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Impact of Sarbanes-Oxley and White-Collar Crime Penalty Enhancement Acts of 2002 on Corporate Fraud Sentencing
Dr. Deanna Oxender Burgess, Associate Professor, Florida Gulf Coast University, FL
Dr. Ara G. Volkan, Eminent Scholar and Moorings Park Chair of Accounting, Florida Gulf Coast University, FL
Alisha Angeloff, Markham Norton Mosteller Wright and Company, PA, Fort Myers, FL
Kelly Dodrill, Markham Norton Mosteller Wright and Company, PA, Fort Myers, FL
James Soldavini, Matthew John Soldavini PA, Naples, FL
Jacqueline Sullivan, McGladrey LLP, Naples, FL
In the years leading up to the Sarbanes-Oxley Act of 2002 (SOX), a number of alleged fraudulent financial reporting cases listed the chief executive officers and/or chief financial officers as accomplices. Spurred on by rising pressure to address these failures, Congress and the House of Representatives voted nearly unanimously to support enactment of SOX. Section 302 of SOX requires chief executive officers and chief financial officers to attest to the fairness of the financial statements they oversee – effectively piercing the corporate shield and holding executives criminally responsible for corporate misdeeds. Companion legislation enacted at the same time, The White-Collar Crime Penalty Enhancement Act, extended the maximum jail-sentences for executives tried for these frauds in the federal courts. This research describes the sentencing outcomes of executives associated with these frauds in the pre-SOX and post-SOX eras, and examines whether the legislation resulted in stiffer penalties. Findings indicate that most frauds end in plea bargains, with fines paid and no admission of guilt. In cases where trials are held, most executives are sentenced to a small portion of the maximum jail-time allowed. Surprisingly, the fraction of actual jail time awarded compared to the maximum sentence permitted under the law decreased post-SOX. Executives committing fraud post-SOX are walking away with smaller portions of the maximum jail time permitted. This finding carries the unintended consequence of failing to hold executives accountable as prescribed by the SOX legislation. In addition, most defendants pay no restitution if they are sent to jail. This paper concludes that the threat of investigation and prosecution under SOX may not deter corporate fraud and unlawful earnings management due to the leniency shown by the courts. Companies are increasingly incorporating clawback provisions in their executive compensation packages as a disincentive to manage earnings. On January 20, 2015 Journal of Accountancy.Com reported that the Securities and Exchange Commission (SEC) is preparing to unveil the final clawback rules. The regulation will require corporate executives to repay bonuses or salaries calculated on financial outcomes that are later reversed. However, Chan et al (2015) reports that clawback provisions appear to have the unintended consequence of creating an incentive to manage earnings through alternative means such as transaction management (examples include altering research and development or optional travel). Similarly, while the Sarbanes Oxley Act of 2002 (henceforth SOX) was enacted to prevent illegal financial reporting and incidences of errors and omissions in financial reports, Brite (2013) and Leech and Leech (2011) suggest otherwise. Brite points to the Financial Crisis of 2008 as evidence of SOX failure. Leech and Leech report that thirteen percent of the 3861 companies studied (with market capitalization value greater than $75 million) were required to issue restatements in 2006 due to errors. Before SOX was implemented, the Committee of Sponsoring Organizations of the Treadway Commission (COSO, 1999) reported that nearly 300 financial statement related frauds were listed in nearly 700 Accounting and Auditing Enforcement Releases of the SEC during the 11 year span of 1987 to 1997. A repeat study by COSO (2010) reported a smaller frequency of fraud involving 347 instances in 1,335 SEC Releases, but the magnitude of the median fraud had increased from $4.1 million to $12.3 million. Leading up to SOX, a significant number (83%) of the alleged fraudulent financial reporting cases reported by the SEC identified the chief executive officers and/or chief financial officers as accomplices (COSO, 1999). During this time in history, the alleged criminal misconduct of executives associated with financial statement fraud was difficult to prove in a court of law. Officers commonly used lack of knowledge or ignorance as a defense. Rector (2007) writes “(D)uring his closing argument in the criminal trial against Bernard Ebbers, the former CEO of WorldCom, Assistant United States Attorney William F. Johnson characterized Ebbers’ defense of ignorance as an “Aw Shucks” defense. Ebbers, who was charged with one count of conspiracy, one count of securities fraud, and seven counts of false filing with the SEC, was ultimately convicted on all counts and sentenced to 25 years in prison. Similarly, a jury found Kenneth Lay, Enron’s founder, guilty on one count of conspiracy, two counts of wire fraud, and three counts of securities fraud. During the same trial, Jeffry Skilling, Enron’s former CEO, was found guilty of one count of conspiracy, twelve counts of securities fraud, five counts of making false statements, and one count of insider trading. During their jury trails, both Lay and Skilling asserted an “I didn’t know” defense.” Spurred on by pressure to address these failures – including highly publicized frauds involving Enron and Worldcom that at the time brought about the two largest bankruptcies in the history of the United States – Congress and the House of Representatives nearly unanimously supported the enactment of SOX. Section 302 of SOX requires chief executive officers and chief financial officers to attest to the fairness of the financial statements they oversee – holding executives personally and criminally responsible for corporate misdeeds. Although securities fraud had been punishable for decades, the SOX provisions aim to drastically increase penalties and make prosecution the most likely deterrent. For example, SOX refers to the knowledge of misrepresenting the financial position of the company as compared to the willfulness that had to be proven under pre-SOX laws.
The Diameter and Company Profitability: An Experiment in Network Evolution
Dr. Tal Ben-Zvi, Stevens Institute of Technology, Hoboken, NJ
Dr. Paul Rohmeyer, Embry-Riddle Aeronautical University, Daytona Beach, FL
Dr. Donald N. Lombardi, Stevens Institute of Technology, Hoboken, NJ
This study examines how business networks evolve over time and impact company profitability. Through simulation, we show that the impact of network evolution on overall profitability is mediated by the network’s diameter. Our analysis indicates that as a network grows, the network’s diameter increases in size. However, as the network evolves beyond a certain point, the diameter stops increasing and starts to decline, following an inverted U-shaped curve. We also demonstrate how a well-connected industry network with a small diameter is correlated with higher company profitability and vice versa – a looser network with a larger diameter produces lower profitability for companies. The results uncover theoretical and practical managerial insights and present a novel approach of conceptualizing businesses within industries. A key question in social networks and alliances studies is how networks in which companies are embedded shape companies’ behavior and conduct, and affect their profitability over time (see, e.g., Goerzen, 2005; Gulati et al., 2000; Hite and Hesterly, 2001; Soda, 2011). Contrary to studies focusing on internal factors that impact companies, this paper discusses the role of network theory in explaining company profitability in a global business environment. We maintain that when companies interact with congruence of interests, when they cooperate with each other to reach a higher value creation while struggling to achieve a competitive advantage, they strive to better positioning within their market. Our main argument is that paying close attention to partnerships and alliances, structuring them into a network that grants access to information, goods, services and capabilities, allow for more business opportunities to companies, which in turn, are translated into higher profits. One way to deepen understanding from this vantage is to investigate the evolution of company networks over time (Chassagnon, 2013). Here, we use a laboratory approach to studying business networks and employ a simulation game approach using dedicated software: we form teams of MBA students, and let them play roles as companies over six simulation-periods. The teams form alliances, create contracts, merge, and go bankrupt just as companies do. The difference is that their interactions are recorded and can be analyzed in detail, providing longitudinal data of a closed system. We take after Carrington et al., (2005) and create a network model that conceptualizes structure as lasting patterns of relations among the actors – in this case, the playing teams. What makes this an experiment in social networks is the inclusion of concepts and information on relationships among the actors and the operationalization of structures in terms of networks of ties among the entities (Wasserman and Faucet, 1994). Entities (or Companies) do not act outside a social context; their purposive actions are embedded in ongoing social relations (Granovetter, 2005). In a similar way that connections among people can be characterized in network terms (Van Dijk, 2012), interactions among companies have structural implications that consequently may affect their profitability. The reminder of the paper is organized as follows: first, we review literature related to networks and company profitability. We look at concepts we later explore. Then we set the study’s hypotheses and describe the employed methodology (the simulation game we used). Next, we examine the implementation of network theory in the proposed simulation and analyze the hypotheses. Finally, we discuss the applicability of this study and draw conclusions to both researchers and practitioners. Many studies have been analyzing companies as autonomous entities, endeavoring for competitive advantage by either studying the external industry sources or the internal organizational capabilities and resources (Gulati et al., 2000). However, while these studies have undisputed value in indicating strengths and weaknesses of businesses, they fail in offering an overarching view of industries and how they evolve over time. As social networks analysis examines the attributes of entities in terms of patterns or structures of ties among them (Wasserman and Faucet, 1994), this paper maintains that as entities (companies) interact with one another, their associated network (the industry where they reside) evolves and impacts their profitability. In this paper we study a network characteristic called the network’s diameter. The diameter is defined as the maximum distance between all pairs of vertices (Wasserman and Faust, 1994). The distance between two vertices is defined as the length of the shortest path between them, assuming there is such a path. A path between two vertices exists if and only if both vertices are linked together, either directly or indirectly through other vertices. The length of the path is the number of edges it has. Thus, the diameter represents the largest nodal eccentricity and is a network characteristic that evolves as the links between network vertices change (Scott and Carrington, 2011). We maintain that the network diameter is a mediating factor between network evolution over time and company profitability. The structure of a business network and its characteristics are vital to forecast or predict its profitability; however, the way through which the network characteristics affect profitability is still unknown. In this study we investigate network evolution over time, the network’s diameter, and the impact on profitability. Figure 1 illustrates the overall research model we study in this paper. The model suggests that network evolution impacts the network diameter (Hypothesis H1), which is turn impacts profitability (Hypothesis H2). We now explain the model and elaborate on our arguments. When a network is small, vertices that join the network are attached by few links. This increases the average distance between all pairs of vertices. In other words, the diameter increases in size (Albert et al., 1999; Bollobas and Riordan, 2004). As the network continues to evolve, it becomes denser over time; hence, the number of edges grows super-linearly in the number of vertices. This phenomenon then exhibits a gradual decrease in the size of the diameter (Leskovec et al., 2005). That is, as a network is formed, firms start gradually developing ties (gradually increasing diameter); next, they significantly explore for adequate partners (the diameter reaches its pick), and then they specialize or maintain only these relationships that are of most interest (a gradual decrease in the diameter).
HR Challenges for Safeguarding Employee Privacy Rights in The Private Sector Workplace
Dr. Bernadette Baum, National University, San Diego, CA
Dr. Jennifer M. Davis, University of New Hampshire School of Law, Concord, NH
Historically, courts have set down precedent dashing any expectation of privacy employees may enjoy in the private sector workplace. Despite the absence of strong employee privacy rights laws, however, employers do not always have the right to violate fundamental privacy values. With recent trends indicating a shift toward laws with broader protections for employee privacy rights, Human Resource managers are tasked with creating and implementing fair policies involving workplace privacy. Employers risk engaging in privacy violations concerning matters related to searches, access to private information, and third-party disclosures. Legitimate reasons may exist for employers to monitor employees or conduct searches. Reasons range from managing the productivity levels of employees to maintaining a safe environment for all employees in the workplace. Likewise, business necessity dictates an employer’s need to obtain certain personal information regarding employees and applicants. Because an employer’s need to know is somewhat broad, HR professionals face challenges in creating policies that strike a balance between how much information is appropriate to obtain and the proper ways in which to safeguard the information. Potential problems arise when employers utilize the services of outside agencies to maintain company personnel records. Reportedly, such data is often shared with third parties and other entities without the knowledge of the employee, or even the employer. Similarly, background checks conducted on prospective employees by outside contractors often reveal inaccurate information detrimental to job applicants, thereby exposing employers to liability should a lawsuit arise as a result of the dissemination of inaccurate information. This paper will explore the challenges faced by HR managers when tackling the tough decisions associated with protecting employee privacy rights. The scope of this paper will be narrowed to private sector employers, with analysis focused on the areas of searches, access to personal information, and third-party disclosures. The word “privacy” does not appear in the United States Constitution, or any other founding document, for that matter. Yet, from the dawn of the country’s inception, America has valued the freedoms associated with privacy as the hallmark of its identity. Freedom of speech, freedom of association, freedom of religion, freedom of assembly, and freedom of the press are among the many freedoms that distinguished the United States of America from any other country in the 18th and 19th centuries. The declaration of its citizens to be endowed with certain inalienable rights – the right to life, liberty, and the pursuit of happiness - was unprecedented. The right to privacy has been interpreted as being implicit in the 4th, 5th, 9th and 14th Amendments to the Constitution. As Justice Brandeis stated, in pertinent part, in his dissent in Olmstead v. U. S., “The makers of our Constitution … sought to protect Americans in their beliefs, their thoughts, their emotions and their sensations. They conferred, as against the Government, the right to be let alone…” (Olmstead, 1928, p. 478) (emphasis added). Fast forward to the Information Age of the 20th and 21st centuries. The lines of privacy have become blurred as American citizens voluntarily relinquish their right to privacy on a regular basis. Participation in social media activities have exposed citizens to avenues of information and requests for information that may have long lasting ramifications on an individual’s personal and private life. Balancing the rights associated with the declared freedoms becomes challenging when the rights of one citizen infringes upon the rights of another. Nowhere is this more challenging than in the workplace. Human Resource managers are faced with the continual task of balancing employee privacy rights with the company’s need for access to personal information. There are three areas in which issues of violations of employee privacy rights appear most often in the workplace: searches, access to personal information, and third-party disclosures. This paper proceeds with an overview of the reasonable expectation of privacy standard and related tests. Select law in the areas of searches, access to personal information, and third-party disclosures will be explored to determine trends that impact the manner in which HR managers implement privacy policies. The paper concludes with preventive measures for private sector HR managers to consider in an effort to mitigate the risks of exposure to liability for violations of employee privacy rights. When examining the source of privacy rights, it is natural to think of the right to privacy as emanating from the United States Constitution. However, privacy rights implicit in the Constitution do not apply to private employers. As a result, privacy rights in the private sector workplace are derived from state common law and federal and state statutes (Brady, 2009). Although private sector employers are not subject to the Fourth Amendment they can be sued under state privacy law, and presumably under any federal right to privacy statute that is applicable. Therefore, in order to limit liability for actions that arguably invade employees’ privacy rights, private employers should establish HR policies that are guided by the principles in key U. S. Supreme Court Fourth Amendment workplace decisions. Two cases, O’Connor v. Ortega, 480 U.S. 709 (1987) and City of Ontario, California v. Quon, 560 U.S. 746 (2010) set the framework for determining whether an employee has a reasonable expectation of privacy under certain workplace circumstances. The inquiry under the test for whether an employee has a reasonable expectation of privacy in the workplace is largely based on the workplace context. Workplace context not only refers to the physical space of the employer’s property, but also relates to other facts specific to the employee’s position, as well as to the company’s policies and procedures. With regard to physical space, for example, generally if an area is considered “within the employer’s control” and “related to work,” the area is part of the workplace itself (O’Connor, 1987, p. 15-16). Depending on the circumstances, an employee can have a reasonable expectation of privacy within an area that is part of the workplace context. However, the reasonable expectation of privacy is not absolute. That is, if a court determines a reasonable expectation of privacy exists, the court may still conclude that an employer had a right to infringe upon the employee’s privacy. Thus, a two-part analysis is necessary: a determination as to whether a reasonable expectation of privacy exists, then whether the employer has a right to infringe upon the employee’s privacy. Upon a finding by the court that a reasonable expectation of privacy exists, the court will then embark on another test to examine whether an employer’s search infringed upon that expectation. This test centers on reasonableness standards as to both inception and scope. That is, the determination most often hinges upon whether 1) the search was reasonable in its inception, by examining the intent behind an employer’s decision to conduct the search, and 2) whether the employer limited the scope of the search appropriately, or overreached in its scope of the search (O’Connor, 1987, p. 726).
