutical industry has been abruptly changing in the last two decades. According to our research, we found the basic and most important factor of strategic success of each pharmaceutical company is definitively a product which is a sound and needed basis for further growth and development of each pharmaceutical company. We found out in our research work there is a huge lack of new, inventive pharmaceutical products, thus world phramaceutical companies try to find out new ways of searching for new products. One of the most logical approaches is to make strategic cooperations among pharmaceutical companies which result in various project and strategic alliances, which predominantly include merger and acquistion strategies which more and more prevail in pharmaceutical industry. We may conclude that products themselves are to play even more important and especially the highest top priority strategic role in the future development of world pharmaceutical industry and we may foresee even more consolidation processes in the future just of the new products management sake. Pharmaceutical industry is still one of the most inventive, innovative and the most lucrative world so called ''high-tech'' industries, however we may talk at the same time of period of great and profound changes in this industry sector. Pharmaceutical industry today probably unite the biggest of all mankind potentials. The basic and crucial condition for each world original, inventive pharmaceutical company is to research and develop new products to offer to mankind new therapies and to enable covering all medical, not yet properly satisfied needs. There are still many unfulfilled therapeutic fields, like cancer, diabetes, severe deseases like rheumatoid arthritis, psoriasis and rare genetic deseases, just to mention some the most important of them. However, the basic research and development of new product is extremely demanding, comprehensive and expensive performance as well. We may conclude that basic research and development activities (R&D) together with marketing and sales are two the most important operative and even more strategic activities of world pharmaceutical industry. In these two activities the biggest investments are definitively put in. Having analysed these figures, we have found that the biggest, inventive pharmaceutical companies invest on average around 16% of their sales into R&D and even more, around 25% or even more, into marketing and sales activities (Kesic 2006,22). However, these ratios, especially these ones for R&D investments, are even higher with specialists, like biotechnology and pharmacogenomic pharmaceutical companies, and much lower with generic pharmaceutical companies (Kesic 2006,28). World pharmaceutical industry is structurally not unique, as pharmaceutical companies differ according to their basic performance, vision and strategic development. We could define three different groups of the world pharmaceutical companies:
Knowledge Transfer and International Outsourcing Alliances: A Case Study of Taiwanese Suppliers
Dr. Wei-Li Wu and Dr. Yi-Chih Lee, Ching Yun University, Taiwan
In recent years, leading multinational enterprises have become accustomed to outsourcing their non-core business in order to increase the competitive advantage of their products. With the prevalence of global outsourcing, suppliers in developing countries have been provided with a good learning platform. Through their involvement in outsourcing, suppliers are able learn about the technology involved in product development from leading multinational enterprises. For instance, over the last few years, Taiwanese suppliers have achieved rapid growth through their cooperation in international outsourcing alliances, and have managed to develop their own brands and technology (e.g., computer firm Acer and the HTC smartphone). Therefore, this study focused on research on Taiwanese suppliers and explored the ways in which they learn about technology effectively through international outsourcing alliances. In general, the previous literature on international outsourcing alliances and supplier learning has tended to use the questionnaire survey method, thereby simplifying the differences in the cooperative relationships of various suppliers with their customers, which makes it impossible for the existing literature to reflect real situations in the real world. In order to fill the gaps in the research, this study aimed to conduct case interviews with five Taiwanese suppliers, and then put forward relevant propositions regarding knowledge transfer in international outsourcing alliances. The present study also indicated the role that Taiwanese suppliers play in international outsourcing alliances, and identified them as technology learners, technology integrators, technology providers, technology supplement providers and technology absorbers. early scholars tended to consider alliances as important means of risk diversification, economies of scale, market entry or legitimate gain (Contractor and Lorange, 1988). In recent years, with the emergence of the resource-based view (Barney, 1986; Wernerfelt, 1984), the dynamic capability view (Teece, Pisano, and Shuen, 1997), as well as the knowledge-based view (Kogut and Zander, 1993; Nonaka and Takeucji, 1995), the importance of knowledge as an asset has therefore become a central issue. Accordingly, the strategic role of alliances has changed in that they have become an important source of external knowledge acquisition and learning for suppliers (Inkpen, 2002; Wu and Yeh, 2011). During the cooperation process, suppliers have the opportunity to observe and imitate the knowledge of their alliance partners, which is then absorbed and transferred within the suppliers. Therefore, for those suppliers who are always striving to acquire new technologies and knowledge, alliances have become an important learning platform. Generally speaking, the external knowledge which is acquired through alliance cooperation can become an important source of internal knowledge creation and technology promotion for suppliers (Nonaka and Takeuchi, 1995). For Taiwanese suppliers, achieving advanced technology acquisition and knowledge transfer processes through cooperation in international outsourcing alliances is a critical factor for the promotion of their capabilities. For example, a number of scholars have observed that Taiwan’s electronics and information technology industries have achieved rapid and stable growth, which is due mainly to the acquisition of advanced technology and knowledge from external sources through their cooperation with foreign enterprises and their ability to develop the technology and knowledge to fit their own capabilities, which will become a drive of their technology development in the future (Hobday, 1995; Ernst, 2000). In other words, the acquisition of foreign technology is the critical factor in the promotion of the technological capabilities of Taiwanese suppliers.
