The Journal of American Academy of Business, Cambridge

Vol.  6 * Num.. 2 * March 2005

The Library of Congress, Washington, DC   *   ISSN: 1540 – 7780

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How Do Pioneering Firms Identify and Pursue Opportunities: An Exploratory Model of Pioneering Behavior

Dr. Kim E. Schatzel, University of Michigan-Dearborn, Dearborn, MI

Dr. Tunga Kiyak, Michigan State University, East Lansing, MI

Trevor Iles, Anson Consulting, Birmingham, MI

 

ABSTRACT

The study develops a conceptual model that examines the means by which firms identify and pursue pioneering opportunities.  First, the authors examine how pioneering firms, through their information exchange practices, identify pioneering opportunities. Additionally, the authors incorporate into the model the construct, competitive equity building, as a means to investigate how pioneering firms pursue pioneering opportunities. Specifically, through competitive equity building, pioneering firms seek to influence the formation of consumer preferences in their own favor, and, consequently, achieve prototypical status for their product. This perspective differs from most extant literature as its focus regarding preference formation is on the pioneering firm rather than the buyer. Lastly, the model incorporates the effect of the environmental construct, industry dynamism, on a firm’s pioneering behavior. The model is tested, via structural equation modeling, using a sample of 265 high level executives from the computer software, computer peripherals, automotive component, and machine tool industries. The findings indicate that a firm’s pioneering behavior fosters greater levels of information exchange to identify pioneering opportunities, as well as, its use of competitive equity building to pursue those opportunities. The authors also provide theoretical and managerial implications of the research results, as well as, directions for future research. Previous research had proposed that market pioneers accrue significantly larger market shares than their competitors in both consumer and industrial markets (Lieberman and Montgomery, 1988; Kerin et al., 1992; Robinson, 1988).  Entry barriers yielding this advantage include preemptive positioning, switching costs (Lieberman and Montgomery, 1988), and consumer preference formation (Carpenter and Nakamoto, 1989).  Previous research has suggested that discontinuities, such as changing customer needs and technological shifts, that are characteristic of dynamic industries foster the creation of requisite “gateways” or opportunities for pioneering moves (Drucker, 1985).  However, the relationship between the industry environment and a firm’s predisposition to select a pioneering strategy remains largely unexamined (Lieberman and Montgomery, 1988).  Therefore, the first objective of this study is to investigate the relationship between industry dynamism and a firm’s pioneering behavior.  Additionally, the mechanism by which pioneering firms identify opportunities for pursuit remains underinvestigated as well (Lieberman and Montgomery, 1988).  One research perspective proposes that pioneering behavior is positively influenced by inbound communication activities such as environmental scanning (Aquilar, 1967; Lozada and Calantone, 1996; Miller and Freisen, 1982; Tushman, 1977). However, the relationship between a pioneering behavior and its information exhange practices (i.e., inbound and outbound) remains underexamined (Lieberman and Montgomery, 1988).  This study addresses this research gap by examining the relationship between the construct firm information interactivity and pioneering behavior.  The study’s third and final research objective is to examine the means by which pioneering firms attempt to achieve pioneering advantage, specifically through attainment of “prototypical” status for their products.  Carpenter and Nakamato (1989) propose that firms can achieve pioneering advantage via their status as “prototypical” product class standards or brands.  Calantone and Calantone (2000) proposed the construct, competitive equity building, as a  means to investigate the pioneering firm’s pursuit of prototypical status for their products; this study extends their work by developing hypotheses regarding the relationships between competitive equity building, a firm’s pioneering behavior, and firm information interactivity.  We develop a conceptual model that examines these relationships and is tested via structural equation modeling using a sample of high level executives within the computer software, computer peripheral, OEM automotive components, and machine tool industries.  Lastly, we discuss the findings from both academic and managerial perspectives, as well as, provide possible directions for future research.

 

Hofstede Theory and Cross Cultural Ethics Conceptualization, Review, and Research Agenda

Ziad Swaidan, Ph.D. and Linda A. Hayes, Ph.D., University of Houston-Victoria, Sugar Land, TX

 