Does the Fire Station have a Glass Ceiling? Perceptions of Female Firefighters
Dr. John Griffith, Embry-Riddle Aeronautical University
Dr. James Schultz, Embry-Riddle Aeronautical University
Dr. Ronald Wakeham, Embry-Riddle Aeronautical University
Dr. Marian Schultz, The University of West Florida, FL
This research examined perceptions of 338 female firefighters in the United States. Specifically, respondents answered questions on if they would pursue a career in the fire service again, if they would advise a daughter or family member to join and if they were treated as equals by male firefighters. Additionally, female firefighters were asked if they achieved more acceptance from males based on length of time on the job and if physical requirements unnecessarily limited female firefighters. A significant majority of female firefighters indicated that they enjoyed their careers, would advise a daughter or family member to join and that the longer they were on the job, the more acceptance they gained from male firefighters. Significantly more female firefighters disagreed that physical requirements to be a successful firefighter limited females. A significant majority of retired female firefighters disagreed that they were treated as equals by male counterparts. Recommendations included repeating this survey in three to five years and studying sexual harassment in the fire service. Future researchers should also examine mentorship of women and minorities, and the acceptance of lesbian, gay, bisexual and transgender (LGBT) firefighters in the fire service. Women comprised 47.2% of the total U.S. civilian workforce in 2010. As of the 2010 census, the United States had 301,000 paid firefighters, 3.6% of whom are women. That translates to approximately 10,800 female fighters (U.S. Census, 2012). Organizations such as the International Association of Women in Fire and Emergency Services as well as researchers producing studies at the National Fire Academy have questioned why the number of female firefighters appears to be so low. Some have looked into the idea that many women do not seem to apply to be firefighters and focused attention on recruiting efforts (Kronenberger, 2009; Ross, 2011). Other researchers have postulated that the career field is male dominated making it difficult for women (and minorities) to enter the fire service and serve long term (Couch, 2002; Pinson, n.d.). This research explores that second line of thought as the possible root cause of low female employment in the fire service. If fire service is perceived to be a difficult environment for women, would that not hurt recruitment efforts? This research explored some fundamental questions on how current female firefighters felt about working in the fire service and how their male counterparts treated them. Previous research has focused on sexual harassment (“Sexual Harassment”, 1995), and recruitment efforts. This research attempted to answer two questions. Do females in the fire service feel uncomfortable working with their male counterparts and if so, why? Researchers developed a survey that was distributed through academic channels as well as through the U. S. National Fire Academy TRADENET service to gain perceptions of female firefighters in the U. S. fire service. A total of 339 female fire fighters responded to this survey. Numerical data were evaluated using non-parametric statistics. Open area comments from 162 respondents were also analyzed using NVivo 10 qualitative analysis software to identify significant themes. Researchers at the National Fire Academy explored the issue of low female employment in the U.S. fire service while exploring the low percentages of minorities as a whole. Much of this applied research focused on recruitment although some researchers also delved into gender and cultural norms, departmental working environments and physical requirements. Kroenberger noted that women were 51% of the population in Middletown Connecticut, but were only 4.5% of the fire service. The city had set goals for minority hiring to include three black females, one Hispanic female and three white females, (seven black males and 3 Hispanic males were also sought). At the conclusion of the recruitment drive, 95 candidates had applied but only 52 of those met requirements and completed all interviews and tests. This group included 47 white males, two black males and three Hispanic males. Unfortunately, no women completed the application process and/or were eligible for hire even though women were actively sought for recruitment. Kroenberger worried that results like this would make his fire department unable to reach diversity goals. To that end, he recommended a strategic recruitment plan that included job fairs at the local high school and college to be advertised well in advance and staffed by minority fire fighters for recruiting purposes. Kroenberger also recommended fire department explorer programs to get interest from potential minority recruits and for his fire department to partner with the Middletown Board of Education for early certification as Emergency Medical Technicians (EMT) and fire fighter certification with the fire and emergency services department, with parental approval (Kroenberger, 2009). The recommendation for more education and certification was noted by other researchers as well and would not only help potential firefighters gain employment, but would help with later promotion. Over 50% of 125 fire service professionals surveyed agreed that there was significant value to firefighters earning bachelor’s or master’s degrees. Over 90% of the survey respondents indicated that there was value for fire protection professionals to have more training (Cwiak, Cline & Karlgaard, n.d). This shift in the view on education and training corresponds with the need for a changing workforce required to deal more with disaster preparedness and emergency services as well as fire protection and suppression (Steen, 2011). Ross (2011) echoed Couch (2002) in noting that most firefighting applicants tended to be white males. The Westerville Ohio fire department female staffing was 4.5%. Knowing that this result was not an isolated trend, Ross surveyed Ohio fire departments to determine if there were deficiencies in recruiting methods that could be identified. The survey was distributed through the Ohio Fire Chiefs’ Association and 40 of 79 departments responded (50%) representing small to large cities (3,500 to 460,000 population served). Most (90%) departments indicated that recruiting a minority workforce was important, however only 15.4% had formal processes in place to encourage minorities to apply. When asked to identify issues or barriers in recruiting minorities, lack of minority candidates who apply was cited by 66% followed by lack of interest among minority candidates (33%), inadequate recruiting budget (31%), followed by lack of qualified candidates (28%). Some departments noted no specific barriers to recruiting minorities (23%).
Ireland Maintains Business Allure
Dennis C. Stovall, Grand Valley State University, Grand Rapids, Michigan
Businesses in the United States have continued to embrace the many positive aspects of locating in Ireland. The two countries have many shared values, with a majority speaking the same language. In addition, the corporate tax rate of 12.5 percent in Ireland has come to be one of the greatest benefits identified by investors. Ireland also has a willing, flexible, and productive workforce, and one of the highest levels of economic freedom in the world. Irish officials have created organizations solely for the purpose of making the transition into the Irish economy as effortless as possible for foreign companies. With all of this and more, Ireland’s business allure has evolved and caught the attention of countless corporations including Amgen and Microsoft. This shift is the cause of some concern for the American government as a great amount of tax revenue leaves with the companies. Rising numbers of Irish companies also are attempting to break into the American economy, however, they do not have the same resources or benefits that the American businesses receive when expanding into Ireland. Irish companies face a unique set of obstacles. Some Irish companies choose to establish contacts to spread the word about their business. Others utilize trade shows to make themselves known. But each comes with some form of the same goal: to become a grand success and a leader in its industry in America. As the benefits of becoming corporately involved in the Irish economy increase, so too does the number of U.S. companies placing or expanding their business into Ireland. The business relationship between the United States and Ireland dramatically increased in 1969 when John A. Mulcahy, a one-third shareholder of Pfizer Inc., convinced Pfizer to move some of its business to his home country of Ireland. Cork, Ireland, became the city of choice for a new citric acid plant built by the drug company. Naturally, other companies looked into the reasoning behind this new venture and discovered many attractive qualities of the European country. With this discovery, many U.S. companies made their way across the Atlantic Ocean to the island nation (Wetzel). In the past few years relationships have been formed. A two-way flow of human, physical, and intellectual capital has been established and is intensifying as the Irish-American relationship continues to be built and maintained. The relationship between the United States and Ireland is longstanding and multifaceted. Due to Irish immigration into America, close to forty-four million American citizens now identify themselves as having some degree of Irish descent. The flow of people between Ireland and America is steadily increasing as tourism expands, students study abroad, academics go overseas to instruct, and business between the two countries increases (Wetzel). It is this increase in business that is at the forefront of their recent relationship. As globalization and international business become more prevalent in the world, Ireland and the United States possess the opportunity to work together utilizing the relationship they have built over the years. The United States Ambassador to Ireland, James C. Kenny, views Ireland as a bridge between Europe and America. He sees the relationship as one that facilitates international cooperation and that increases the two countries’ involvement in each other’s private sectors (Kenny). The American Chamber of Commerce Ireland reports that over 700 U.S. businesses have operations located in Ireland. These businesses employ over 115,000 people and the stock of these investments total 204 billion dollars of foreign direct investment. Additionally, the investments in Ireland are greater than the combined United States investments in Brazil, Russia, India, and China. In 2012, these investments accounted for 74 percent of Ireland’s inward investments. This investment relationship is not one-sided. As of 2011, Irish investment in the United States totaled 25 billion dollars and the companies located in America employ an estimated 120,000 people in 227 companies across the United States (“U.S. Investment”). Kenny recognizes that the interests Ireland and the United States have put into each other stem from the associations created through immigration. Past generations had many Irish citizens immigrating to America and gaining an understanding of American culture while also providing Americans with an understanding of Irish culture. This mutual understanding created a pathway to strengthen the ties between the United States and Ireland. (Kenny) Kenny also stresses the contribution that shared values have made to perpetuate the Irish-American relationship. He says that the values of democracy, respecting basic human rights, respecting the law, tolerance, appreciating diversity, and having a commitment to individual importance, are shared between the two countries. These shared values lead to connectivity in which business relationships can thrive because the countries are united in striving for the same goals. This is not to say that Ireland and the United States never differ in their policies. The governments do disagree over policies and practices, but ultimately they resolve these differences or agree to disagree. These dynamics are the basis of the transatlantic relationship between Ireland and the United States (Kenny). Another element of the relationship between Ireland and the United States is the commonality of language. No language barrier must be broken in order for the two countries to communicate or do business (Browne). This is a definite advantage in today’s Internet-dominated world, with the majority of web sites published in English. Because of technologies such as instant messaging and live video chats that are enhancing and increasing efficiency within the communication of the business world, the relevance and benefit of a shared language are multiplied significantly. Up until the 1990s, Ireland was primarily an agricultural society. Then a radical shift took place in which the economic focus turned to chemicals, electronics, and information technology (“Ireland”). With this change came an effort to promote Ireland as the place for high-tech firms from around the globe to start up international branches and subsidiaries. By attracting foreign investors, the Irish economy could prosper from increased job creation. In order to lure investors and companies to Ireland, Prime Minister Bertie Ahern slashed the corporate tax rate to 12.5 percent in January of 2003 (Sowinski). When compared to the European average of approximately 20 percent, it is quite evident that investors were markedly enticed (Sowinski). As shown in Table 1.1, the Irish tax rate is preferable compared to a number of countries. It was after this tax break that a number of large corporations announced they would build research facilities in Ireland (Simpson). The tax break is not the sole reason why U.S. companies choose to expand their business into Ireland. This by itself cannot propel a corporation to success. An additional positive aspect, which Ireland is able to boast of, is the high labor productivity amongst its workers. Table 1.2, shows that Irish workers lead the world when comparing the gross domestic product each employee contributes per hour as of 2011. U.S. corporations find this aspect of Ireland’s business environment extremely attractive because it is an opportunity to get more accomplished in the same amount of time.
FDI and Its Impact on Developing Markets
Bryan Herriford, Sam Houston State University, TX
Dr. Balasundram Maniam, Sam Houston State University, TX
Dr. Hadley Leavell, Sam Houston State University, TX
Foreign Direct Investment (FDI) has played a crucial role in the growth of the economies in many developing countries. With FDI monies, a country may be able to make the transition leap to a developed nation. As companies determine where to place their resources, they must consider the effects these investments will make on the host country. Host countries must learn what investors are looking for and ensure their country is receptive to the change these investments will make. This study looks at the increase in FDI in many developing countries over the last twenty years and the effects these investment have had on the host country. First this study looks at the positive reforms that host nations enact in order to attract new foreign investment. It will then discuss different types of spillover effects FDI has on the domestic market. It concludes with a look at possible negative effects to the host economy and what host nations can do to limit those effects. Foreign direct investment has been one of the largest factors in the growth of developing nations over the last decade. Many countries with a low gross domestic product (GDP) have seen the opportunities that additional capital from foreign investment could bring to their countries and how fast they could grow their economies with outside help. The large impact foreign investment can have on a country’s economy has heavily influenced political leaders in these countries. New laws and policies are reconsidered in light of the ramifications they would have on their desirability to foreign investors. Many companies have seen the potential for very large returns by investing in developing nations where investment was never possible before. With the chance to expand business production and products into untouched markets, multinational companies are investing large sums of capital in many developing economies to lower their production costs and gain a larger market share in the world economy. As these investments grow, developing nations are forced to consider new reforms that would help entice companies to invest. With the increase in FDI over the last few decades, developing economies have had to make changes in order to attract new capital investments in their countries. Many economic and governmental reforms have been enacted to help capture the largest, and best, foreign capital for their countries. Companies are looking for the largest returns with the least amount of risk. Foreign investment has expanded economic boundaries and increased the diversity of goods and services available in developing countries. One important benefit that foreign investment provides to developing nations is “spillover effects:” when a company brings advanced know-how to a new market and the market learns and adapts these advances to help update its local firms. The spillover effects can increase the efficiency and productivity of many domestic companies and allow them to compete effectively with the larger multinational corporations. However, the FDI will also have negative effects on the local economy as new businesses may push out less efficient existing companies. It can also cause the local economy to develop unequally as foreign companies are only looking to invest in sectors where they can make money and not always where it would best benefit the nation as a whole. Host nations need to be cognizant of the negative effects and find ways to maximize the pros and minimize the cons. Lautier and Moretaub (2012) explore how the level of domestic investment in a developing country affects the amount of foreign direct investment the host country receives. Al-Sadig (2013) discusses how the amount of FDI invested in a host country can influence the amount of domestic investment private companies make in their own country. Herrera-Echeverri, Haar, and Estevez-Breton (2014) analyze how the levels of institutional quantity, economic freedoms, and entrepreneurship affect the amount of FDI inflows in emerging economies. Kapuria-Foreman (2007) discusses how economic freedom, the openness of the country, and legal protections for businesses will determine the level of FDI that companies will spend. Quer and Claver (2007) argue how political stability, the level of workforce, and the current political and economic reforms a country makes will dramatically change their ability to attract FDI. Alfaro and Charlton (2009) debate the two main investment avenues that companies take when investing in foreign countries: horizontal or vertical investments. Sen, Senturk, and Ozkan (2014) study FDI inflows in a country and their impact on that country’s gross domestic product (GDP) growth. When looking at how FDI impacts the transfer of technology to developing countries, Sivalogathasan and Wu (2014) reveal that countries with well-equipped human capital will increase the level of domestic RandD due to the positive spillover effects from FDI inflows. Cevis and Camurdan (2007) find that the economic determinants of FDI are inflation, interest rate, growth rate, and the trade rate. Zhang, Li, and Li (2014) refute the old belief that FDI spillovers happen immediately and instead show that the spillover effects occur gradually. Countering the positive spillover argument, Hoang, Wiboonchutikula, and Tubtimtong (2010) give an example in Vietnam where FDI inflows do not create any spillover effects in the country and the only way the economy is growing is by the inflow of additional capital from FDI, not by any increase in domestic businesses. Borensztein, De Gregorio, and Lee (1998) show that FDI is an important way for spillover effects to help a host country improve their domestic economy, as long as the level of human capital is high enough to absorb these positive effects. Gittens and Pilgrim (2013) discover how the level of human capital in a host country shapes the amount of FDI businesses are willing to invest. Malhotra, Russow, and Singh (2014) look at economic and institutional variables that influence the level of FDI a host country receives and detail what reforms a less developed country can make to help attract a higher level of FDI. Skuflic and Botric (2006) examine how reforms in a host country’s economic policies, increased economic performance, and changes to the privatization process will attract more FDI than a country without economic reforms. India is a good example of these reforms and Kumar (2005) demonstrates that their change, from a restrictive FDI policy to a more liberal policy towards FDI, has grown capital inflows in the country. FDI can have a crowding-in effect or a crowding-out effect on the host country and Gocer, Mercan, and Peker (2014) show that the level of economic reforms the host country has impacts which type of effect that will be.