A Study of Evaluation Criteria for Disclosure and Transparency
Dr. Yeong-Bin Lee, Ling Tung University, Taiwan
Disclosure and transparency is an integral part of corporate governance. Disclosure helps the public understand a company's activities, policies and performance with regard to environmental and ethical standards, as well as its relationship with the communities where the company operates. Inadequacy of disclosure and transparency may lead to unethical behavior such as fraud and corruption, costing not only the company but the economy as a whole. There is a close relationship between transparency and the enforcement mechanism of corporate governance. Both are interlocked with each other and have to work together in order to maximize efficacy. The study develops constructs for disclosure and transparency through Delphi method and builds a hierarchical structure via AHP analysis to identify important criteria and their priority setting for successful evaluation of disclosure and transparency. It is hoped that the study has contributed to the body of knowledge available to assist companies in the promotion of disclosure and transparency and relevant agencies in the provision of criteria for evaluation. The results of the study show that five key constructs for evaluation of disclosure and transparency are protection of rights of shareholders, strengthening of functions of board of directors, disclosure of financial information, information transparency, rights of stakeholders. Disclosure and transparency refers to accurate and timely release of information about the business strategy, financial performance and corporate governance to the general public by a company. To investors, disclosure and transparency can not only prevent employees from acting in any way detrimental to the company due to information asymmetry between management and investors, but also increase investors’ willingness to invest in the company when they can access to information that they need to know for a sound investment. Thus, disclosure transparency has a significant impact on the enhancement of enterprise value and reduction of the cost of capital. Transparency is closely related to enterprise value. Sound corporate governance is a good background for better transparency. A company with sound corporate governance is capable of providing information on the appropriate level of transparency and timing, which in turn has a direct impact on the company’s competitiveness. Better disclosure leads to higher market liquidity and stock price. These stocks usually have very little volatility. Meanwhile, better transparency helps listed companies raise capital. It also ensures more stable sources of funding, long term profitability and sustainable development. Transparency enables both institutional investors and individual investors to access all the relevant information, increases their confidence and helps the company gain more advantages of financing through capital markets. The purpose of disclosure and transparency is to ensure all interested parties are provided with true, correct, complete and timely information which they can use for decision making. It reduces information asymmetry and uncertainty, enables investors to make the most well-informed investment decisions and eliminates the risk of illegal insider trading. Recently, the corporate scandals in Taiwan have caused investors to lose confidence in the fairness of the markets. Therefore, how to enhance transparency, reduce information asymmetry between management and investors, provide investors with relevant, accurate and timely information that informs decision making about project design and management has become more important for businesses than ever before. Inadequacy of disclosure and transparency can cause great distress to both the business and investors. Thus, how to enhance transparency, reduce information asymmetry between management and investors and provide investors with relevant, accurate and timely information that facilitates the understanding the operations of the company has become more important for businesses than ever before.