ABSTRACT

Individual differences in ethics reflect cultural variations, that is, differences in the collective programming of the mind that distinguishes one individual from another. This research conceptualizes the relationship between Hofstede theoretical framework (Individualism, Power distance, Uncertainty avoidance, Masculinity, and Confucian dynamism), and cross-cultural ethics. Also, this study develops the hypotheses and directions for future research.  Hofstede (1991, 5) defined culture as “the collective programming of the mind which distinguishes the members of one group or category of people from another.” This does not imply that humans are programmed the same way computers are. Hofstede (1991) concluded that individuals’ behavior is only partially predetermined by their mental programming. Individuals have the ability to deviate from their mental programming. They have the ability to react in ways, which are different than their culture. On the other hand Hofstede (1991, 6) defined personality as the unique set of mental programs, which individuals do not share with any other human beings.  Culture is recognized as one of the most important variables influencing ethical decision-making (Singhapakdi et al. 1994). Differences in individual ethics reflect cultural variation, that is, differences in the collective programming of the mind that distinguishes one culture from another (Hofstede 1991). Cultures could be contrasted along five dimensions: individualism/ collectivism, power distance, uncertainty avoidance, masculinity/feminine, and Confucian dynamism (Hofstede 1991; Hofstede and Bond 1988). Individualism/Collectivism represents the relation between an individual and her/his fellow individuals (Hofstede 1983). Collectivism is characterized by a tight social framework, in which people distinguish between in-groups and out-groups (Hofstede 1980). Power distance covers how individuals deal with the fact that members of their society are unequal (Hofstede 1983). Uncertainty avoidance involves how society deals with uncertainty because the future is unknown (Hofstede 1983). Masculinity includes the division of roles between the sexes in society (Hofstede 1983). Confucian dynamism measures the extent to which a culture emphasizes long-term values, in contrast to a culture that emphasizes short-term values. This theoretical paper lays the scientific grounds to explore the ethics of individuals from various cultures using the five dimensions of Hofstede theory.  Hofstede (2001, 225) said that individualism stands for  “a society in which the ties between individuals are loose: Everyone is expected to look after him/herself and her/his immediate family only”. Individualism is a loosely knit social framework, in which people are supposed to take care of themselves and of their immediate families (Hofstede 1980, 1991). Individualists value personal independence and pleasure and individual expression and personal time. They tend to believe that personal goals and interests are more important than group interests (Hofstede 1984). Individualists tend to have a high need for personal achievements and value individual rights.  Hofstede (2001, 225) stated that collectivism stands for “a society in which people from birth onwards are integrated into strong, cohesive in-groups, which throughout people’s lifetime continue to protect them in exchange for unquestioning loyalty.” Collectivism is characterized by a tight social framework, in which people distinguish between in-groups and out-groups (Hofstede 1980). Collectivists consider themselves as members of an extended family, tripe, nation, or culture (Hofstede and Bond 1984). Collectivists value reciprocation of favors, a sense of belonging, and respect for tradition (Schwartz 1992). Individuals with low scores in the individualism dimension have an emotional dependence on the group. Collectivist’s identity is based on the social system rather than on the self. Although the group invades private life of individuals the group provides protection, loyalty, and security for members.  Hofstede (2001, 98) proposed that power distance represents “The extent to which the less powerful members of institutions and organizations within a country expect and accept that power is distributed unequally.” The fundamental issue involved in power distance is how individuals deal with the fact that members of their society are unequal (Hofstede 1983). Power distance indicates the extent to which individuals accept the fact that power in the society is distributed unequally (Hofstede 1980). Individuals with larger power distance accept the inequality of power in their society (Hofstede 1983).

 

Derivative Gain/loss, Currency Hedging and Management Compensation

Janikan Supanvanij, Ph.D., St. Cloud State University, St. Cloud, MN

 