Organizational Creativity Capability and Firm Performance: Evidence From Software Businesses in Thailand
Wadsana Charunsrichotikomjorn, Mahasarakham University, Thailand
Dr. Phaprukbaramee Ussahawanitchakit, Mahasarakham University, Thailand
Dr. Prathanporn Jhundra-Indra, Mahasarakham University, Thailand
This study aims to investigate the relationship between organizational creativity capability and firm performance via the mediating role of business practice effectiveness, organizational innovation success, and organizational excellence efficiency. The results were derived from a survey of 104 software businesses in Thailand, which CEOs or managing partners are the key informant. The results found that new management method and valuable human resource development have significant influences with all of two organizational consequences; business practice effectiveness, and organizational innovation success. Whereas useful operational control establishment has an insufficient influence to yield significantly expected outcomes. The contributions of theoretical and managerial, conclusion and suggestions for future research are also discussed. Keywords: Organizational creativity capability, New management method, Valuable human resource development, Novel oganizational culture formation, Useful operational control establishment, Original performance evaluation system, Business practice effectiveness, Organizational innovation success, Organizational excellence efficiency, Executive proactive vision, Strategic renewal mindset, Corporate resource rreadiness, Business environment complexity. Under the severe competitive business environment such as economic, technology and culture, those firms generate rapid responses in order to survive and succeed. In an era of high-technology changes, firms encounter globalization and rapid changing in business environment, many firms have been affected by macro environmental factors including the threat of new entrants and established competitors, substitute products, bargaining power of suppliers and customers (Porter, 1979). These factors have a pressure on firm characteristics. The rapid changes in the external environment provide advantageous or disadvantageous outcomes to the firms. Firms must be capable of current adaptation and future changes in the external business environment by continually renewing their products and services. According to this change, firms can create their capability to resist the drawback under the rigid competitive context. The approaches which the firms employed to operate to gain accomplishment of the organizational objectives are the implementation of their strategy. The diverse strategies are formulated under the situation of existing firm capabilities. In order to grow up and survive, firms require continuous improvement of their capabilities for responding to the changing of the dynamic external business environment. As a result, the best way for growth and survival depends on often having new capability, new products, and new services. In contrast, the relationships between innovation and productivity have never linked in the short term, because complex organizational environment needs a long period so as to change (Chakrabarti, 1990). Especially, the manufacturing industry is encountering gradually more competitive environment (Danneels, 2002) such as, firms have a new diversity of products affecting operations of both production and sales with more complication. Consequently, the manufacturing industry continues to execute several techniques for the sustainable achievement of the firm (Chenhall & Langfield-Smith, 1998). However, in the long term, innovations are still significant in increasing productivity and firm performance. Likewise, firms require creativity capability in the process of generating innovation for new opportunities in markets. Hence, both creativity and innovation are key success factors for firm survival, growth, and are a cause of organizational excellence (Cook, 1998). As aforementioned, organizational creativity capability is proposed to fullfill these gaps, which it examined in terms of a quantitative variable of the collected data from the software businesses in Thailand, while most of the past research proposed the conceptual relationships. The Resource-Advantage theory (R-A theory) aims that the resources of firms are dissimilar, unique, and relatively dormant within the same industry. “ R-A theory is an evolutionary, disequilibrium-provoking, process theory of competition in which innovation and organizational learning are endogenous, firms and consumers have imperfect information, and entrepreneurship, institutions, and public policy affect economic performance,” (Hunt & Madhavaram, 2006). It emphasizes that a source of competitive advantage leads to sustainable performance. Especially, firm resources are inimitable, non-substitutable, valuable, and rare in which are applied four principles: (1) market segments, (2) heterogeneous firm resources, (3) comparative advantages and disadvantages in resources, and (4) marketplace positions of competitive advantage or disadvantage (Hunt & Madhavaram, 2006).It highlights on creativity, including proactive and reactive. Both proactive and reactive creativity capability contribute to the competitive advantage. In this research, the R-A theory is applied to explain that organizational creativity capability is the intangible strategic resource which creates an advantage for the marketplace position (organizational innovation success, and business practice effectiveness, organizational excellence efficiency) leading to organizational outcomes, as well. Contingency Theory proposed depended on the situation and chose the best practices which were appropriate with each situation (Fiedler, 1967). When the situation was different, the management changed. Therefore, the organizational performance relationship is between the environment and organization, which the organizational practice created or adapted in accordance with the environment (Drazin & Van de Ven, 1985). The contingency theory points to three approaches consisting of a) selection, b) interaction, and c) systems (Drazin & Van de Ven, 1985). The main contingency theory refers to the operational fit of the organization by the contingencies application such as the environment, organizational culture, and society for best performance (Drazin & Van de Ven, 1985). Thus, the contingency theory assumption is not the best practice for every situation, but it creates the best way for the decision-making of businesses, which should be considered carefully as alternative analysis because each method has its advantages and limitations (Vroom & Yetton, 1973). It attempts to identify and evaluate the conditions under everything likely to occur (Schoech, 2006), which affects the best method and any method of an organization for operational performance (Gerdin & Greve, 2008). Hence, the sustainable success of an organization must depend on the flexibility of the organization appropriately, so the organization should be aware to integrate resource management, joint facility utility, mutual target emphasis, and valuable activity cooperation, which affect the operation appraising fit. Thus, it is employed to investigate the effectiveness of the antecedent variables (executive proactive vision, strategic renewal mindset, corporate resource readiness, business environment complexity) on organizational creativity capability. The relationship model of organizational creativity capability, its antecedents, and consequences are shown in Figure 1 Moreover, firm age and firm size are control variables that may affect the relationship among these variables. The definition and hypothesis development, which proposed to be positive association, are detailed. New management method is defined as an ability of a firm to create new processes, new products, and new methods for operation for increasing potential, efficiency, and effectiveness of the firm. Moreover, new management methods to search for new ideas are to combine these with existing knowledge and new techniques which lead to business effectiveness (McNelly, Durmusoglu, Calantone, & Harmancioglu, 2009). Previous study found that the business process through which the original business concept is changed into a product/service ready for commercialization (Kamm & Nurick,1993). Furthermore, the effective of business process is an effect of the quality of planning and the quality of new business ideas (Foo, Wonga & Ong, 2005), which aim to create either superior outputs or more cost-efficient input (Macduffie, 1995). Also, it can lead to new value creation across and within industry such as new innovation, new practice, and new management process (Balakrishnan, Eliasson & Sweet, 2007). Thus, it is an important factor for firms as they seek to upgrade their productivity, procedures and retain competitiveness (Ichniowski, Kochan, Levine, Olson, & Strauss, 1996). In summary, new management method affect on business practice effectiveness, organizational innovation success, and organizational excellence efficiency. Following hypotheses are hence offered:
Management As A Moderating Variable in the Causes and Effects of Construction Delays
Dr. Miemie Struwig, Professor, Nelson Mandela Metropolitan University, South Africa
Gerrit Smit, Nelson Mandela Metropolitan University, South Africa
The construction industry has been exhaustively studied, both internationally and locally, in the area of delays in projects. A list of possible delays has evolved over the past 10 years that covers all major delays in this industry. Although the causes and effects of projects delays are clear, little attention has been given to what factors can moderate the influence of the delays. This research focuses on the development of a proposed model of causes, effects, and moderating variables of project delays. The intention is to use the proposed model to identify and confirm the moderating variables (management activities) to mitigate construction delays. The causes and effects of construction delays are well documented and researched (see Motaleb & Kishk, 2010; Sambasivan & Soon, 2007; Assaf & Al-Heijji, 2006). Causes of construction delays are factors or events that occur before and during the construction process that will affect the time to complete, and the cost and quality of completing, a project. Effects of construction delays are the consequences when the causes of delays are not identified and worked on effectively. Although most studies on construction delays and their effects proposed solutions or remedies, their effectiveness has never been tested. Very little research focuses on the moderating variables that will influence the effects of delays due to the various factors causing them. Thus, based on the surveys of construction delays and their effects, a proposed model showing the effects of delays will be developed. This model will include the suggested moderating variables that can assist to manage construction delays, and that can be tested empirically. The construction industry is known as a very highly-fragmented industry with a large number of activities involving different parties and professionals, such as architects, engineers, quantity surveyors, contractor teams, suppliers, and financiers. As a fragmented industry, management efficiency and competency is needed to increase the level of competitiveness. The construction industry has been exhaustively studied, internationally and locally, in the area of delays in projects. A list of possible delays has evolved over the past 10 years that covers all major delays in this industry. The most extensive list is that of Yang, Yang and Kao (2009), which identified eighty possible delays. This research will focus on the development of a proposed model of the causes, effects, and moderating variables of project delays. The literature shows that the causes of delays occur at different levels, ranging from those caused by the client or owner to those caused by other external factors (Youngjae, Kyungrai & Dongwoo, 2006; Kim, 2009; and Al-Humaidia & Tan, 2010). The literature also shows that each category of causes of delays has different factors that can lead to delays on construction projects. There is much research into the causes and effects of project delays in the literature (for example, Aiyetan, Smallwood & Shakantu, 2011 and Mukuka, Aigbavboa & Thwala 2013). The effects of delays in most cases are only linked to a few construction delay causes. Most of the literature focuses on the delays in projects in the construction industry; information on project delays in other industries is also available. Odeh and Battaineh (2002) focused on owners, contractors, and consultants when investigating construction project delays. Owners, contractors, and consultants in many projects dislike experiencing extensive delays because they have a negative impact on the initial cost and time estimates (Odeh & Battaineh, 2002). Delays are generally acknowledged as the most common, costly, complex, and risky problem encountered in construction projects. The overriding importance of time – for both the owner (in terms of performance) and the contractor (in terms of money) – makes it the source of frequent disputes and claims that lead to lawsuits. Table 1 outlines some previous research done into the causes of project delays. A comprehensive list of construction delays across varying countries was developed by Toor and Ogunlana (2008), which showed the difference in construction delays before the year 2000, compared with those after 2000. Their study identified additional factors that cause delays in developing countries. These include: lack of finance, technically incompetent and less experienced local companies, an underdeveloped business environment, complexities in legal and regulatory systems, and distinct socio-cultural issues (Toor & Ogunlana, 2008). They concluded that the factors that cause delays in construction in developing countries are mostly identical. They identified 75 such factors, arranged in 10 categories. Wei (2010) states that the classification of delays is dependent on the type and magnitude of the effect that an activity will have on the project, and on who among the stakeholders is responsible for the delay. Theodore (2009) categorised delays into four groups: critical or noncritical, excusable or non-excusable, compensable or non-compensable, and concurrent or non-concurrent. Mukuka, Aigbavboa and Thwala (2013) categorised the causes of construction delays into seven groups: owner-related, contractor-related, consultant-related, material-related, equipment-related, labour-related, and caused by external factors. Odeh & Battaineh (2002) grouped their delay factors based on the categories of client, contractor, consultants, material, labour and equipment, external factors, contract, and contractual relationships. The agreed significant factors of delay were: inadequate contractor experience, owner interference, financing of work, delays caused by subcontractors, slow decision-making by owners, improper planning, and low labour productivity. Sweis, Sweis, Hammad and Shboul (2008) listed the three most critical delay causes in the Jordanian construction industry based on the views of consultants, contractors, and owners in residential construction projects. Assaf and Al-Hejji (2006) investigated the causes of delays based on the perception of owners, contractors, and consultants in the construction industry in Saudi Arabia. They listed 73 possible causes of construction delays. Kao and Yang (2009) classified construction delays in the following four broad categories according to how they operate contractually: Non-excusable delays / Excusable non-compensable delays / Excusable compensable delays / Concurrent delays. The effects of delays are the consequences when the causes of delays are not identified and worked on effectively. Mukuka, Aigbavboa, and Thwala (2013) identified a total of 14 effects of delays in construction projects: time overrun, cost overrun, negative social impact, idle resources, disputes, arbitration, delay by the client in returning loans, poor quality of work due to hurrying the projects, bankruptcy, litigation, creating stress for contractors, total abandonment, and acceleration losses.
Organizational Management Flexibility and Goal Achievement of Electrical Appliance and Electronic Parts Businesses in Thailand
Dararat Thatrak, Mahasarakham University, Thailand
Dr. Karun Pratoom, Mahasarakham University, Thailand
Dr. Pakorn Sujchaphong, Mahasarakham University, Thailand
The objective of this research is to examine the relationships between organizational management flexibility and goal achievement via organizational innovation, value creation, and firm competitiveness as mediating variables. Creative organizational culture, organizational learning, change management competency, and environmental dynamism are the antecedents of organizational management flexibility. The data was collected by a mail questionnaire survey from electrical appliance and electronic parts businesses in Thailand. The model used in this research was explained by using the dynamic capability theory and the contingency theory. The sample was 128 electrical appliance and electronic parts businesses in Thailand. The statistical results revealed that organizational management flexibility had a significant positive effect on organizational innovation, value creation, firm competitiveness, and goal achievement. Besides, the consequences of organizational innovation had a significant positive effect on value creation and goal achievement. Value creation and firm competitiveness had a positive effect on goal achievement. Finally, the antecedent constructs, namely, creative organizational culture, organizational learning, change management competency, and environmental dynamism partially affected organizational management flexibility. Some theoretical and managerial contributions, a conclusion, and suggestions for future research are also discussed. In a globalized world, the uncertainty of the environment is considered as the key factors that organizations need to focus on the business operation because it is a factor that may cause the operation of the organization not success. Therefore, the current business operations of the organization need to keep track changes in the environment that is constantly. Organizations must accept and be prepared to cope with the changes that occur. Then need to have several strategic options for management and modifying the form and method of operation to improve the organization's ability in order to have a way to operate in a form that can respond to the changes that occur quickly which will entail the ability to perform tasks that help organizations to survive and achieve organizational goals (Kogut & Kulatilaka, 2001; Sommer, 2003). Flexibility is one option which is necessary that organizations should pay attention because of the environment has the dynamic changes.Organizations must have flexibility management of the organization of changes that take place quickly. The organization should have the comprehensive capabilities in many aspects in order to improve and develop methods of operation which occur in new ways to respond to the changes under conditions of high uncertainty (Combe, 2012; Dreyer & Gronhaug, 2004; Zhang, 2006). Flexibility in the organization will demonstrate the ability of the organization to handle.That allows organizations can adapt quickly on an environment that is changing all the time. This is a challenge in today's corporate executives that should be aware of and pay attention. Organization must have management technique that can improve the rapid adjustment of the organization in order to operate in a dynamic situation that has changed (Combe, 2012; Evans, 1991; Regner, 2008).Therefore, in situations where there is uncertainty in the environment the organizational management that featured on flexible management in the organization must build capacity for the organization in which to adapt to any style when a change occurs of environment (Bacanu, 2006). That is, organizations can improve existing systems and processes in response to the changing environment from the flexible management of the organization. Organizational management flexibility is the management organizational capabilities which enable organizations to have the process and system that are flexible. It is the ability to design a corporate job to respond to the changing environment. Organizations must have a dynamic capabilities to use the resources and capabilities to improve operational guidelines in accordance with changes. The organization has the update how new operation constantly and when changes occur. The organization must be ready to adapt to use new strategies or methods of operation to cope with change.Demonstrate that the organization has the ability to use the resources and capabilities continuously in a situation of dynamic environments which will bring the goals of the organization (Grewal & Tansuhaj, 2001; Johnson, Lee, Saini, & Grohmann, 2003; Verdu & Gomez-Gras, 2009). In this research, is focused on the ability of the organization dynamic providing organizations to have the flexibility to manage the organization in the circumstances of environment that has changed over time. Organizations should be aware of talent management, systems and processes management which provide flexibility and able to adapt to the changes that occur and lead to value creation, organizational innovation, firm competitiveness, and contributes to the goals of the organization (Varadorajan, 2009). Accordingly, the main objective of this research is to examine the relationships between organizational management flexibility and goal achievement with three mediator variables (organizational innovation, value creation, and firm competitiveness). Moreover, this research aims to investigate the relationships between the four antecedents (creative organizational culture, organizational learning, change management competency, and environmental dynamism) and organizational management flexibility. In addition, the research questions are as follows: (1) How does organizational management flexibility have an influence on organizational innovation, value creation, firm competitiveness, and goal achievement? (2) How does organizational innovation have an influence on value creation and goal achievement? (3) How does value creation have an influence on firm competitiveness and goal achievement? (4) How does firm competitiveness have an influence on goal achievement? And (5) How do the four antecedents (creative organizational culture, organizational learning, change management competency, and environmental dynamism) have an influence on organizational management flexibility?