Exchange-Traded Funds: Characteristics, Growth, Problems and Evolving Issues
Mickey W. Keeling and Dr. Balasundram Maniam, Sam Houston State University, Huntsville, TX
Geetha Subramaniam, Victoria University of Wellington/Universiti Teknologi MARA, Malaysia
This paper reviews articles on the topic of exchange-traded funds (ETFs). ETFs have grown at a blistering pace since the first ETF began trading in 1993. This paper details how ETFs’ shares are created and redeemed, the features of ETFS, the types of ETFs available to investors, and some of the problems and issues related to investing in ETFs. The effects of the May 6, 2010, “flash crash” on ETFs are also reviewed. Finally, some evolving areas of ETFs development are discussed. This paper looks into the issues involving exchange-traded mutual funds (ETFs). Though ETFs resemble open-end and closed-end mutual funds, there are also important differences. Exchange-traded funds are open-end investment companies whose shares can be traded on exchanges during normal trading hours. ETFs promise convenience, easy diversification, increased liquidity, low costs and tax efficiency. Aber, Dan and Luc (2009) compared the price volatility and tracking ability of ETFs to conventional index mutual funds that tracked the same index as the ETF. They found that ETFs are more likely to be priced at a premium more than at a discount. By comparing prices of ETFs to net asset values, Ackert and Tian (2008), found that the average premium for U.S. ETFs was less than 2 basis points while the premium for country funds was greater than 10 basis points. In another related study on the degree of diversification, performance and performance persistence in ETFs, Adjei (2009) found that thirty-eight percent (38%) of an average ETF’s total risk is diversifiable. He also found no significant performance difference between S&P 500 index and ETFs based on that index. Bary (2010) surveyed the ETF landscape and describes the various types of funds available to investors, and provides details about some of the major sponsors of ETFs. Boudoukh, Richardson, Subrahmanyam and Whitelaw (2002), studied a mutual fund practice that allows the buying and selling of fund shares after the close of the business day at stale prices, creating trading possibilities on the fund shares that adversely affect the buy and hold investors of the fund. Barnhart and Rosenstein (2010) studied the discounts on closed-end funds (CEFs) around the time of the introduction of similar asset class ETFs. They found that the introduction of an ETF reduced the value of a corresponding CEF. Dromis (2010) describes fundamental indexing, which is a recent innovation in the way of index funds are constructed. By comparing fundamental indexing to the more widely used market-capitalization weighted index funds, he reviews the arguments for and against fundamental indexing. Engle and Sarkar (2006) who studied the discounts and premiums of ETFs found that domestic ETFs premiums are small and last for only a few minutes. On the other hand, international ETFs premiums and discounts were larger and frequently lasted for several days. Gardner and Welch (2005), who reviewed tax and estate issues concerning ETFs described the tax advantages of ETFs over traditional mutual funds. Hamman (2008) described the differences between actively managed ETFs and passively managed ETFs and provided information about how investors should choose between these two types of ETFs. Harper, Madura and Schnusenberg (2005) compared the risks and returns of ETFs to closed-end funds (CEFs). Their findings indicate that passive ETFs may be superior investments to actively managed CEFs. Laise, (2010) in a Wall Street Journal article, outlined how ETFs behaved poorly during the “Flash Crash” of May 6, 2010. She reported some previously unknown dangers of ETFs and made suggestions as to how investors can protect themselves from those dangers. Poterba and Shovern (2002) described the mechanics of how ETFs are organized and traded. They further described the tax advantages of these new mutual funds for taxable investors.
Board of Director Characteristics and Audit Fees: Does Concentrated Board Ownership Matter?