ABSTRACT

This paper analyze whether gain/loss from using currency derivatives can affect a firm’s hedging decision and top executives compensation.  I examine 138 industry firms that report the use of derivatives during 1998-2000 for hedging purpose.  I find that gain/loss has a significant impact on risk management and managerial pay package.  Firms may reduce risk management activities because gain/loss resulted from hedging can significantly affect management compensation. This paper is the first study in the area that analyzes whether the gain/loss from using currency derivatives affect the firm’s hedging decision and managerial compensation.  The primary objective of hedging is to reduce uncertainty, not to make profit.  Hence, when the firm uses derivatives to manage risk, its decision should be free from gain/loss resulting from the usage.  Derivative use that is related to the gain/loss indicates that the firm may use those tools for other purpose than hedging.  Hedging can increase firm value by reducing underinvestment problem, expected financial distress costs, and expected taxes (Froot, Scharfstein, and Stein, 1993; Mian, 1996; Stulz, 1996; Haushalter, 2000; Allayannis and Weston, 2001).  Management, therefore, should engage in risk management activities to increase shareholder’s wealth. In this paper, I also investigate the effect of gain/loss on executive compensation. When firms use derivatives to manage risk (for hedging purpose), gain/loss from using derivatives is not a good measure of management performance.  Management should not be rewarded (punished) based on good (bad) luck.  If management compensation is tied to derivative gain/loss, management may consider reducing derivatives use, which in turn may not benefit the shareholders. This paper examines 138 industry firms that report the use of derivatives for hedging purpose during 1998-2000 (the transition period regarding the impact of SFAS133).  The sample starts in 1998 to coincide with the Accounting for Derivatives Instruments and Hedging Activities (SFAS 133).  Before 1998, firms were required to enclose only the notional values of the derivative contracts in their 10-K forms.  SFAS 133, issued in 1998, requires US firms to report the fair values of derivatives in their financial statements.  Although the effective date of this standard was postponed several times during 1998-2000, early implementation was encouraged.  Many US firms prepared their financial statements to conform to this new standard as early as after passage.  When examine closely, most S&P firms started to report both notional values and fair values of derivatives in their annual reports in 1998.   After 2000, firms are not required to enclose the notional values in their financial statements.  This paper is organized as follows: Section II presents review of the literature. Section III describes the data and methodology. Results are shown in Section IV.  Section V concludes.  Prior studies show that hedging is related to the underinvestment problem associated with costly external financing (Nance, Smith, and Smithson, 1993; Geczy, Minton, and Schrand, 1997; Gay and Nam, 1998), the expected costs of financial distress (Mian, 1996; Stulz, 1996; Hausshalter, 2000), and expected taxes (Froot, Scharfstein, and Stein, 1993; Mian, 1996).  The extent of hedging can also be affected by the forms of management compensation. Since risk management can increase the firm value, derivative use is predicted to increase with compensation when agency conflict between managers and shareholders is not presented. However, in case of agency conflict, hedging decision can be affected by the forms of management ownership.  Management whose large proportion of compensation is in the form of stock options may reduce derivative use because it can lower the value of options they own.  On the other hand, managers with more wealth in the form of stock equity may actively engage in risk management activity because reducing stock price volatility can result in increase stock price.  In addition, it is less costly to use the firm’s assets to manage the risk.  Recent studies show correlation between compensation and risk management in gold mining industry (Tufano 1996) and savings and loans (Schrand and Unal 1998).  However, in oil and gas industry, the relationship is not clear (Haushalter, 2000). Investment opportunity (MKBK). Froot, Scharfstein, and Stein (1993) find that risk management can reduce underinvestment problem.  By alleviating unnecessary fluctuations in cash flows, hedging helps ensure that a firm will not increase the use of expensive external financing or bypass positive NPV projects (Geczy, Minton and Schrand, 1997; Gay and Nam, 1998).  I use market-to-book ratio to represent growth opportunity. Financial distress costs (LTDTA). Risk management decreases the expected cost of financial distress by reducing the volatility of a firm's cash flows or earnings (Smith and Stulz, 1985; Geczy, Minton and Schrand, 1997; Berkman and Bradbury, 1998).  It also increases a firm’s value by reducing its probability of default and increasing its leverage (Froot, Scharfstein and Stein, 1993; Haushalter, 2000).  Financial distress is measured by the ratio of long-term debt to total assets.

 

A Statistical Approach to Peer-Groupings; The Case of Banks in Armenia

Dr. Cyrus Safdari, Michigan State University, East Lansing, MI

Dr. Nancy J. Scannell, University of Illinois at Springfield, Springfield, Illinois

Rubina Ohanian, American University of Armenia & Accenture

 