Sports Sponsorship: An Effective Tool for Marketing Strategies
Dr. Hyun Sook Lee, National Autonomous University of Mexico, Mexico City
Companies adopt sponsorship to capture or target the huge consumer market, communicating their brand information and image, and informing consumers about the company and its offerings and building a long term relationship with the consumer (Stipp, 1998; Simmons & L.Becker-Olsen, 2006; Tanvir et al., 2012). In particular, sponsorship for mega-sports events such as the World Cup, Olympic Games, Formula 1 racing etc. has become the marketing tool of choice for corporations seeking brand impact in the heart of consumers both globally and nationally. In terms of totally or partially banned TV advertising on products like tobacco and alcoholic drinks, mega-sports sponsorships present great opportunities to access their target markets. Sport plays one of the most significant roles in everyday life of people around the world, whether those actively participating in it or those who are just spectators and supporters. In most western countries, this part of social life is widely reported on and reflected by the mass media (Lee, 2013). The same phenomena might be an opportunity for the companies that are looking to raise their current and/or potential consumers´ awareness of their products/services, including certain products prohibited for advertising through mass media. In the meanwhile, salient/prominent athletes and/or sports teams tend to earn large sums paid by their sponsors, resulting in mutual benefits to all. For this paper, the author intends to define sponsorship as well as sports sponsorship in particular. She also reports trends of sports sponsorship, especially the most sponsored sports, a background of mega-sports events and principal sports sponsors. A discussion of marketing effects through sports sponsorship, based on secondary sources like academic journals and Web-sites is included. Sponsorship has been defined as “provision of assistance either financial or in kind to an activity by commercial organization for the purpose of achieving commercial objectives (Meenaghan, 1983; Speed & Thompson, 2000). The involvement of a second party, that is, the activity sponsored, distinguishes sponsorship from advertising, and the commercial motivation distinguishes sponsorship from altruism (Speed & Thompson, 2000). Sponsorship shows the alliance and relationship of the organization with the sports event (Stipp, 1998). Through rapid increases in media exposure, companies try to target the huge consumer market in a short period of time. For this purpose, companies adopted sponsorship to capture or target these consumers, communicating their brand information and image, and informing consumers about the company and its offerings and building a long term relationship with the consumers (Stipp, 1998; Simmons & L.Becker-Olsen, 2006; Tanvir et al., 2012). Sponsorship has become a vital part of funding for a wide range of sporting, artistic, and social events. The worldwide sponsorship market has grown from an estimated US$2 billion in 1984 to $16.6 billion in 1996 (Meenaghan, 1996; Speed & Thompson, 2000). Sponsorship can prove effective only when the company hits the targeted audience that relates to and associates itself to the Olympics. Sponsors' attempts to attract consumers around the world may fail if their image and activity is perceived differently in various parts of the world (Lee, 2013). Major sporting events in particular have become dependent on sponsorship (Stipp, 1998; Shoebridge, 1995; Speed & Thompson, 2000). In today's environment sports sponsorship plays a very significant role towards consumers and people value it (Tanvir et al., 2012). Sports sponsorship is big business, and it is still dominated by a relatively small number of sports with huge pulling power, such as football. But few marketers have the sort of budget needed to participate in these more popular sports on a national or international scale (SPORTS SPONSORSHIP, 2006). It is crucial to preserve the image of the team or event because it is this image which attracts the fan to watch the sport. Several types of sponsors and their requirements are discussed. The first high volume consumer brands to be involved in Formula 1 as well as other sports were alcohol and tobacco brands. The globalization of commercial brands and instantly recognizable consumer products has resulted in a new class of sponsor with deep pockets. Among other considerations, care must be taken that a sponsored event does not become known only by the name of the sponsor and then loses its identity when sponsorship changes (Felt, 2002/2003). Sport sponsorship can be viewed as a strategic business-to-business (B2B) relationship between a sponsor and a sport entity or athlete for mutual benefit (Farrelly & Quester, 2005; Henseler et al., 2011). Companies engage in sponsorship activities to satisfy a number of objectives such as relationship building, general entertainment for stakeholders, new business development opportunities, and building brand equity (Funk, 2008; Pope & Turco, 2001; Henseler et al., 2011). Given the business relationship between sponsors and sport entities, it is critical that sport entities understand how sponsors may view each aspect of the sponsorship in terms of achieving brand-related objectives (Henseler et al., 2011). Sponsorship works better than promotional activities and it creates a strong perception in the minds of people because of its affiliation with the offering. People remember that sponsor when they think about the offering. Sponsorship works for the both promotional tool as well as building the association in the minds of consumers (Rifon et al., 2004; Tanvir et al., 2012). Sponsorship management priorities are different between Australian and North American firms. At the corporate level, North American firms seem more prone to looking at sponsorship as a strategic, rather than a solely communication focused tool. Australian firms, on the other hand, were significantly less likely to do so. Moreover, whereas North American firms anticipate that greater efforts will be devoted to integrating sponsorship with other elements of the communication mix, Australian firms appear unaware of this opportunity, which may retard the effectiveness of sponsorship management and potential gains in the future (Ferrelly et al., 1997).
Service Innovation Capability of Tour Operator Businesses in Thailand
Sakkasem Panalad, Mahasarakham University, Thailand
Dr. Phaprukbaramee Ussahawanitchakit, Mahasarakham University, Thailand
Dr. Nantana Ooncharoen, Mahasarakham University, Thailand
This research aims at investigating the effect of service innovation capability on performance via competitiveness in the new model. Whereas, customer force, competitive diversity and technology become the antecedents of service innovation capability. Moreover, the moderating effects are executive vision and learning culture. The key research question is how service innovation capability affects performance. Data are collected from travel agency in Thailand. The regression analysis is employed to examine all hypotheses. The results indicate that some dimension of service innovation capability namely innovativeness, alertness to create, and research and development awareness have a positive effect on competitiveness. Moreover, competitiveness is effective on performance. A potential discussion of the results is evidently implemented in this research. Contribution and conclusion of the research are presented accordingly. The atmosphere of global economy, business environment is rapidly change in the area of customer demand, competitions, technologies, regulations, and economic group (Tingsapat, 2006). As a result of a intense competition to both domestic and international markets. Firm need to make adjustments or try to find ways to deal more effectively o firm that have the potential to compete and more competitive and success of the business performance. Therefore, firms need to focus on various firm capabilities. Especially, capability service of innovation has become important factor of the competitive advantage and success of the business competitiveness which effect to its performance. As previous research found that innovation establishment is a significant factor of the business competitiveness which effect to its performance. Melton and Hartline (2010) suggested that businesses are forced to change by the innovation which affected on business performance. As well as it play on importance role to competitive advantage for all the countries (Porter, 1990). In addition, managers are providing the innovation to encourage a managerial system, and it is likewise the innovation creates a basis of the firm achievement (Hult et al, 2004). Service innovation capability is the important key to create a competitive opportunity of firms. Nonetheless, service innovation capability different from technological innovation capability and unique product innovation, because service innovation is the combination of tangible and intangible goods (Asasongthum, 2005). Effectiveness of service innovation tends to increases the growth and profitability of business services, as well as creates of the business value (Berry et al, 2006). Moreover, the innovation is able to develop new approach to serve customers that are more efficiently and progressive results. Accordingly, it expands and increase customer with the presentation of new and different products (Theoharakis and Hooley, 2008). In this research, resource-based view of the firm (RBV) this is theory used to explain the service innovation capability, the sources of competitive advantage and a sustainable performance, so that there are firm resources are rare, valuable, non-substitutable and inimitable. Also, organization attempts to develop their unique internal capability to gain its accomplishments (Penrose, 1959; Barney, 1991). In addition, service innovation capability is determined as the internal capability which coordinates various activities within firm and it provides beneficial resources for management and business administration as a result of enhancement of firm performance. The purpose of this research is to examine the effect of service innovation capability (ie., innovativeness, capacity to innovate, willingness to change, innovation perception, alertness to create, research and development awareness) on firm performance via competitiveness. This research investigates the antecedent of service innovation capability with are customer force, competitive diversity, technology growth and also examine the moderating effects of executive vision and learning culture. The key research questions in the current research are; 1) How does each dimension of service innovation capability affect competitiveness?, 2) How does competitive affect performance?, 3) How do customer force, competitive diversity, and technology growth have an influent on service innovation capability?, and 4) How do executive vision and learning culture effect on the relationship among service innovation capability, competiveness and performance?.This research attempts to investigate how service innovation capability affects competitiveness and performance by utilizing resource based viewed of the firm is explain the conceptual model. Resource-based view of the firm that explain to the conceptual model, as well as an understanding effort of internal resources and capabilities within a firm and to provides sources of competitive advantage (Barney, 1991). Furthermore, this theory explains resources collections which related to the firm growth as well as resources which are heterogeneity more than homogeneity (Penrose, 1959). Firm resources consist of all assets, capabilities, organizational process and attribute, innovation, knowledge, and know-how that controlled by firm. Moreover, firm attempts to develop their unique internal capabilities to gain their accomplishments (Penrose, 1959; Barney, 1991). Then, resources and capabilities are valuable, rare, imperfectly imitable, and non-substitutable which are the drivers of the firm performance and competitive advantage (Wernerfelt, 1984; Peteraf, 1993; Barney, 1991). In this research, service innovation capability is determined as the firm’s resources that enhancement of competitive advantage. This research attempts to linking six dimensions of service innovation capability consists of six dimensions:1) innovativeness, 2) capacity to innovate, 3) willingness to change, 4) innovation perception, 5) alertness to create and 6) research and development awareness, the consequences are competitiveness and performance, three antecedent variables and two moderating effect on this framework. Service innovation capability refers to the new service, process, or market that creates value for stakeholder (Hipp, Tether and Miles, 2000). Service innovation capability is not only technology innovation but also identify to enhance service quality. Service innovation is integrated the tangible and intangible products. Moreover, service innovation capability is very important to improve business operations in the present. Then, Melton and Hartline, (2010) provide that service innovation capability is positive effects on operation and competitive advantage. Beside, Gebauer and others (2010) emphasized that service innovation capability orientation that enhances competitive advantage. Innovativeness is defined as a concept ideas or behavior about policies, programs, systems, processes, products or services which are new approach in organization management. All that new approaches bring benefits in firm. Prior research demonstrated that competitiveness encourages organizations to increase competitive advantage and positive effects on performance )Deshpande, Farley and Webster, 1993; Porter, 1990; Yamin et al, 1997). Furthermore, innovative implementation is within tour operator businesses such as information systems that increase competitiveness of its organizations (Potgieter et al, 2010). This implies that, innovativeness can enhance competitiveness. Thus, a hypothesis is proposed as follows: Hypothesis 1: Innovativeness is positively related to competitiveness.
Service Perceptions of Social Networking Sites: A Comparison of Saudi and Indian Users
Dr. Yasser Mahfooz, King Saud University, Riyadh, Kingdom of Saudi Arabia
The objective of this paper is to compare perceptions of service quality of social networking sites (SNS) among Saudi and Indian users. The data was collected online using convenience samples technique. The respondents were students who visit social networking sites (181 in Saudi Arabia and 128 in India). The service quality of social networking sites was measured using four dimensions- ease of use, privacy, design, and functionality. Data was analyzed using exploratory factor analysis, t-test and regression analysis. Respondents in both countries reported high levels of perceived service quality for social networking sites. However, Saudi respondents reported a higher perceived service quality than Indians on all dimensions, and all individual items. The social networking sites should recognize the importance of design and functionality in service delivery, by implementing appropriate customer-oriented strategies. Despite the large number of studies on social networking sites, very few studies compare e-service quality perceptions among different countries. The present study does so between users in two countries with different socio-cultural environments - Saudi Arabia and India. A traditional service is an intangible offering based on performance or efforts (Berry, 1980), whereas electronic service or e-service can only be delivered through mediation of information technology. E-service can be delivered alone or with e-commerce, either unconditionally or with a service contract (Rowley, 2006). Researchers have been of the view that e-service is an information service (Rust & Lemon, 2001; Rowley, 2006) and has significance in providing better experience to consumers through interactive flow of information (Santos, 2003). This information can be gathered and analyzed by the e-service provider, and used as the basis for the customization of the service that the organization offers to the customer (Rowley, 2006). Social networking sites (SNS) generate information through user-generated content, which includes personal profiles with photographs, audio, or video; and can also include activities and tools such as blogs, forums, or message boards (Kaplan & Haenlein, 2010). They focus on active involvement of users to facilitate communication through creation of content, sharing of information and opinions, and insights on various topics or offerings (Lim et al., 2013). Another opportunity in these networks has been found by businesses which use them to build brand communities (Muniz & O’Guinn, 2001) through pull marketing, marketing research (Kozinets, 2002), or promotion of their offerings and enhancement of brand image (Trusov et al., 2010). The businesses consistently identify new ways to make profitable use of social networks, such as Facebook or Twitter. Social networks thereby represent a revolutionary trend that is of interest to individuals and businesses alike. The existence of numerous social networking sites makes it essential to differentiate the services. Service quality is considered to be an important strategy to differentiate according to customer value and satisfaction of customer needs (Ozment & Morash, 1994). This form of service quality, which is termed as ‘E-Service Quality’ relates to customer perception of the outcome of the service along with recovery perceptions if a problem occurs (Collier & Bienstock, 2006). It is defined as ‘the consumer’s evaluation of process and outcome quality of the interaction with a service provider’s electronic channels’ (Gummerus et al., 2004). High e-service quality levels have been linked to better relations with customers (Keating et al., 2003), and a greater ability to attract potential customers (Yang et al., 2004). Previous research on e-service quality has primarily focused on the interaction of the consumer with the Web site (Lociacono et al., 2000; Yoo & Donthu, 2001), especially retail Web sites. These e-service quality studies provide an adequate framework for measuring Web site interactivity but have failed to look at the broader picture that e-service quality is more than just a retail process. As a result of these considerations, the paper provides valuable insights and implications for application of e-service quality scale to social networking sites. In e-services, perceived quality is defined as the overall judgment of the excellence and quality of offerings. This is based on the expectations of consumers toward e-marketplaces (Santos, 2003). Research by Zeithaml et al. (2002) states that expectations are not well formed in e-service quality, which supports perception as the basis for measuring e-service quality. The dimensions of service quality suitable for offline environment may not be applicable for online business. The difference in perception is often due to the unique characteristics of the Internet that can be affected by server problems, outages for backing up information, and connectivity issues (Collier & Bienstock, 2006). One of the early definitions of e-service quality was proposed by Zeithaml et al. (2000), which stated that service quality on the Internet is the extent to which a Web site facilitates efficient and effective shopping, purchasing, and delivery of products and services. Earlier research in conceptualizing e-service quality focused on the interaction between the customer and the Web site. Researchers have developed scales for measurement of e-service quality, which include WEBQUAL by Lociacono et al. (2000). It had 12 dimensions - Information fit to task, trust, design, visual appeal, flow, business process, interaction, response time, intuitiveness, innovativeness, integrated communication, and substitutability. Later, Yoo and Donthu (2001) developed SITEQUAL with 4 dimensions to measure online service quality (ease of use, aesthetic design, processing speed, and interactive responsiveness). Li et al. (2002) applied the traditional SERVQUAL dimensions to an online context along with additional dimensions, such as tangibles, reliability, responsiveness, integration of communication, assurance, quality of information, and empathy. Further research on e-service quality expanded the scope past Web site interactivity. Wolfinbarger and Gilly (2002) developed an e-service quality scale initially titled .comQ, which later progressed to eTailQ (Wolfinbarger & Gilly, 2003) with 4 dimensions, such as Web site design, reliability or fulfillment, privacy or security, and customer service. An additional study that looked at e-service quality from a broader perspective was by Zeithaml et al. (2000, 2002), who developed the e-SERVQUAL model for measuring e-service quality. Their research produced 7 dimensions for evaluating e-service quality. These 7 dimensions were efficiency, reliability, fulfillment, privacy, responsiveness, compensation, and contact. The 7 dimensions were further split into two separate scales by Parasuraman et al. (2005) and labeled as E-S-QUAL and E-RecS-QUAL. The core dimensions of E-S-QUAL were efficiency, system availability, fulfillment, and privacy; whereas the E-RecS-QUAL for recovery aspect had responsiveness, compensation, and contact. The existence of different construct highlights the lack of consensus on the components of e-service quality (Yoo & Donthu, 2001; Li et al., 2002; Collier & Bienstock, 2006; Ladhari, 2010). Majority of studies on e-service quality focus on the commercial behavior as they include the component of internet buying and post-purchase behavior. This is fundamentally different from the nature of social networking sites which are not retail-oriented. This makes the earlier scales inappropriate or inadequate to directly measure the service quality of social networking sites (Wu et al., 2014). Hence, there is a need for a dedicated measurement scale for such Web sites.