Chi-Ying Chiao, Hsing Wu Institute of Technology, Taiwan ROC
This study examines the empirical relationship between four board characteristics (ownership, independence, CEO duality, and compensation) and audit fees in Taiwan listed companies. Using OLS regression to analyze the data, I find that concentrated board ownership is related to lower audit fees, and higher board compensation is related to higher audit fees. Further, the relationship between CEO duality and audit fees will be weaker when the board of directors holds concentrated ownership. The findings suggest that the concentrated board ownership has a significant impact on the determination of audit fees. In the wake of the Enron and WorldCom scandals, concerns about corporate governance have been and continue to be a topic of important for shareholders, practitioners and academics. An effective board of directors is considered one of the strongest indicators of shareholder value and good governance, because directors have the responsibility of ensuring management acts in the shareholder’s best interest. In addition, it is advisable that listed companies to set up the audit committees to assist the board of directors to perform its supervision responsibilities such as examination of the accounting system, financial conditions, the procedure for financial reports of the company, and the internal control of the company. However, to set up the audit committees is not common in Taiwan listed companies. An effective board of directors still plays an important role in Taiwan listed companies. The inherent risk and control risk for auditors are a fundamental aspect of an auditor’s fee setting process. An effective board of directors may reduce the control risk of the company, which in turn, audit efforts and audit fees will be declined. The purpose of this paper is to examine the relationship between four board characteristics (ownership, independence, duality, and compensation) and audit fees in Taiwan listed companies, as well as the moderating effect of board stock ownership. Prior studies (Shleifer and Vishny, 1997) indicate that ownership concentration itself is an important determinant of effective corporate governance. Mitra, Hossain, and Deis (2007) find evidence that firms with high managerial ownership have less agency problems in financial reporting, because high managerial ownership has the effect of decreasing the inherent risk of material misstatements resulting in less audit effort and audit fees. La Porta, Lopez-de-Silanes, and Shleifer (1999) indicates that 20 percent of ownership is usually enough to have effective control a firm. Prior studies find that more independent boards are more likely to block a managerial attempt to manipulate discretionary accounting accruals to benefit themselves at the expense of the shareholders (Fama and Jensen, 1983). Tsui, Jaggi and Gul (2001) provide evidence that firms with independent boards have a more effective internal monitoring mechanism that reduces the auditor’s assessment of control risks and scope of audit work, thus reducing the audit fees. CEO is the highest-ranking corporate officer in charge of total management of a company.
Measuring the Health of a State Branded Wine Product in Texas
Dr. Roger D. Hanagriff, Texas A&M Kingsville
Dr. Olga Murova, Texas Tech University
Dr. Michelle Santiago-Mullins, Sam Houston State University
Previous research had shown that consumers can switch between different brands based on wine market share; and some categories of consumers are not very concerned with taste and quality differences behinds the label (Ehrenberg, 2000). The consumers cannot usually measure a taste value prior to purchasing wine, so consumers make their decision on what to buy based on the previous knowledge, the label and the bottle. Researchers found that consumers’ attitudes towards a brand do not predict buying behavior accurately (Fishbein and Ajzen, 1975). Instead, consumers’ attitudes towards the action of buying the brand, moderated by their subjective norms, predict buying intentions much more accurately, as tested in the theory of attitude formation (Fishbein and Ajzen, 1975; Sheppard et al., 1988). Scott and Davis (2005) developed a scale to measure the health of a brand, which is derived from consumer’s measure of five parameter areas. These areas measure pre-purchase, purchase, and post-purchase values associated to the health of a branded product. In reference to consumer demographics, Texas consumers are primarily between the ages of 45 and 60, upper income levels and interested in seeking out wines that taste great, but are not high-priced. Also these consumers overwhelmingly prefer red wines over other wines and associate terms such as smooth, full-bodied, dry and balanced. Term association was interesting, in that only 4% of consumers responded that they do not associate terms in their decision to buy a wine, which offers marketing opportunities to wineries seeking to gain customers. In terms of the health of the Texas wine brand and following Davis and Dunn’s approach to measuring brand touch-points, awareness of Texas wines is high, but easily identifying Texas wines is difficult. Texas consumers report premium priced wines and they often refer to others, but seeking to buy and post-satisfaction are low values. Health of the Texas wine brand is mixed with a high value in terms of pre-experience, but losing health as consumers move from pre to post-purchase. Efforts to improve wine quality, increased signage at retail outlets and winery location and feedback to wineries from consumers could all raise the health of the Texas wine brand. There have been many studies analyzing consumer preferences of wines and wine characteristics. These research studies were done in attempt to recognize the characteristics of desired products. Once wine characteristics are measured, researchers proceed to relating them to the various aspects of wine economics. Most of the studies look at the demand, supply, and marketing aspects of wine economics.