ABSTRACT

Financial data for banks operating in Armenia in 2001 were extracted from Arka News Agency publications which use an Asset-based algorithm to rank and classify the country's 31 banks. The present study performs statistical analyses on a subset of Armenia's 31 banks. One conclusion of the present study corroborated Arka News Agency's use of Assets to classify banks. Further analysis determined peer group cutoff points which diverged somewhat from those used by Arka. Factor and Cluster Analyses findings in this paper thus illustrate an alternative methodology for peer group determination, an important stipulation in advance of performing comparative analyses among banks. Decisions with respect to the welfare, oversight and regulation of a financial institution are routinely executed on the basis of an individual entity's performance within the context of its presumed or conventional peer group. Decision-making of such import, accordingly, necessitates careful specification of both the salient variable (or variables) and ranges of the variable(s) in order to appropriately demarcate distinct peer groups among a given population. This study considers the banking institutions population of Armenia, employs quantitative analyses to determine statistically significant bank peer groupings, and juxtaposes its findings with peer groupings as established and published by Arka News Agency, a prominent media firm in Armenia. In the beginning of the 20th century capitalism emerged in Armenia. The Russian capital, Moscow, ruled over Armenia, and the major banks of Russia had established their branches in principal towns of Transcaucasia (Armenia, Georgia and Azerbaijan). About 10 banking institutions were operating in Yerevan in 1914. In October 26, 1920, a law established the State Bank of the Republic of Armenia on the basis of the Yerevan branch of the State Bank. After the establishment of the Soviet regime in Armenia, the Revolutionary Committee and the People's Commissariat of Finance (PCF) issued a decree on December 10, 1920, to nationalize the private banks and withdraw the currency then in circulation. In 1921 the State Bank of USSR was established, and its main office and branches were created in Armenia in 1924. In 1925 the Yerevan office of the State Bank of the USSR was renamed as the Armenian office of the State Bank of the USSR (CBA, 2002). (See this paragraph and additional historic references cited in Scannell, Safdari and Newton, 2003.) In the late 1980's, there were 52 branches of the Republican Office of the State Bank of the USSR in Armenia. Haik was the first cooperative bank established in Soviet Armenia on October 6, 1988, which afforded basis and gave rise to a broad network of banks in the Republic. In December 1988, Erevan Bank was the first among commercial banks to be established. Armeconombank was the first bank established immediately after the independence of the Republic of Armenia was obtained on September 26, 1991 (CBA, Banking System of Armenia; 1999, P. 11). In December 1991, the State Bank of the SSRA (Soviet Socialist Republic or Armenia) was charged with responsibility as a National Bank of the newly independent Armenian Republic. The Armenian Law on The Central Bank of the Republic of Armenia was adopted on March 27, 1993, and the National Bank was then renamed as the Central Bank of Armenia (CBA) (CBA, 2002). (See this paragraph and additional historic references cited in Scannell, Safdari and Newton, 2003.) Banks and financial institutions mushroomed rapidly during Armenia's early years of independence, but faced a number of serious problems in the years 1994 and 1995, when the banking system crises forced 37 banks to cease activities. At the end of 1995, only 34 banks were operating in Armenia (Synthesis, 2001, p. 74). The new minimum capital requirements had forced the closure of almost half of Armenia's banks (Lafferty, 1995). (See this paragraph and additional historic references cited in Scannell, Safdari and Newton, 2003.)  The banking situation remained more or less stable until mid-2000 when another wave of asset mismanagement and minimum capital under-performance was observed. During 2000 and at the beginning of 2001 the CBA undertook various types of insolvency procedures against the 5 worst-performing commercial banks. At the beginning of 2001, the license of Econominvestbank, for example, was revoked because of minimum capital requirement violations. As of March 31, 2001, 30 banks with 218 branches were registered in Armenia, but only 26 of them were totally operating, out of which 4 were subsidiaries of foreign banks: HSBC-Armenia, Areximbank, Mellatbank, and International Commercial Bank-Armenia. Regarding ownership, 15 banks were closed joint-stock companies (one, Armsavingsbank, being state-owned), 6 were open joint-stock companies, 4 were limited liability companies and one was a co-operative (Synthesis, 2001, pp. 74-75). (See this paragraph and additional historic references cited in Scannell, Safdari and Newton, 2003.)

 

Government Intervention and Market Distortion: The Case of the Chinese Stock Market

Dr. Tyler. T. Yu and Dr. Miranda M. Zhang, Mercer University, Atlanta, GA

Dr. Shao-zhou Qi, Wuhan University, Wuhan, Hubei, China

 