Internal Audit Transparency and Firm Goal Achievement: An Investigation of Financial Businesses in Thailand
Varipin Mongkolsamai, Mahasarakham University, Thailand
Dr. Phaprukbaramee Ussahawanitchakit, Mahasarakham University, Thailand
Dr. Sutana Boonlua, Mahasarakham University, Thailand
The main objective of this study is to examine the effects of internal audit transparency of Thailand’s financial business firms’ goal achievement. 81 firms are the sample of the study. The results reveal that internal audit transparency is positively related to internal audit reliability, internal audit quality, internal audit usefulness, information value, and best decision making. Internal audit quality has a significant positive effect on internal audit reliability and internal audit usefulness while information value results in a significant positive influence on firm goal achievement as well as best decision making, which also poses a significant positive effect on firm goal achievement. Besides, internal audit reliability and internal audit usefulness are positively related to information value whereas the information value itself displays a significant positive effect on best decision making. In terms of the antecedents of internal audit transparency, the findings assert that the internal audit ethics and regulation force pose a significant positive impact on internal audit transparency. Furthermore, future research could be conducted on different samples and on a larger scale to widen the generalizability of its findings. For many years, the political unrest in Thailand has affected the economy and its investors’ confidence, which results in stock market bubbles or inefficient capital markets, and damages the economy (Penman, 2003). This is considered important for the reason that the stock market is a national treasure which can influence the economy success (Sutton, 2002). Since the market is no longer limited by time zone boundaries; businesses, therefore, are conducted simultaneously in various countries with many people worldwide. There have been numerous reforms undertaken to restore users’ confidence, including the internal auditor’s role outstands to reestablish the user’s confidence (Octavia, 2013; James, 2003). The internal audit function should be prepared, not only to explain how it affects market value, but also to show an increase in value (Octavia, 2013). From a capital market perspective, transparent reporting is important for both the allocation and institutional efficiency of the capital market (Burkhardt and Strausz, 2009; Pott, Mock, and Watrin, 2008). Most investors make a decision by the number of the financial status and reports. It is obvious that the financial report is truly supported by a transparent internal audit process, which makes it more creditable for the investors to be more confident to invest and results in more effective economy. The Eighteenth Century industrial revolution stimulated the formation of capital markets and the separation of owners and managers, which came with the potential for opportunistic management behavior (Imhoff, Jr., 2003). Sisaye (1999) notes that crisis creates the condition for organizational change to survive and remain competitive. Managers usually prefer high stock prices and high returns for the firms they manage since those motives can increase the value of their stock options and stock holdings, cash compensation, and chances for retaining their current jobs or landing positions with other firms (Bloomfield, 2002). A weak internal control environment accelerates earning management and opportunistic behavior, and also reduces the reliability of financial reporting (Jiang, Rupley, and Wu, 2010). Recent high-profiled corporate collapses have focused attention on corporate governance, and also emphasized internal auditing as an important part of the governance process (Coram, Ferguson, and Moroney, 2008). Some prior research has applied an agency cost framework to illustrate the value relevance of the internal audit function framework (Salehi, Arianpoor, and Salehi, 2013; Ho and Hutchinson, 2010; Lee and Ismail, 2010; Sarens, Beelde, and Everaert, 2009; Archambeanlt, DeZoort, and Holt, 2008; Coram, Ferguson, and Moroney, 2008).The current contexts of economic, social, and technical society development determine the appearance of new risks, which cause adaptation on the audit structure. Thereby, the methods and techniques used have been enhanced to be able to analyze the risks and increase the internal audit performance (Munteanu, Zuca, and Ţînţă, 2010; Sfetcu, 2013). There are several clarifications of the internal audit’s roles which are increasingly important in improving the organization functions to enhance corporate governance, protect stakeholders and an organization’s assets (Octavia, 2013; Steinbart et al., 2013; Sobel and Kapoor, 2012; Pajak, 2012; Archambeault, DeZoort, and Holt, 2008). In addition, the internal audit is seen worldwide as a profession, searching to constantly meet the continuously changing needs of organizations (Watson, 2007; Flostoiu, 2012). The extensiveness of the internal auditing scope has been emphasized by several authors. For instance, Sisaye (1999) notes that internal audit constitutes an important aspect of administrative process innovations that result in significantly better business performance. On the other hand, auditing does not only identify quality processes in organizations; it also locates problems and needs, and delivers information to develop action plans for better results. A fairly consistent finding across more recent studies is that internal audit function can result in a positive influence on corporate governance, including reporting quality and firm performance (Gramling et al., 2004). Moreover, transparency is used as a tool for global environmental governance, including the induction of targeted actors to reduce environmentally-harmful behaviors (Mitchell, 2011). At all levels of society globally and locally, transparency has become an increasingly essential element of governance. Also, to improve effectiveness for a leader, the development of leadership skills is necessary and led to transparency (Crumpton, 2011). Education-based transparency policies play significant roles to influence those targeted actors who share the values of information generators providing new information (Mitchell, 2011). From the important reasons mentioned above, this study aims to investigate the internal audit transparency in Thailand contexts focusing on Thai-financial business firms. In this study, the key research questions are: (1) how does internal audit transparency affect internal audit reliability, internal audit quality, internal audit usefulness, information value, best decision-making, and firm goal achievement?; (2) how does internal audit quality affect internal audit reliability and internal audit usefulness?; (3) how do internal audit reliability, internal audit quality, and internal audit usefulness relate to information value?; (4) how do internal audit reliability, internal audit quality, and internal audit usefulness relate to best decision-making?; (5) how does information value affect best decision-making and firm goal achievement?; (6) how does best decision-making affect firm goal achievement?; and (7) how do governance awareness, internal audit professional, internal audit ethics, regulation force, and environment uncertainty relate to internal audit transparency? The remainder of this study is being organized as follows. The second section presents the theoretical foundation; the third provides literature reviews and links to the hypotheses and framework development illustrating the relationships among internal audit transparency and firm goal achievement. The fourth presents the details of the research design, data collection, variables and measurements, and statistics. The next part gives the results of the analysis and discussion. The final summarizes the findings of this study; the theoretical and managerial contributions, suggestions for further research, including the limitations of the research. This study integrates two theoretical perspectives to explain the relationships among internal audit transparency, its consequences, and its antecedents.
Cost of Capital and Price of Banking Intermediation in Croatia
Dr. Alen Stojanovic, Professor, University of Zagreb, Croatia
Dr. Vlado Leko, Professor, University of Zagreb, Croatia
Zeljko Menalo, University of Zagreb, Croatia
From the very beginning, banks were considered to be the most important financial institutions in every financial system. In a certain aspect, they are treated as the “public good”. It is, therefore, understandable that the entire public, not just regulatory institutions, is interested in their safety and stability. This concern has been reflected differently, but most obviously seen in a slow and constant increase in bank capital requirements over the past few decades. Unfortunately, there has not been an agreement between the banks, regulatory institutions and scientific community on the important issues of effectiveness and sustainability of new capital rules. This paper will point to the complexity of increase in bank capital requirements, as well as mechanism of determining the price of bank intermediation and costs distribution of commercial banks funding, in order to contribute to very limited comprehension of long –term consequences in growth of bank capital requirements. As it is generally accepted, tightened capital standards enforced upon banks by implementation of Basel III have drawn attention of not just regulatory and supervisory institutions, but also of wide scientific community. Discussions on potential effects of tightened capital standards include not just the issues of bank safety and stability of banking and the entire financial system, but also potential consequences of increasing capital requirements on the cost of bank intermediation, loan activity volume and, consequently, the overall economic activity. The scientific and expert literature differs two prevailing, but often completely opposite views on the matter. While some authors believe that these changes will lead to considerable negative effects on overall banking activities, especially in the part of increase in the cost of bank funding and consequently in the growth of required rate of return, other authors believe that, similar to Modigliani – Miller model, the growth in capital adequacy does not significantly influence the total costs of bank funding, the loan price or the level of bank loan activity. Using the comparison of financial leverage and net interest margin in Croatia, the paper tries to contribute to a contemporary discussion about suitability of M–M model in modern banking that is about the impact of capital structure or sources of funding on the bank intermediation pricing. The paper reviews basic determinants of sources of funds, theoretical framework and new interpretations of the M–M model, as well as opposed general assumptions of traditional bank management, particularly in the part of influence of shareholders' equity on loan pricing. Furthermore, the paper shows bank development in Croatia, balance sheet analysis, as well as their growth over the last two decades. Having this in mind, paper will try to determine and explain the correlation between the financial leverage and bank's net interest margin in Croatia, in order to contribute to better understanding of the real influence of capital structure on the cost of bank intermediation, with a special emphasis on smaller, bank – oriented and transitional financial systems, such as Croatian. Banks are from the very beginning considered to be the most significant financial institutions in every financial system. Their impact on the overall economic environment as financial intermediaries is crucial. By gathering savings and allocating it into economically profitable projects, banks serve as a stimulus to economic growth and development. Contemporary business activities of banks extend beyond traditional deposits, loans and non – interest banking services. They also include numerous business activities, products and services provided to their clients, all representing financial innovations that just recently gained more significance. The above mentioned specially refers to various forms of investment activities and securitisation techniques on the financial market, new forms of financing, general application of derivatives, strong growth of off – balance sheet activities, extensive orientation to international market, etc. Furthermore, banks today control the highest amount of total national savings and represent the most significant creditors of households and nonfinancial business sector, local government authorities and sometimes of the government itself. It is, therefore understandable that they are, in a specific way, treated as a “public good”. Bearing this in mind, together with the fact that the bank's basic goal is to make profits, the concern about bank profitability and success is not only a matter for board members and shareholders but also for a wider public, including regulatory institutions, investment analysts, together with the representatives from both the scientific and professional community, as well as their clients. In that sense, it has been generally accepted that bank profitability is not determined only by their assets, but also liabilities structure, as well as increasingly important off – balance sheet activities. In other words, volume and structure of both incomes and costs determine the level of bank profitability. The costs of bank funding determine returns which bank has to realize on their investments, to cover interest and non-interest expenses but also to ensure expected profits for shareholders. It is for this very reason that each bank tries to achieve an optimum combination of sources of funds, bearing in mind their availability and stability, maturity, risk exposure, competition, state of economy, etc. Apart from this, one of the most important issues of bank management is also the cost of funding. Taking into consideration the usual costs, availability and stability of certain sources of funding, it is not surprising that banks try to fund the largest parts of granted loans and other investments by different deposit categories as rather low cost and steady sources of funding. The second source of funding, by its importance, refers to funds acquired through interbank and other loans on the wholesale open market, and lately especially by issuing debt securities, i.e. securitised forms of liabilities. This kind of funding is usually perceived as more unstable and expensive category (“hot” money). The third category of funding is shareholders equity. Its special legal position makes it the most important part of bank’s founding sources, i.e. bank's balance sheet. Shareholders (accounting) equity is not just used to finance bank’s lending and investment activities, but also is the basis for founding and starting bank activities, and then an instrument for insolvency and bank default protection. It serves as a protection of non – insured deposits and non – equity banking liabilities ensures a timely access to financial market and new sources of financing and finally, using capital adequacy ratio, it limits bank growth and risk exposure (Koch, MacDonald, 2015). However, despite its unique functions and a special legal treatment, capital has the smallest share in total bank funding. The reason behind this is its high price and sometimes very restricted availability. Existing funding structure clearly reflects mentioned determinants of current dominant banks funding strategy.