Human Resources Development for Aging Population in Korea
Dr. Namchul Lee, Korea Research Institute for Vocational Education and Training, Seoul, Korea
Population ageing will result in the decline in the number of the economically active and thereby hinder growth. The governments and societies around the world are concerned as this will mean that fewer numbers of productive workers will be left to shoulder the growing burden of supporting the elderly. This may bring about a crisis in both economic and social terms. The purpose of this study is to present long-term policy alternatives in the future through an analysis of the causes of aging in Korea. This article will raise two agendas. First, we will forecast the future of the aging population around the world. Second, we will focus more specifically on creating future jobs and human resources development for the aging population. Currently, Korea faces a severe aging crisis. (1) Baby boomers, those who were born between 1955 and 1963, are likely to lead a large-scale aging process after 2020. Aging has a positive aspect of lengthening average life spans and creating new industries; however, it expedites the fixation of a low-growth era caused by its negative effects such as capital, finance, etc. According to major domestic research institutes over recent years, it has been analyzed that the growth potential of Korea is on the decreasing trend due to the decline in the productive population following the aging phenomenon. Meanwhile, the OECD estimates that Korea’s average potential growth rate in 2010-2011 will be in the baseline scenario containing mid-to-long-term economic forecasts (OECD, 2010). SERI (2004) forecasted that the potential growth rate may decline to 4 percent in 2010 and 3 percent in 2030 due to only population factors, including aging. This is because economic growth will inevitably contract as investment decreases caused by a slower savings rate with the reduction of labor supply and the progress of aging. To overcome the expected low growth rate caused by reduced labor power and reduced capital input, improvements in productivity are necessary. However, in a society where the aging of labor power is progressing quickly, it is generally accepted that this task may be difficult. The EU estimated 22 percent for Japan and 19 percent for the Europe as the rates of decrease of economic growth per capita caused by population decreases and aging by 2050 (KDI, 2003). The EU has forecast that Korea is expected to experience a faster decrease of child births and more rapid aging. Therefore, by 2050, the degree of aging would become the highest in the OECD. It can be expected that the reduction of economic growth may be far larger in Korea than in other OECD countries. According to an IMF analysis (2004), GDP per capita is forecast to increase by 0.08 percent when the production age increases by 1 percent, and decrease by 0.41 percent when the elderly population increases by 1 percent. In Korea, numerous research projects have been conducted by the KDI, KLI, KIHASA, and KRIVET in early 2007 focused on various themes related with human resources development and lifelong learning, and occupational ability development, as well as the economic approach, social approach, and legal approach to aging (Kim, K. H. and Others, 2008; Lee, U. K., 2005). KDI forecasted labor power changes through long-term employment forecasts, analyzed the retirement aspects of the old-aged people based on cross sectional data, and analyzed the data by focusing on what factors would bring about changes in the labor market of the old-aged people (Choi, G. S and Others, 2003).
The Long Run Relationship between ISE-100 and S&P-500
Dr. Elif Guneren Genc, Istanbul Commerce University, Istanbul
Elcin Aykac Alp, Asist. Prof., Okan University
In today's economic trends, there is the flow of goods/services, labor-force, technology, and capital in a global perspective exceeding the borders which affect the economies of countries. Commerce and financial links show that there are relations in the movements of one country with another and they share the common conjecture. In this sense, minimization of the risk depends on the relations of returns of stocks and bonds and investor's international portfolio diversification. In this study we analyzed the relation between ISE-100 and S&P-500 for the period 07.01.2000–29.04.2011. This period contains especially two big crises. These crises also affect the structure and lead the nonlinearity of these data. Today, trends in world economy and circling of goods and services, labor, technology and capital around the world without knowing no geographical bound, affects the national economies. Since all national economies are affected from the events of the rest of the world through commercial and financial links, it is understood that cyclical components are interdependent and share a common conjuncture as a result of relations of a country’s cyclical movements with the other countries’ cyclical movements. On the other hand, due to different economic structures, development levels, systems and geographical characteristics of countries’, it may have different features and interactions in each country. As the run of financial markets is both shaped by internal economic developments and fed in global economy phenomenon, continuously repeated growth or economic crises are observed both in micro level and macro level. In particular, a unified economic activity structure continues with expansions occurred almost at the same time and with similar general declines combined with the next stage of expansion. Having information on this subject not only affects local economy but also is the necessity and determinant for the investors’ decisions in the global markets to contend with the negative and positive situations. For example; while investors can facilitate to determine the markets in which they will be in a weak relation by allocating their risks for two securities market which move parallel, the size of the reflections of current developments against external shocks can be predicted. In countries in which financial system is strong, savings are transferred to entrepreneurs through financial institutions. In countries in which financial markets don’t run effectively, all investments are realized by the savers, this situation prevents the use of savings for productive purposes. As a result of savings that are not used for productive purposes, it cannot be expected that financial system will grow and savings will increase economic growth (Gokten, Okan, Onder and Ayberk, 2008). Today it is comes out that the efficiency and the performance of a financial system is the primary determinant factor in economic prosperity and countries with more developed financial systems show more rapid growth (Raghuram and Zingales, 1998). Performance of security market depends on two criteria. The first is the risk formed according to the performance of the company that has the stocks in security market; and the second is the risk resulted from fluctuations that will occur because of sensitivity to macroeconomic factors in economic conjuncture and vulnerability to sudden developments. Because of all these, risk improvement depends on the relations of the returns of securities taken in the portfolio with each other and investors’ international portfolio diversification. At this point, there comes the importance of portfolio diversification.