Audit Practice Transparency and Audit Survival: An Empirical Investigation of Certified Public Accountants (CPAs) in Thailand
Usaporn Ponphunga, Mahasarakham University, Thailand
Dr. Prathanporn Jhundra-indra, Mahasarakham University, Thailand
Dr. Kesinee Muenthaisong, Mahasarakham University, Thailand
This paper aims to examine the relationship among the effects of audit practice transparency and audit survival. The components, the consequences of audit practice transparency are included audit quality, audit credibility, financial information reliability, information value, stakeholder acceptance, and audit survival. For the relationships among audit practice transparency and its consequences can explain by the capability theory. The Certified Public Accountants (CPAs) in Thailand were selected as the sample. A questionnaire is used as the instrument for data collection and an auditor is the key informant. The data were received and usable 376 auditors of the sample. The effective response rate was 21.41%. The Ordinary Least Squares (OLS) regression analysis is methods for testing the hypotheses. The results indicate that audit practice transparency has significant positive impacts on audit quality, audit credibility, financial information reliability, information value, stakeholder acceptance, and audit survival. Similarly, audit quality has significant positive impacts on audit credibility, financial information reliability, information value, and stakeholder acceptance. Likewise, audit credibility and financial information reliability have significant positive impacts on information value, and stakeholder acceptance. Moreover, Information values have significant positive impacts on stakeholder acceptance, and audit survival. Similarly, stakeholder acceptance has significant positive effects on audit survival. Future research is suggestion to seek other consequence variables of audit practice transparency for literature review. Theoretical and managerial contributions are explicitly provided. Conclusion and suggestions and directions of the future research are included. Since the global accounting scandals surrounding Enron, WorldCom, and Xerox were caused from inadequate monitoring and timeliness about fraud detection and it was a signal for the failure of corporate governance, the cause of the collapse was the behavior of infidelity (Messier et al., 2010). Thus, the Sarbanes Oxley Act, 2002, was enacted to protect stakeholders. In addition, the failure of auditing leads to fraud (Pagano and Immordino, 2012). Because the auditors lacked good audit practice, it led to unfavorable financial information, and supported fraudulent financial reporting (Becker, Haugen, and Matton, 2005). Transparency is a key topic of corporate governance (Haat, Rahman, and Mahenthiran, 2008). Thus, transparency is a new ethical subject for the 21 century (Capurro, 2005). Transparency is the complete, accurate, and timeline disclosure about fair financial reporting information to shareholders, analysts, and other users, for understanding the operations and activity of the firm (Gramling and Hemanson, 2007). Also, it is a revelation of processes, procedures and assumptions of financial reporting (Lamberton, 2005). Also, it is causing reduced inequality of information between management and stakeholders, thus it is a chance of investments for the firm (Bushman and Smith, 2003). It increases the liquidity of high-quality assets, making sure for the stock of the firm (Burkhard and Strausz, 2009). Thus, when auditors have audit practice transparency, it leads to positive to information. Accordingly, the auditors with higher audit practice transparency should have high audit quality, audit credibility, financial information reliability, information value, stakeholder acceptance and audit survival. Such auditors who have reputation lead to audit quality and best certify the reliability of financial statement (Krishnan, 2003). Also, when events adversely affect that reputation, it should also lack perceived credibility of the audited financial statements (Wilson, Apostolou, and Apostolou, 1997). Additionally, the financial information is important for inside and outside users to promote decision-making (Reck, Vernon, and Gotlob, 2004). The investors/analysts need effectiveness about information disclosure and best report (Ho and Wong, 2003). Moreover, code of ethics with more general experience, leads to a higher judgments quality (Pflugrath, Martinov-Bennie, and Chen, 2007). Thus, audit practice transparency is important to guarantee the financial reports and is a consequence of audit best reporting. Moreover, capability theory which is adapted to explain the impact of audit practice transparency on audit quality, audit credibility, financial information reliability, information value, stakeholder acceptance, and audit survival. In this research, a questionnaire is used for data collection. The results of this research can improve the quality of audit practice transparency and provide implications for efficiency and effectiveness in the audit processes that lead to audit quality, audit credibility, financial information reliability, information value, stakeholder acceptance, and audit survival. Prior research such as that of Mironeasa and Codina (2013) demonstrate a new approach to audit functions and principles, by reviewing of the literature, identifying the principle audit and fine connections between principles and newest audit functions, such as principles with a viewpoint of a better understanding of the roles on in the audit process. Meanwhile, Becker, Haugen, and Matton (2005) studied a substandard audit work and unethical decisions of auditors, which have revealed that the investors and retirees have loss by billions of dollars and the loss of thousands of projects for investors and retirees. There are more studies in examining audit practice transparency in the ethical issues of monitoring activity influence on accountants. However, the updated transparency research in the accounting field that has focused on the code of ethics and its impact on the ethical dimensions of the auditor’s judgment which are mixed, unclear indications of ethics on all codling which are a part of the environment that may impact the auditors’ judgments. The main purpose of this study is to examine the relationship among audit practice transparency on audit quality, audit credibility, financial information reliability, information value, stakeholder acceptance, and audit survival. In this study, the key research question is: How does audit practice transparency influence on audit quality, audit credibility, financial information reliability, information value, stakeholder acceptance, and audit survival? The remainder of this study is outlined as follows. The first discusses the theoretical foundation that explains the relationship between audit practice transparency and its consequences. The second provides the literature review and hypotheses development. The third section is research methods. The fourth section is analyzed results and discussion. The fifth section shows of theoretical and managerial contributions. Finally, the sixth provides the conclusion of the study. The relationships among audit practice transparency and its consequences can explain the empirical evidence by the capability theory. Sen and Nussbaum (1980) pioneered the capability theories by their writings over the last few decades that have become influential in a number of fields with an ethical or policy dimension. The capability theory is concerning the person who can succeed, concluding, the person’s freedom made better life and possible livings. The theory has been employed not only in various applied forms, including the analyses of poverty and human rights but also in the development of the quality of life which can support how to maintain the sustainable livelihoods and also to the development of agencies (Johnstone, 2007). The capability theory is a framework for assessment and development about individual well-being and social arrangements, the design of policies, and proposals about social change in society. The main idea of capability theory is a scanning for effectively able to do and to be; it is capabilities of people, well-being, justice and development. Their effective opportunities undertake actions and involve activities for whom they wish to be. The capability approach is not only advocating an evaluation of people’s capability sets, but is also insisting on scrutinizing context in which economic production and social interactions take place, and whether the circumstances which people choose from their opportunity sets are enabling and just (Robeyns, 2005). This study uses the capability theory to explain audit practice transparency and its consequences. The capability theory explains the relationships among behavior of auditors and effect to the stakeholders. Additional, the auditors have to guarantee the financial statement and must be considering about stakeholder to the audit survival. The auditors need to balance the needs of different demands of stakeholders. This research adapts the capability theory to describe the auditors’ behavior to generate the audit value. Therefore, this research used the capability theory to develop hypotheses about the relationships among audit practice transparency and its consequences.
Exploring Business Development
Haifa Al Wawi, A’amal Holding Company, Kuwait
Business development has become an important tool to ensure current business growth, sustenance and future survival. However, the term “business development” is interpreted differently, and its theoretical foundations are still underdeveloped. The present study explores the business development function as currently being practiced in the corporate world to clarify the concept and to discover the main business development practices by investigating the duties and responsibilities of business developers in various commercial settings, as well as the skills and experience necessary to become a successful business developer. At present, business development (the abbreviation “biz dev” or the acronym BD are used by most professionals) refers to corporate entities’ and government agencies’ assisted development efforts for a particular area, groups of people or SMEs. This paper’s focus is on the corporate side of the business development. The popularity of the term ‘business development’ has recently increased. A search on any popular Internet search engine for ‘business development’ may now result in millions of results. Despite its increased use in the corporate world during the past few years, relatively less academic research has been done on business development. This is evident from the fact that management books not only lack its definition but also exclude business development as a business function. Similarly, companies also differ in its interpretation. Even some progressive high tech-firms claim their core competence is business development; however, they are unable to define it except that to say that it has some specific tasks and procedures. Thus, business development represents an important but unacknowledged practice in management theory and the corporate world. This paper’s objective is to understand the concept of business development, its organization in companies, the main tasks of business development functions and the skills of business developers. A review of relevant literature reveals that business development has developed itself within the strategic management discipline. However, the BD function is now transforming itself into a separate function in the field of management. Broadly, business development can have two perspectives, viz., strategic and operational. The strategic side of business development focuses on long-term organization growth as a whole. This is why a business developer should know how to develop strategies for business growth or for consolidation in coordination with top management. The operational side mainly deals with managing development projects and revenue growth. Projects are used as the main tools of business development, and it is very important to link a strategy to a series of business development projects. The BD capability in organizations grows over time, and the groups or teams assigned to BD tasks are initially ad hoc and are themselves not clear about their BD goals. With time and experience, however, project-based units emerge, and they become formal BD units integrated with strategic planning; then, the organization starts to gain much from its BD efforts. (Christensen, 2007) Firms should identify their BD requirements according to emerging market needs and arrange their stock of human capital. The business development activities involve a continuous restructuring and positioning of any firm to successfully exploit the business opportunities based on its strategy; thus, the BD function should be organized to act as a corporate entrepreneurial function to review opportunities and/or projects and to guide top decision makers regarding the risks related to its implementation and benefits related to it. BD mainly involves identifying and analyzing business opportunities, developing business models and business plans, finding new strategic business partners and managing relationships with them, getting into new market segments and acquiring new businesses, projects and customers, and making ground work for the sales function to achieve revenue targets. Thus, business development is an important function for an organization to fill pipelines with the new business opportunities that are essential for survival and long term benefits. Business developers come from a variety of backgrounds and have earlier experience in a particular industry. In specialized industries they should be technically qualified in relevant areas, whereas they should generally possess experience in that industry. Thus, they may be a specialist in one area but have also integrating knowledge of other business functions. Their experience requirement in terms of number of years also varies according to the levels within the organization. They should have entrepreneurial skills in early stage businesses, as well as execution skills in later stages of the business expansion. They should have strong strategy, business acumen, analytical, project management and engaging skills. Their capabilities include industry know-how, strategic planning, customer needs and familiarity with products and markets. They play a key role in strategy and product innovation, market acquisition, execution and facilitation. The present research endeavors to study a subject that is relatively underdeveloped and still has not gained much acceptance by academicians in the management field. Even the professionals are not clear about its functions, which often overlap strategy, marketing and sales. Due to the nature of this study, it is an exploratory research project to demystify business development practices and the roles, responsibilities and skills of people engaged in it. The present research also intends to provide a working definition of business development that could be shared by practitioners and academicians alike. Taking cues from the literature, a general understanding of the subject was acquired to formulate the research problem and the following working propositions. 1. Business development practices are both strategic and operational in nature. 2. One definition of business development cannot fit all organizations. 3. Business development is a staff function and does make decisions on its own; it acts as an internal consultant to an organization on various developmental issues. 4. Business developers’ main tasks are supporting strategy development, research, opportunity identification and analysis, maintaining partnerships, and developing strategic alliances and product, service and process development. 5. Business developers should act as intrapreneurs (work as an employee, think as entrepreneur) and should possess a variety of skills in different functions, especially strategy, marketing, operations, finance and project management. In order to better understand the perspectives of professionals regarding the business development discipline, the author initially searched business development groups on the LinkedIn professional networking site, using the key word business development. Thereafter, the author applied for memberships in the most relevant groups and joined the open groups. Some notable groups were: Business Development - The Missing Link between Marketing and Sales; Business Development Forum; Business Development 24*7; and Mastering Business Development. Later, the author followed various relevant discussions in these groups and monitored inputs of the professionals on various BD concepts. At the same time, the author referred to the literature review to filter those comments that were solely related to sales or were irrelevant. Collection of business development advertisements was an ongoing activity through online job portals such as bayt.com, gulftalent.com, monster.com, LinkedIn and other job websites. Subsequently, initial interviews were planned with business development professionals who have been working in Gulf Cooperation Council (GCC) countries. For this, the author undertook a search for LinkedIn profiles of business developers in GCC countries, especially Kuwait and United Arab Emirates (UAE). The study of these profiles provided a basic idea of what BD professionals in this region have been doing and what sort of skills, qualifications or experience they possess. A list of prospective business developers for interview was developed from shortlisted executives from LinkedIn, as well as through the author’s own business contacts in Kuwait and UAE.
Service Creativity Strategy and Business Performance: Empirical Investigation of Boutique Hotel Businesses in Thailand
Anantaporn Puttassa, Mahasarakham University, Thailand
Dr. Prathanporn Jhundra-indra, Mahasarakham University, Thailand
Dr. Saranya Raksong, Mahasarakham University, Thailand
Recent research has indicated that service creativity strategy is hot issues, which a better explanation between firm creativity and firm strategy. Thus, this study addresses the main research question is how the relationship between service creativity strategy and business performance is. Based on two theories comprise of the Resource-Advantage Theory(R-A Theory) and Contingency Theory that are supported in this model. The purpose of this research is to investigate the relationship among each dimension of service creativity strategy, its consequences, and antecedents. Regression analysis is used for analyzes the data from 75 boutique hotel businesses in Thailand. The results show that service creativity strategy positively influences on its consequences and antecedents. Especially, the proactive service encouragement strongly influences on business performance. Finally, contributions and future directions are included. Currently, the globalization of technology rapidly changes and has an influence on the organization's adaptation for increasing competitive advantage, efficiency, and effectiveness. Thus, the firms have creative ability to develop new service will succeed in competitive advantage, which is the basis for the firm competency to survive and grow in the future. Hence, creative strategy is the core of the organization’s survival and competitive advantage that brings firms to achieving sustainable competitive advantage (Haward, Murphy, and Lorenz, 2008). Specially, the influence of the global competitive environment pressured the executive need to increase a potential of business strategies (Porter, 1979). According to Dewett and Gruys (2007) suggested that the firm understanding of creative strategy is the foundation of innovation development. Moreover, it is suggested more than 50 years, which creativity becomes an influential resource to generate competitive advantage (Guilford, 1950). In summary, creativity is a main factor for product and service production because it develops and adapts for business advantage (Zeng, Proctor, and Salvendy, 2009). However, service sector concerns about both processes and activities intend to services modification for superior business performance. The most important issue is to understand the effect factors of service marketing, which firm should concentrate and search information to continually increase competitive advantage (Kunz and Hogreve, 2011). Hence, this research focuses all process of service creativity strategy for creating competitive advantage. Firm must creativity integrate in organization form several perspective analysis for create strategic planning; which firm should consider internal and external environment as well as others (Rivera, 2014). Thus, for decision making of excusive analysis should consider multiple factors for creative process in firm (Pabón, 2001). Organization creativity is a way to success for business performance (American management association, 2010). Moreover, creativity was the core competency for development of product and service for firm (Schmidt, Soper, and Bernaciak, 2013). Hence, firm considers creativity issue that is an important key for competitive advantage and success in organization. Service industries in Thailand are the most important industry and can create huge income to the nation, and become one of the business driven economies. Correspond with Thailand that had established as tourism hub in ASEAN which has resource readiness of tourism such as outstanding culture, beautiful nature, and unique food taste. This opportunity of service business will gain acceptance from tourists both Thai and foreigners to invest in hotel businesses by expanding all over tourist attraction, which in turn, rapidly increases number of hotel businesses (National Tourism Development Plan, 2555-2559). However, the progress of dissimilar forms of tourist accommodation is a straight response to varying markets, the unstable production of somewhere to live, and most significantly to new consumer trends that select the standardized atmosphere of much of the commercial accommodation sector (Stern at al., 2007; Timothy and Teye 2009; Rogerson, 2010). Specially, the highlight five distinguishing features of boutique hotels, including: (1) a smaller hotel with a more intimate feel, (2) a stress on stylish fixtures fittings and appropriate electronics, (3) an individual identity despite the presence of a soft brand in some circumstances, (4) an emphasis on modern styles using key designers to develop the concepts, (5) personalized service but the hotels do not always have full service facilities such as restaurants and bars (Horner and Swarbrooke, 2005). Hence, organization creativity enhances distinctively for competitive advantage and superior performance. The population and sample of this research are the boutique hotel business in Thailand, which is appropriate the conceptual model and there are important contributors to Thailand’s economy. Moreover, the challenges to afford a deeper consideration of service creativity strategy that is establishing a new concept with five dimensions consist of new service idea, service development originality, novel service program, dynamic service activity and proactive service encouragement. This research is organized as follows. Firstly, the literature review all of the variables in the model include 15 variables consist of 4 dimensions of service creativity strategy, 6 consequence variables, and 5 antecedent variables. Secondly, research methods consist of data collection, measurements, and statistics. Thirdly, it presented the contributions, limitation, and the suggestion for future research direction. The Resource-Advantage Theory (R-A theory) is used to explain and point out that the advantage of marketing resources can help better firm performance. Hunt and Madhavaram (2006) stated that the resources can divide into tangible and intangible assets, which tangible resources are assets that can be quantified and capabilities are the intangible assets. Organizational abilities can develop the firm’s competencies and apply them to create specifics when firms combine resources and capabilities (Teece et al., 1997). In this research, service creativity strategy is a resource that provides competitive advantage. According to Hunt and Morgan (1995) who mentioned that resources support a firm to gain competitive advantage in the market by having efficient and/or effective resources. Thus, it is implied to explain the relationships between service creativity strategy, its antecedents, and outcomes. The Contingency Theory is a strategic organization and organizational theory; particularly in situation, construction, and performance interactions (Nath and Sudharshan, 1994). It maintains an association between organizational construction and a condition. Also, it identifies the importance of the business environment and balances between more subjective approaches and organizational strategies (Pettigrew, 2007). This association is an impression of organizational efficiency (Kaplan and Mackey, 1992). Furthermore, Gong and Tse (2009) suggested that the organizational structure depends on the situation and performance of an organization, and on the fit between its structure and other contextual variables. The view point of the Contingency Theory describes external factors restraining the performance of structure or strategy constructs (Homburg at al., 1999). Therefore, a firm’s usefulness, specific alteration, and existence, result from the suitable corresponding of possibility variables and internal structural design (Zeithaml, Varadarajan, and Zeithaml, 1988). This research is developed on the basis of extant conceptual framework. It illustrates the relationships among service creativity strategy, antecedents, and consequences variables, as shown in Figure 1.
Social Marketing Strategy and Sustainable Marketing Success: An Empirical Investigation of ISO 14001 Manufacturing Businesses in Thailand
Chotika Chimngamsert, Mahasarakham University, Thailand
Dr. Prathanporn Jhundra-indra, Mahasarakham University, Thailand
Dr. Saranya Raksong, Mahasarakham University, Thailand
Societal marketing strategy has been viewed as one of key components that influence marketing outcomes. Drawing on Stakeholder Theory, the objective of the study is to investigate the relationships among societal marketing strategy and its consequences; brand image, product reputation, customer satisfaction, superior market position, customer loyalty, and sustainable marketing success, and also to explore the moderating effects of firm-stakeholder relationship. The result were derived from a survey of 95 ISO manufacturing businesses in Thailand provided the interesting points of the societal marketing strategy which was directly associated with marketing success. Ordinary least square (OLS) regression analysis is used the hypothesized relationships among variables. Results suggest that societal marketing strategy is positively related to its consequences. Brand image is positively related to superior market position. Product reputation is positively related to superior market position and customer loyalty. Similarly, customer satisfaction is positively related to customer loyalty. Firm-stakeholder relationship plays a moderating role between societal marketing strategy and its consequences are partially supported the hypothesis. Moreover, theoretical and managerial contributions, conclusion, and suggestions for future research are also interesting to be discussed. During the 21st century, there’s been a trend towards a global increase in the social and environmental responsibility. Current situations has emerged the effects and problems such as air and water pollution, and health problems such as cancer and heart disease (Crane and Desmond, 2002; Sirgy et al., 2012).Prior research has indicated that environmental and social effects may impede business development and long-term success (Timbur, 2010). Many empirical researches have been conducted on the social responsibility of businesses. Societal marketing strategy is popular marketing strategy that relates to corporate responsibility while firm achieves profits and sustainability (Burke and Logsdon, 1996; Liu and Zhou, 2009). Societal orientation is the concentration of three domains including social, environmental and economic issues for sustainable development with decision making brought into corporate strategies which can enhance corporate image, competitive advantage, firm performance and sustainable success (Kotler and Zaltman, 1971; Zeng et al., 2013). Consequently, societal marketing strategy is a good practice for businesses under competitive environments. Its strategy that focuses on benefits of customer and stakeholder groups by improving products, protecting the natural environment, and operating marketing activities by the right ways. Therefore, societal marketing strategy aims to creating values for customers such as supporting a good health and happiness. Societal marketing strategy defined as the approach and process to create the salutary products to customers with the rights mix of marketing practice as well as enhancing the quality of life of consumers and public well-being. Fuller (1999) suggested that societal marketing strategy is the key to the success of green products, and reinforces the superior market position for these products in a global market. Therefore, societal marketing strategy is a key way for marketing managers who create marketing activities that want to match customers and social group needs. However, efforts to understand the nature of societal marketing strategy found that a few empirical research studies have attempted to investigate the concept of societal marketing strategy. Therefore, it leads to an unexplored gap in research. In particular, there are only a few empirical studies that study the societal marketing strategy of for-profit organizations in the context of Thailand (Chattananon et al., 2007; Nurittamont, Ussahawanitchakit and Suwannarat, 2010). Most empirical studies have focused on investigating the social marketing domain of risky consumer behavior (for example: alcohol, drugs, and diseases), campaigns, advertising, and non-profit organization (Chitakornkijsil, 2012; Thailis, 2014). But few empirical studies have investigated the societal marketing domain. Therefore, this study contributes to a better understanding of the influence of societal marketing strategy on sustainable marketing success. Based on the above literature review, the conceptual model of societal marketing strategy has presented Stakeholder Theory to explain phenomena. The main purpose of this paper is to investigate the relationships among societal marketing strategy and sustainable marketing success through brand image, product reputation, customer satisfaction, superior market position, and customer loyalty, as well as the moderating roles of firm-stakeholder relationship is also examined. The key research question is how societal marketing strategy is related to sustainable marketing success. Furthermore, to highlight this relationship, four specific research questions are established as follows: (1) How is societal marketing strategy related to brand image, product reputation, customer satisfaction, superior market position, customer loyalty, and sustainable marketing success? (2) How are brand image, product reputation, and customer satisfaction related to superior market position and customer loyalty? (3) How are superior market position and customer loyalty related to sustainable marketing success? (4) How does firm-stakeholder relationship moderate the relationships among societal marketing strategy, brand image, product reputation, customer satisfaction, superior market position, customer loyalty, and sustainable marketing success? This study proposed testable hypotheses. This research makes two contributions to the literature on societal marketing strategy. First, it studies empirical data at the organization in the context of ISO 14001 manufacturing businesses, whereas prior researches do not. Second, this research applied Stakeholder Theory toward explaining conceptual framework. This study is organized as follows: The first part presents the literature review of societal marketing strategy and sustainable marketing success. Additionally, hypotheses developments are presented. Next, research method includes sample selection, data collection procedure, the measurement of variables, the statistics and equations to test the hypotheses. The results are derived from 95 ISO manufacturing businesses in Thailand indicated reasonable discussions with existing literature supports are shown. Lastly, the study concludes by discussing implications, suggestions, and future research. Since the 1990’s, the societal marketing concept has been adopted by marketers, as well as the conceptualization of the societal marketing concept, has been widely utilized (Kang and James, 2007). Its effect of societal marketing concept was applied by marketers through marketing practice to replace the original marketing concept. Societal marketing concept had been the four phases of marketing evolution. Societal marketing concept explains the environment, society, and profit (Prothero, 1990). The main cause of environment and human problems are affected by the speed of economic expansion that leads to use the natural resources (Kotler, 1972; Kotler, 1986). Previous phenomenon has shown the traditional marketing concept that focuses on a higher profit than competitors. Therefore, traditional marketing concept should be adapted for matching the current trend (Chattananon et al., 2007). Currently, many businesses have showed awareness to the long-run effect on the natural environment, consumer health problems and the public’s well-being (Nurittamont, Ussahawanitchakit and Suwannarat, 2010; Sirgy and Lee, 2008;Zeng et al., 2013). In previous research, societal marketing strategy has been characterized as a firm’s concerns to perform the right for achieving outcomes in the long-term. Prior empirical studies have found that two domains of Stakeholder Theory including ethics and management or instrument to perform carefully such as marketers and sellers who willingly respect the role, regulation and norms of the profession (Prasong, Ussahawanitchakit and Muenthaisong, 2013). Therefore, Stakeholder Theory is appropriate theory to explain this study. Stakeholder Theory explains rightfulness and awareness of firms toward customer and stakeholder groups. Therefore, Stakeholder Theory proposes that firms must concern and emphasis the needs of shareholders and each stakeholder requirements, including employees, customers, community, suppliers, competitors, and social groups etc. Each of them has different preferences and needs (Freeman and Gilbert, 1987; Jurgens et al., 2010). Hence, a firm responds to their expectations with different ways and activities in order to achieve marketing success and firm performance. In previous research has suggested that firms’sustainable development depend on the ability of the firms to use their resources and capabilities through marketing strategies and activities. They can respond to expectations of each stakeholder to satisfy. Moreover, firm can gain marketing success and firm survival (Roeck and Delobbe, 2012). In this paper, Stakeholder Theory provides the foundations for the assertion of societal marketing strategy which can serve marketing activities and practices to respond their stakeholders and to gain competitive advantage and sustainable marketing success (Maignan, Ferrell and Ferrell, 2005). These illustrate the capability of firm behavior to bring developing to outcomes in both financial and public welfare in the short-term and long-term. Therefore, this study uses Stakeholder Theory to describe the study phenomenon. The research model of this research is illustrated in Figure 1 in which presents the relationships among societal marketing success, brand image, product reputation, customer satisfaction, superior market position, customer loyalty, and sustainable marketing success. Moreover, firm-stakeholder relationship is the moderator.
Assessing the Consumers’ Propensity for Online Shopping: A Demographic Perspective
Dr. Mahmoud Abdel Hamid Saleh, King Saud University, Saudi Arabia
This paper is aimed at achieving two goals: first, to identify consumers’ propensity for online shopping, and second, to investigate the association of gender, income, age, and education with consumers’ propensity for online shopping. The study was conducted on a sample of 293 consumers in Saudi-Arabian market. Data were collected through a questionnaire contained four measures of consumers’ propensity for online shopping. The findings of the study outlined that 66% of the respondents preferred traditional retail-store shopping to online shopping. The findings also revealed insignificant differences in consumers’ propensity for online shopping between males and females and between the various levels of age. Conversely, significant differences were found between the levels of income and education for the higher levels. Based on the research findings, marketers are recommended to pay more attention to consumers who prefer online shopping to traditional shopping, and at the same time, work diligently to stimulate consumers who prefer traditional shopping in retail stores; removing their uncertainty and perceived risks associated with online shopping transactions. With the development of the Internet usage during the last two decades, Online shopping has grown up rapidly to be a major activity for numerous consumers all over the world. The amount of sales on the Internet increased globally to reach about 348.6 billion dollars in 2009 (Keisidou et al., 2011) and was expected to reach 778.6 billion dollars in 2014 (IMAP retail report, 2010). The reason for online shopping growth may be explained in terms of the advantages the Internet provided to both the sellers and the buyers. It allowed business organizations an easy access to enter the global markets effectively at a low cost. Simultaneously, it enabled consumers obtain adequate information on the products and to make convenient shoppings, anywhere at anytime. In the framework of the business concern to study consumers in the electronic markets and the factors influencing their behavior, marketers are interested in the differences in consumers’ propensity for online shopping; to be guided in making proper marketing decisions in several areas, e.g., market segmentation, targeting, building competitive positioning and strategies in e-markets. Previous studies that examined the research topic could be classified into three categories: the propensity for online purchasing, uncertainty avoidance, and perceived risk associated with online shopping (Al Kailani and Kumar, 2011). Despite the Westerners’ interest in studying topics related to consumers’ willingness and attitudes towards online shopping and the factors that influence their behavior in e-markets, the researcher did not find similar studies concerning the Arab or Gulf regions. Accordingly, this study is aimed at identifying the consumers’ propensity for online shopping in the Saudi-Arabian market, and the consumers’ propensity for online shopping associations with some related demographics. The findings from this study could guide both national and international businesses in e-commerce to understand the basic dimensions of doing e-business in the Saudi market, especially with the lack of studies and information regarding consumers’ online shopping behavior in this market. Considering the importance of online shopping to consumers, previous studies indicated three perspectives on online shopping: first, the consumer’s completion of online shopping transactions (Degeratu et al., 2000), second, the data collection of goods and services (Yang and Cho, 1999), and third, a combination of these two perspectives (Pan et al., 2010; Hill and Beaty, 2011). In terms of the third perspective, online shopping is defined as efforts made by the consumer via digital technologies - most notably the Internet - in search of information on products and making trade-offs, as well as the completion of purchase transactions (Alturkestani, 2004). Correspondingly, the current study adopts the definition of consumers’ propensity for online shopping as consumers’ tendency to use digital channels in search of products and collect information about product features and prices for the purpose of the trade-offs, and making shopping transactions. Regarding the measurement of the consumers’ propensity for online shopping, some measures were used in the previous studies. Lian and Lin (2008) measured the extent to which consumers like to buy online, the attractiveness of this kind of purchase to consumers, the consumer’s likelihood to return to the store website and purchase within the next three months or during a year, and the consumers’ intention to increase their online purchase. The likelihood of ever purchasing from a particular store again was used by Jarvenpaa et al. (2000). Similarly, Jahng et al. (2001) measured consumers’ acceptance of online shopping and their attitudes towards certain electronic stores. Along the same lines, Domina et al. (2012) measured consumers’ online shopping intention and their willingness to recommend others to purchase online. In the same context, a number of studies measured consumers’ attitudes to perceived risks of online shopping, e.g., financial, performance, physical, time, psychological, social, and security-related risks (Jahng et al., 2001; Griffin et al., 2011). Times of purchase was used by Li and Zhang (2002) and Doolin et al. (2005). Also, Lee et al. (2001) measured the amount of purchase, repetition of purchase within six months. Some other measures were used, e.g., consumers’ satisfaction with online shopping, future purchase intention, frequency of online shopping, number of purchased items, and expenditures on online shopping (Richa, 2012). Reviewing previous studies on the concept and measures of consumers’ attitudes and propensity for online shopping, the researcher classifies the measures into two categories. First, quantitative measures, e.g., volume of the purchased products, times of purchase, the amount of purchase on online shopping. Second, qualitative measures, e.g., satisfaction, future purchase intention, desire to resume purchases, and perceived risks. The current study is based on the two categories of measurement to measure the consumers’ propensity for online shopping; taking into account that online shopping term in this study is used as an alternative to e-shopping on the grounds that the Internet is the most-used e-shopping channel in the Saudi-Arabian market. Considering the findings of the previous studies on consumers’ propensity for online shopping, hypothesis number one (H1) is developed as follows. H1. There are no significant differences in consumers’ propensity for online shopping. H1a. There are no significant differences in consumers’ preferences for online shopping. H1b. There are no significant differences in consumers’ times of online shopping. H1c. There are no significant differences in consumers’ intentions of online shopping. H1d. There are no significant differences in consumers’ amounts of online shopping. Differences between shoppers are of extreme interest in market targeting and the setting of marketing strategies. Several studies investigated the demographics association with consumers’ propensity for online shopping. Those studies have focused on gender, income, age, and education. The following presentation is a review of the most prominent results from those studies. Gender: Regarding the association of gender with the propensity for online shopping, results from the previous research are mixed. A number of studies concluded that males outperform females in making online shopping (Nayyar and Gupta, 2010; Stafford et al., 2004; Rodgers and Harris, 2003). This is in line with the findings by Burke (2002) who concluded that males are more interested in and inclined to use electronic technology in making purchase transactions than females. On the other hand, females still prefer using the catalogs for home shopping transactions. Nevertheless, Burke, (2002) revealed that females who preferred online shopping have had the largest shopping transactions compared to males.