Economic Impacts Derived from a Newly Developed Community Supported Equine Facility: Impacts to Rural Tourism
Dr. Roger D. Hanagriff, Dr. Randall H. Williams, Langdon L. Reagan, and Trent Whitis
Texas A&M University, Kingsville
According to the U.S. Census Bureau, the estimated percent change of the population in Wilbarger County, Texas will decrease by 6.1 % (U.S. Census, 2000). When a decreasing population occurs in a normal situation, property taxes increase due to a decreasing tax base and sales taxes decrease. In order to increase sales tax revenue, people must be attracted to the City of Vernon. One way to bring people to Vernon is through tourism. Equestrian based facilities are uniquely qualified to facilitate significant economic impact because participants generally spend multiple days in town, bring with them multiple family members or supporters and spend money on motel rooms, food, fuel, and take advantage of other retail purchase opportunities. According to Brown (2002) and Lewis (1998) rural tourism has become a popular destination for tourists. In addition, Lewis predicts that because of this renewed interest in America’s rural communities; tourism in this area should continue to grow. According to the Travel Industry Association, nearly two-thirds of all adults in the nation, or 87 million individuals, have taken a trip to a rural destination (Travel Industry Association of America, 2001). Several reports conclude that state support of rural tourism creates positive and significant returns on investment of state funding (Hanagriff and Lau, 2009; Murova, Hanagriff, and Lyford, 2009). Murova and Hanagriff (2011) found that smaller communities with a higher sense of identity had higher economic impacts from events in larger communities. Also found in this report were highly correlated tourism activities related to higher economic impact that include tourists traveling greater distances, utilizing hotels and plans to visit surrounding areas. In assessing the newly built equine facility in Vernon, 48 of the 49 annual events held (2009) were evaluated to measure visitor demographics and likely economic impact from visitor spending. It was found that groups attending events held at the Vernon equine facility averaged over four persons per group, on average traveled 190 miles and created spending value of over $800,000, which is an economic impact to the region of over $1.7 million. It was also determined that events exceeding one day attract significantly higher spending values, which translate to higher economic impact. According to the U.S. Census Bureau, the estimated percent change of the population in Wilbarger County will decrease by 6.1 % (U.S. Census, 2000). When a decreasing population occurs in a normal situation, property taxes increase due to a decreasing tax base and sales taxes decrease. In 2006, the Wilbarger County property tax rate was set at .4658. There has been a steady increase in the property taxes with the 2009 Wilbarger County property taxes currently set at .47128 (Beebe, 2009). In order to increase sales tax revenue, people must be attracted to the City of Vernon. One way to bring people to Vernon is through tourism. Equestrian based facilities are uniquely qualified to facilitate significant economic impact because participants generally spend multiple days in town, bring with them multiple family members or supporters and spend money on motel rooms, food, fuel, and take advantage of other retail purchase opportunities. According to Brown (2002) and Lewis (1998) rural tourism has become a popular destination for tourists. In addition, Lewis predicts that because of this renewed interest in America’s rural communities; tourism in this area should continue to grow. According to the Travel Industry Association, nearly two-thirds of all adults in the nation, or 87 million individuals, have taken a trip to a rural destination within the past three years (Travel Industry Association of America, 2001). A potential reason for this increase in rural destinations could lie in the finding by Lewis which noted that approximately 96 percent of the U.S. population lives on four percent of U.S. land, which provides a great opportunity for tourist destinations to include rural areas
The Survival of Small Businesses in the Absence Supportive Political and Economic System
Dr. Rassem Amash, Royal University for Women, Riffa, Kingdom of Bahrain
Many economists agree that small and medium enterprise can a very powerful tool to stimulate the economy and create a tremendous economic growth if is gets a proper support system. Small business and entrepreneurship is a culture, for instance U.S.A, Singapore, and Israel did realize the importance of small businesses and tried to nurture it; as a fact two third of jobs added and economic growth were created by small and medium enterprise, for instance Israel 2005-2008, Singapore 2006-2009, South Korea, Brazil, the question is always asked why it does work for one region and it does not work for the other. Some developing countries with natural resources are trying to diversify the economy and fight unemployment, by investing heavily in programs to stimulate the economy; and support fellow citizen by providing free education, grants, scholarships, training on the job, loans for small enterprise and many other financial support, but the money did not solve the problem of slow economic growth and high unemployment. The research is set to examine the challenges and difficulties facing small, medium enterprise and entrepreneurs in developing countries, in addition the research will examine the support system available in such countries. The study will focus on wealthy, rich with natural resources region, but high unemployment and other economic challenges. The Gulf Countries Council (GCC) trying to have an economic revolution in the past decade, putting together an economic vision to compete globally in term of economic growth, education, prosperity and eliminate unemployment among citizen. One tool adopted was, a comprehensive support system and tremendous investment to assist small businesses. The research will focus on the correlation between that expansive comprehensive support system and the success of small medium enterprises in the region. In other words can money always solve the problem, the second part of the research will focus on the challenges and difficulties facing small businesses and compare them to the support provided by governments. The role of small business culture in economic and social development has often been underestimated. Over the years, however, it has become increasingly apparent that small businesses do indeed contribute to economic growth and prosperity. Governments and policy makers around the world are starting to realize that in order to sustain progress and improve country’s economy, citizen have to be encouraged and trained to think out-of-the-box and be constantly developing innovative products and services (Chan, 2004). Chan stated that small businesses are the source of sustainable economic prosperity for nations, societies, regions and individuals. He saw small enterprises and startups as an innovator who implements change within markets through the carrying out of new combinations. Small businesses and startups are important to economic wealth creation at the national and individual levels. As individual citizens, it is important to understand that small enterprise significantly impacts our own lives and those of our fellow citizens as a vital source of new job creation and a source of a vast majority of new technology and products.
Cash Flow Residential Real Estate: Time to Buy?
Zeke Galo, Sam Houston State University
Dr. Hadley Leavell, Sam Houston State University
Dr. Balasundram Maniam, Sam Houston State University
Cash flow producing residential real estate bears many desirable characteristics for portfolio diversification, but is often overlooked as an asset class for inclusion in an investor’s portfolio. Given this fact and in light of the current correction, this paper undertakes a top-down initial analysis to see if the present time is ripe for investment in this asset class. This paper uses two relative value measures to make this assessment. The first is a price-to-rent ratio. It was found that 1) housing values are currently lower than historic rent prices, 2) the current level is above the historical low and 3) it was noted that the recent bubble could have an after effect that violates the historic low. The second method looks at median existing housing prices relative to new housing prices. A widening spread in prices is noted, but it is difficult to confirm a trend due to “noisy” data in new home prices but the trend appears to be downward. Ultimately the assessment is made that residential real estate will trend lower in the short term, but a return to health continues to be uncertain. Since this hard asset tends to be a long term investment and it is not possible to pick an absolute bottom in any investment class other than through sheer luck, now is possibly the time to pursue cash flow residential real estate for inclusion into an investment portfolio. The recent market crash has given investors who already had a full plate of data to sift through even more reasons to question what they already know. Risks that the average investor thought he understood suddenly blew up as margin calls and general fear caused models to break down and confidence to disappear. Following the crash, there were three overlapping effects or stages of response. The first effect was the shock and the “what happened” response. Next were the parade of committed “bears,” such as Nouriel Roubini and the Monday morning armchair analysts, whose responses are best described by Nassim Nicholas Taleb’s “triplet of opacity” (2007). The committed bear views the event not so much as a tragedy but as a solidification of their true clairvoyance (at least in their own mind). The third response can be described as constructive damage control. This phase is not only characterized by an examination of the “what happened?” but is also characterized by asset risk aversion. What can the average investor do for damage control? How do they recuperate losses while shoring up their portfolio and dropping their risk level? One way to approach these problems is though the standard strategy of diversification while maximizing returns by successfully timing the addition of assets. The only way to succeed in timing is to buy before the masses start to follow. The best time to buy an investment may be when that asset looks absolutely terrible (Osbon, 2010). To this end, income producing residential real estate is an asset class that warrants an investigative look. Residential real estate, specifically cash flow producing residential real estate, is an often ignored component of