Human Resources Management Model oriented to the Sustainability of Family Businesses - A proposal from the Comparison Between Italy and Colombia
Orlando E. Contreras, Universidad Industrial de Santander, Bucaramanga, Colombia
There is no doubt that dynamics of productive sector in Europe, especially in Italy, have been constructed through a genuine and collaborative work, which has its deepest roots in the gentle spirit of its people and in the influence of families, which in its role of the relational core of society, have over the decision process of human resource management in organizations. Unfortunately, this reality has not been taking place in other latitudes, such as Latin American countries, where despite the potential of its resources and talent of its people, phenomena such as the formation of long-term business alliances based on overall goals (environmental, social and financial) is the exception rather than the rule. This paper makes a previous analysis and formulates a proposal in the line of making an integral comparison between Italy and Colombia, in terms of societies, leadership styles, but especially in human resource management practices in order to create a managerial model oriented by sustainability principles for Colombian family businesses, which would be developed in further research process. The broadly shown interest in business-environment-related topics raises the need to be permanently looking for research alternatives in the area of management and business administration. This is carried out in order to achieve a methodological contribution to practices, which are consistent with the objectives of harmony for such relationship. Nevertheless, there has been a tendency to focus on the impact produced by the actions of companies on the environment: Clean Production, Sustainable Development, Zero Emission as well as the recurrent claims from several sectors towards Ecological Philanthropy. All of these are examples of a wave of applications from the business management area, which is motivated by actual problems that mankind will have to face to a greater or lesser extent if a possible future is wanted. Later, new elements are presented by means of initiatives such as the United Nations Global Compact (UNGC), which are a fundamental part of the actions of different organizations in their environment. Besides this, topics such as business ethics, dignity of labor and children’s exploitation, among others, have emerged. Hence, organizations have been invited to seek after the transcendence of their purely financial goals. This document comes from the meaning of Corporate Social Responsibility by doing a brief theoretical summary from its initiation as subject, to its current mention. It suggests its evolution itself as a model of Business Sustainability. Then, this is addressed through the participation of human talent in the organizational purpose of transcending in time due to bold proposals such as Sustainable Performance. The former is addressed again with more direct contributions, for instance, Green Human Resource Management. Likewise, it is expected to create a simple parallel between Italy and Colombia, which look very different but whose inhabitants have identical levels of welfare perception. The aim of this is to find a relevant connection to demonstrate cross learning potential actions on the issue of sustainability of small and medium businesses. It is concluded with a proposal for deepening on the subject in order to schematize a valid model, which can contribute to the development of that kind of ventures in emerging economies based on that comparison. Barnard (1938) has schematized theoretical and practical approximations of Corporate Social Responsibility from the contextualization of executive functions. It has gone from the pragmatism of Levitt (1958), the utilitarianism of Friedman (1970), to the development of Freeman’s Stakeholder Theory (1984). Of course, it is essential to bear in mind the likely first relation between the company’s competitive capacity and the need to report back to its environment throughout its framework of reference. This perspective is based in the resources of the firm (RBV) which was initially addressed by Wernerfelt (1984) and retaken by Hart (1995) in a practical context with a single approach to environmental impairment of the environment, which was then called Environmental Social Responsibility. However, McWilliam, Siegel and Wright (2006) managed to make an alignment between Corporate Social Responsibility and Strategy. Such alignment was retaken by Porter and Kramer (2006) who stand out the need to deepen on this topic as well as the concern raised of members of senior management of large organizations. It was no longer a matter of somehow giving back to society and the environment because of the excessive actions of companies. It was now a matter of survival, which then would be coherent with the actions developed in all organizational levels. That is, Sustainability had officially arrived as a concept and as one of the dominant paradigms in the field of formulation and implementation of a strategy to ensure the survival of society and by definition of business. There was a strong evolution of concepts since the proposal of union of these two issues, which were then supported by Pinillos and Fernández (2011). They assured in a word game that “Corporate Sustainability had won the battle between Corporate Social Responsibility and Business Philanthropy”. This was directly associated with the creation of long-term value, which transcended purely to technical and financial scenarios due to the creation of metric such as Dow Jones Sustainability Index (DJSI). Since then (2006) topics such as the use of alternate energy systems have been cataloged as sustainable businesses and have been required as well. It has also happened with other issues as the search of guarantees to maintain the global food chain, the business potential in working for the bottom of the social pyramid, the so-called “industry without chimney” whose leading example is eco-tourism along with the social inclusion of employees. In the same way, the raise of innovation as sine qua non factor for organizational success matched perfectly with all of the previously mentioned concepts. As defined by Nidumolu, Prahalad and Rangaswami (2009), sustainability is the new key driver for it to be started. This statement was ratified by Kiron, Kruschwitz, Reeves and Goh (2012) later. Both studies came to the conclusion that the tendency to set out businesses with a positive impact on the environment and society is compatible and coherent, almost synergetic, with the entrepreneurs’ legitimate interests for the creation of financial wealth. In addition to this, a new approach emerged intensely. It consisted in the contextualization of a triad of concepts, which integrated capitalistic ambitions with the impact generated on the environment along with the direct influence to the social environment. This “triple bottom-line” was the order of the day by restating Hart’s contributions (2007) in his book: “Capitalism at the crossroads”. It is worth mentioning that it was later reformulated by Porter and Kramer (2009). It meant the definite endorsement of a change in Porter’s vision, “wild” in essence, about the concept of strategy associating it with innovation and growth. The shared value was the redefined notion of the talked-about Corporate Social Responsibility, which is presented as an opportunity for companies to retrieve the formerly lost respect of society, among other things. At the same time, they were carrying out studies in which it was possible to associate in a much more clear way the notions of sustainability with its contribution to business competitiveness. On one hand, Hopkins, Townend, Khayat, Balagopal, Reeves, Berns and Kruschwitz (2009) published the results of the first survey of business sustainability. There, the apparent entrepreneurs’ levels of awareness of topics related to business sustainability stood out at that time as well as their concern about global issues, which did not seem to have to do with their decisions before. Authors highlighted that this is definitely a topic of strategic convenience. On the other hand, it was also likely to observe some conclusions that revealed a direct correlation between a company’s sustainable performance and its financial profitability. The latter was done by referring to Fox (2009) mitigation of companies’ future volatility and its own economic value. The efforts made by a lot of organizations, industries and countries were of public access by several cases of study in which there were reports of initiatives with positive results, which served function of the application of sustainability principles. These aimed at looking for better organizational performance now conceived directly or indirectly by a more lucid society with a future full of hope.
Exploring Perceived Product Knowledge, Credibility, and Attractiveness of Celebrity Endorsers on Influencing Teen Purchase Intentions
Dr. Scarlett C. Wesley, University of Kentucky, KY
Dr. Minyoung Lee, University of Kentucky, KY
Behnoosh Ghaani Farashahi, University of Kentucky, KY
Laura ParksUniversity of Kentucky, KY
Retailers and branded products use celebrity endorsers in their advertisements as a way to entice shoppers to purchase their products. The celebrity attributes of product knowledge, credibility, and attractiveness can determine a celebrity’s effectiveness as an endorser. Teens are a group that is heavily influenced by celebrities because they emulate celebrities’ actions and personalities to better fit in with their peers. For this study, surveys of 246 teens were collected asking them to rate endorsers’ product knowledge, credibility, and attractiveness based on their intention to buy an advertised product. Celebrity endorsers were found to influence teens’ purchasing decisions. Product knowledge, credibility, and attractiveness all have an effect on teens purchasing intentions with endorser’s product knowledge and credibility have the largest influence on whether they purchased a product. Retailers and branded products use celebrity endorsers in promotions and advertisements as a way to entice shoppers to purchase their products (Keel, 2012; McCracken, 1989). A celebrity endorser is “any individual who enjoys public recognition and who uses this recognition on behalf of a consumer good by appearing with it in an advertisement” (McCracken, 1989, p. 187). One quarter of American commercials and advertisements use celebrity endorsements, and those endorsers have a great impact on product sales because celebrities create a higher instance of recall and attention (MarketWatch, 2006; Shimp, 2000) for a product over non-endorsed items. One quarter of all advertisements feature celebrities as an endorser of a product or brand (Shimp, 2000), indicating the validity of this strategy as a means of persuasive communication (Biswas, Hussain, & O’Donnell , 2009). The teen market segment more than most other consumer groups is known to be heavily persuaded by their peers and often looks towards celebrities to determine what is and is not popular (Yarrow & O'Donnell, 2009). The purpose of this research study is to determine whether or not celebrity endorsers influence the purchasing intentions of teen consumers, to discover which celebrity attributes (credibility, attractiveness, and product knowledge) affect teens’ decisions to purchase endorsed products, and to identify gender differences. The use of celebrity endorsers represents a major monetary investment for a company, with organizations finding celebrity endorsements to be beneficial because consumers try to emulate the people they idolize. When a celebrity endorses something, they are in a sense lending their own selves to the brand or product. A celebrity endorser can operate as a co-brand for the endorsed brand and this could create an equity for both endorsing celebrity and endorsed brand (Seno & Lukas, 2007). Celebrity endorsements produce more positive responses toward advertised items and greater purchase intentions than non-celebrity endorsed products (Biswas et al., 2009). Celebrities provide symbolic aspirational reference group associations making them effective product endorsers. Pairing a celebrity with a brand in an efficient way will persuade consumers to visit the retailer being endorsed (White, Goddard, & Wilbur, 2009). In this way, brands and retailers use celebrities to broaden the appeal of advertised products, and the celebrity endorser becomes an effective way of transferring meaning to something (McCracken, 1989). The celebrity makes the advertised product appear more desirable and glamorous, which enhances audience attentiveness resulting in a more memorable advertisement (Byrne, Whitehead, & Breen, 2003). When assessing a celebrity’s influence, consumers most often use attributes of the celebrity endorser such as credibility, attractiveness, and product knowledge. These attributes influence a consumer’s ability to recall an advertised product (Ohanian, 1990; Ferle & Choi, 2005) and then in turn influence their purchasing decision. Credibility is defined as the belief by a receiver that a source makes honest assertions (Hovland, Janis, & Kelley, 1953) when endorsing a product. Attractiveness is defined as whether or not the endorser is found to be pleasing in appearance or manner or that they are simply found to be good-looking to the consumer (Ohanian, 1990). Product knowledge is the perception of the endorser’s ability to make valid assertions about the product (Hovland et al., 1953), in other words does the endorser really know what they are talking about. Today the celebrity culture is such that individuals in entertainment and athletics enjoy immense fame and influence, providing consumers with role models of behavior. Today’s teens have grown up in the glare of the media spotlight, having unprecedented access to advertising messages through a wide variety of sources. The teen market is highly coveted due to their spending power, ability to be trendsetters, receptivity to new products, and tremendous potential for becoming lifetime customers (Wolburg & Pokrywczynski, 2001). Teens are now an important part of retailers’ target market because of their exponential spending power of $100 billion annually and heavy influence on their parents’ spending (Magie & Young, 2010; Gil, Kwon, Good, & Johnson, 2012). Teens today are also more resistant to advertising efforts, more individualistic, and anti-corporate than any generation that has preceded them (Wolburg & Pokrywczynski, 2001). Teens tend to compare themselves to celebrities as a result of their significant connection between them and the celebrity culture (Turner, 2004). During their consumer socialization process, the lives of these teens contain more media than previous generations exposing them to media influences their entire lives. Therefore, teens are a viable group to examine in terms of their media influences. The following is a discussion of the theoretical foundations of this study. Consumer socialization is “the process by which young people acquire skills, knowledge, and attitudes relevant to their functioning as consumers in the marketplace” (Ward, 1974, p. 1). Socialization agents are the sources of influence that transmit norms, attitudes, motivations, and behaviors to the young person (Moschis & Churchill, 1978). These agents may be anyone in the person’s life including parents, mass media, school, and peer groups, and they frequently take the form of a role model. Consumers learn their behavior through the process of modeling (Moschis & Churchill, 1978), and both directly and indirectly, role models provide young people with someone to emulate. Contact with these models influences the young persons’ consumption-related decisions and actions (Bandura, 1986). Young people logically consider parents, teachers, peers, or relatives as role models. Other role models are individuals with whom the young person has little or no direct contact with such as public figures, celebrities, and sports stars, or in other words individuals of outstanding achievement. Studies show that role models have a considerable influence in the development of career aspirations, educational objectives and self-view of teens (Clark, Martin, & Bush, 2001).
An Examination of the Impact of Social Isolation in the Workplace
Dr. Charles Chekwa, Troy University, FL
Eugene Thomas, Jr., Dillard University, LA
Dr. Akins Ogungbure, Troy University, GA
Dr. Conrad Francis, Texas Tech University, TX
“Social isolation” and “loneliness” can be viewed as related or causational, one to the other. However, the authors recognize a distinct difference. The authors believe that while loneliness draws more association with the immeasurable and internal emotion one has for dependencies on others, social isolation represents the manageable external variables that affect, and motivate or demotivate, individual behavior. Therefore, the authors seek to delve into social isolation within the workplace and, more particularly, where technology has supplanted human interaction. In doing so, the authors seek to answer the questions: What is social isolation? How does social isolation affect employees within the workplace? What is the residual impact of social isolation on employers? Recently, a bank television advertisement aired displaying customers having an objectionable experience with a non-human approach to customer service. The underlying idea was the importance of human interaction and the consequences of its absence. The authors noted the implication or suggestion that technology in the form of self-service substitutes can be a poor replacement for “oh-so-valuable” social interactions. Despite this, and independent of it, among business models today, the authors note that technology self-service models have become more prominent; call any service line and you will surely be greeted by an automated call distributor (ACD). Companies view this as a means for businesses to “utilize web-based Self Service Technologies (SSTs) to minimize costs, provide readily available resources as needed, and reduce latency while simultaneously serving multiple customers” (Boyette, Thomas, & Rankin, 2009). While the authors can accept that self-service does give some remedy to the customer and business alike, the objection unfolding, as illustrated by the aforementioned advertisement, is that removal of human interaction may not be a workable alternative. Also, exploring the paradigm of the worker working within a human-less environment as a daily routine, this “social isolation,” if you will, may have adverse economic and/or interpersonal effects on all parties involved. For the sake of this research, the authors define social isolation as “distancing of an individual, psychologically or physically or both from his or her network of desired or needed relationships with other persons” (Biordi & Nicholson, 2012). However, it is important to mention that being socially isolated should not be generalized or pooled with the term “loneliness.” Social isolation, like loneliness, affects both the isolated and those around or in support of them. However, unlike loneliness, social isolation can be by design or necessity (Biordi & Nicholson, 2012). The authors believe that social isolation is more of an epistemic phenomenon that can be accepted or not and separate the term into “social disconnectedness” (or choosing to have small social networks) and “perceived isolation” (or loneliness) (Cornwell & Waite, 2009). While social disconnectedness and perceived isolation allow for grouping, they do not eradicate confusion. Thus, the authors streamline these terms and present them as the “choice” (social disconnectedness) and the “effect” (perceived isolation). While the choice may be preferred by seasoned, experienced employees, the authors believe that social isolation in either form, whether by design or consequence, can be more negative than positive. Isolation within today’s technologically enhanced workforce is not limited to the self-starting/self-motivated employee within a private office behind a closed door. As technological advancements feed the needs of a more diverse and flexible workforce, employees are moving away from the old all-hands-on-deck office. With the opportunity to provide 24 by 7 services in a global marketplace, technological advancements have made the world smaller and fed the ever changing need and opportunity to be professionally or socially isolated. Working away from the “office” is becoming more the norm. It is estimated that some “16.5 million regularly employed Americans telecommute at least one day of their normal work schedule” (Cooper & Kurkland, 2002). Just as impressive, and since the smart phone has become so prevalent, “according to an industry trade group, from June 2009 to June 2010, cell phone subscribers sent 1.8 trillion text messages. That was up 33% from the year before” (Cafferty, 2011). Furthermore, managing desktops, applications, and data centrally and delivering them efficiently over networks opens up the user/worker ability to work away from the office. To address this, virtualization (simulation of the actual hardware to allow software, which typically consists of a guest operating system, to run unmodified) “has provided IT [information technology] with a powerful and proven approach to addressing an organization’s evolving workspace needs” (http://www.cisco.com/en/US/ netsol/ns1135/index.html). However, what impact does this have on the isolated employee? Does the trade-off of telecommuting and use of virtual options create detrimental effects on the positives within personal interactions? Despite the authors’ speculation of adverse impact, some reports have suggested that there is “no correlation found between times spent teleworking and professional isolation” (Dino, Golden, & Veiga, 2008). Employees and the circumstances to which they are subjected during periods of isolation can lead to costs for the employer, both direct and indirect. Primary to costs associated with employees in isolated environments or circumstances are illnesses that affect the cost of insurance coverage. These illnesses can be varied and have varying impacts and costs. One study reported that “[b]ased on average impairment and prevalence estimates, the overall economic burden of illness was highest for hypertension ($392 per eligible employee per year), heart disease ($368), depression and other mental illnesses ($348)” (Goetzel, Hawkins, Long, Lynch, Ozminkowski, et al., 2004). Negative properties of social isolation can also result in workplace stress for both the isolated and those with whom they interact. Stress-associated cost and impact to U.S. employers can be “an estimated $200 billion per year in absenteeism, lower productivity, staff turnover, workers’ compensation, medical insurance and other stress-related expenses” (Maxon, 1999). Precluding other variables, employers are now weighing options for insurance coverage of employees versus penalties for non-coverage under the new Affordable Care Act (Ritger, 2013). Statistics indicate that the “number of employers offering coverage has declined, from 66 percent in 2003 to 57 percent today, according to Kaiser’s study” (Ritger, 2013). The authors propose that this has a far-reaching effect on employers’ employee turnover ratio because insurance and available benefits are common factors in employees’ and potential employees’ decision to continue or accept employment.
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