an investor’s portfolio that carries some interesting and unique characteristics. As an asset class, with $17.4 trillion in total value, residential real estate makes up a much larger pool than the S&P 500’s $10.6 trillion (Residential Real Estate, 2010). It is a hybrid asset that has equity and bond characteristics (Osbon, 2010). Low liquidity, lack of pricing transparency, asymmetric price movements, cumbersome settlement processes and the presence of significant costs during the holding period (Residential Real Estate, 2010) are all characteristics of residential real estate. Each of these can be reasons that investors both attract to and shy from direct exposure to the asset class. Mispricing at the time of sale is likely a result of and have increased by the interactions of many of these characteristics. This mispricing is a reason for its appeal. It is one of the facts that allow many real estate investment savvy and often traditionally uneducated investors to be able to earn their living from investing in residential real estate. This fact is supported by research that shows increased information of the pricing factors surrounding the area of a given residential real estate asset allows the informed investor to reap superior returns (Min & Quigley, 2009). Specific information on local markets is often observed by those closest to the locale and not taught in the academic classroom. As an asset class, residential real estate has a risk/return/correlation profile versus other asset classes which is appealing. S&P delves heavily into this relationship in an analysis that they publish on their website. This analysis tends not to consider the rental aspect of the asset but still produces compelling results (Residential Real Estate, 2010).
Self Control Theory: Recognizing Your Company’s Vulnerability to Employee Theft
Jason Geesey, Tarrant County College, Fort Worth, TX
Claudia Rocha, Texas A&M University, College Station, TX
Today business success is dependent upon several important variables and scholars may suggest those are related to planning, execution, and innovation. In fact these three variables are often analyzed when diagnosing business failure. Yet, many of us fail to recognize the importance of human capital and how it contributes to a business’ success or failure. Astoundingly almost one out of three small business failures occur because of internal theft (Kulas, McInnerney, DeMuth, & Jadwinski, 2007). Although many have argued that internal theft can be controlled or eliminated through planning and execution the number of failures continue to plague businesses – especially small organizations. Despite prior research describing the problems and suggestions of how to mitigate internal theft, it is a problem that still continues to burden today’s businesses. Kulas, McInnerney, DeMuth, and Jadwinski (2007) confirm that 30% of all business failures occur because of employee theft. Hence, the authors believe there may be another methodology for eliminating or deterring internal theft by utilizing the constructs of Self-Control Theory. Self-Control may not only help reduce internal theft it may diagnosis other human resource problems that can ultimately change an organizations future. According to many experts business failures occur because of poor business planning, a lack of capital, and mismanagement. Yet, research suggests another hypothesis that management seem to ignore until it’s too late. Many business owners do not want to consider such losses or are too embarrassed to admit they have become victims of their employees (Eckelberry, 2005). While other owners are in denial and often believe it will never happen to them (Stettner, 2009). Unfortunately, neither trust nor a positive workplace environment is good enough to prevent employee theft. Kulas, McInnerney, DeMuth, and Jadwinski (2007) theorize that workplace environment is a major factor toward influencing employee theft. Although their research confirms an organization’s climate can influence the climate for theft they also suggested further research identifying individual variables such as age, gender, and the tendencies to steal. So the threat from employees may go beyond an organization’s environment. Additional inquiries will confirm the need for further research to Kulas’, McInnerney’s, DeMuth’s, and Jadwinski’s findings. Temple (2009) believes the greatest threat to business success is in the fate of the company’s employees. His research found U.S. companies incur $20 to $40 billion in losses each year due to employee theft. These losses occur within the walls of the firm that averages about $400 per every American worker (Temple). What is more compelling than the billions lost to theft is the impact it has toward sustainability. In 2003 nationwide studies determined that employee theft was responsible for 30% of small business failures (Kulas, McInnerney, DeMuth, & Jadwinski, 2007). The American Management Association deems 20% of all business failures were attributed to internal theft or fraud (Eckelberry, 2005). Regrettably small businesses are hit hardest by employee theft (Eckelberry) (Temple). This adds to the risk for small business survival. Thus business owners and management should prioritize the magnitude employee theft can impact their organization. Lately, several articles were written to help business owners deter employee theft.
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