ABSTRACT

China has, since the late 1970s, gradually transformed itself from a centrally planned economy into a market-oriented economy. China has developed a nationwide equity market with stock exchanges located in Shanghai and Shenzhen. The stock exchanges have been continuously updating their technology, improving services, and consistently developing conditions that provide a foundation to expand the market. They have also been improving trade, settlement, registration, and custody practices, as well as upgrading the information transmission system. However, the efficiency in the market is far from reality. This is due mostly to the frequent government intervention and the resulting market distortion. This paper provides an overview and analysis to examine the Chinese stock market and its distortion that has made it infeasible and unsuitable for providing meaningful information that can be used in business valuation and financial analysis.  In 2002, China has surpassed the United States, becoming the largest hosting country for foreign direct investment (IMF, 2003).  By the end of Sept. 2002, the number of enterprises with FDI in China was 414,796, and the utilization amount of FDI was $435 billion (China Securities, 2002). The average annual growth rate has been 22%, again second only to the United States. China’s international trade has also increased tremendously, with an average growth rate of 12.1 % since 1978 (http://:www.state.gov.cn, Oct. 12, 2002).  A drastic inflow of foreign capital has occurred in the forms of mergers, acquisitions, and joint ventures between Chinese firms and firms of foreign origins.  It is important to know how these firms may use the Chinese stock market, which was developed in 1990.  That is, the evaluation of the efficiency of this market has become a critical and crucial task.  The purpose of this paper is to examine the distortion of the Chinese stock market.  Specifically, the existing literature that is pertinent to this topic will be reviewed. Then, secondary data and sources will be compiled and pulled together to provide new insights regarding the efficiency of the Chinese stock market.  Specifically, the Chinese stock market will be diagnosed to determine the degree of the distortion, identify the sources of the distortion, and the effects of the distortion. Finally, some conclusions will be drawn based on the analysis. Since the inauguration of the Chinese stock market in 1990, it has caught the attention of both academic researchers and business practitioners. Research publications regarding this newly developed stock market have emerged. This paper reviews only the most recent research studies, i.e., the ones published after 1999. Zaloom at el (1999), examined the impact of the Securities Law of China, the country’s first comprehensive national law on securities, which was passed and adopted by the Standing Committee of the National People’s Congress on December 29, 1998 and took effect on July 1, 1999.  The purpose of the law is to regulate the country’s stock market, which is in its infancy. The authors maintain that although the law does not contain many breakthroughs, it does bring some substantial changes, such as banning banks and state run enterprises from trading in stocks, proscribing brokerage firms from mixing their own and client’s funds to trade shares, and granting the China Securities Regulatory Commission (CSRC), the authority over all aspects of the securities business.   All of these have helped correct the distortions in the Chinese stock market. An empirical study was conducted to examine the difference between earnings based on Chinese GAAP and those based on the International Accounting Standard (IAS) (Chen, Gul, and Su, 1999). The authors studied how current Chinese accounting standards are different from the IAS, whether these differences are systematically biased toward under- or overstated earnings, and which items from the financial statements contributed most to these differences. The empirical finding of the study reveals that reported accounting earnings based on current Chinese GAAP are significantly different from those based on IAS. Specifically, the reported earnings based on Chinese GAAP are, on average, 20%-30% overstated compared with earnings based on IAS. This difference and the overstatements may have contributed to the inefficiency and distortion in the Chinese stock market. Ahorony at el (2000) conducted a research on financial packaging of initial public offering (IPO) firms in China. The authors examine the earnings pattern of IPO firms in China to look at the role of earnings management in the financial packaging of Chinese state-owned companies for public listing. According to the findings of the study, the state-run company managers’ incentives and opportunities for earnings management differ across industries and locations.  As analyzed later in this paper, earnings management may also cause the market to be distorted.

 

Appraisal and Comparison of the Financial Performance of the Household Electrical Appliances Industries of Mainland China, Taiwan and Hong Kong

Dr. Kuo-Wei Lin, Hsuan Chuang University, Hsinchu, Taiwan

 

ABSTRACT

When selecting shares of a listed company, a rational investor must analyze the company’s financial performance with reference to the declared financial reports.  However, different industries have different characteristics, so the values that must be considered in financial analysis also vary.  Therefore, the investor cannot easily judge whether the financial performance of an individual company is strong or poor.  Hence, the simplest means of evaluating financial performance is to compare firms in a particular industry.  The problems caused by variations among normal financial data can thus be avoided.  This study considers listed companies in the household electrical appliances industry in Mainland China, Taiwan and Hong Kong and applies multiple criteria for evaluation and to establish a comparative model of financial performance.  This model can then be used as a reference for investors when they invest in stock in companies in the household electrical appliances sector.  In the first half year of 2003, when SARS severely affected Mainland China, Taiwan and Hong Kong, the entire Chinese community was burdened under a heavy cloud of worry and misery.  Although the entire world was pessimistic about economic development in the Chinese community, Heinzl(2003) reported that America’s Number One Investor, Buffett was still buying large amounts of Mainland China shares.  On the same time, Lashinky(2003) revealed Buffett’s letter to the Berkshire Hathawy Company’s annual stockholders meeting, he said, “Though the American stock market has been a bear market for three years and the share prices have drastically declined, there are still few companies worth investing in”.  Thanks to these words from Buffett and to his large investments in Mainland China, investment specialists all over the world have shifted their focus to the economic development of Mainland China and the value of investing in stock there. Since Mainland China and Taiwan joined the WTO successively in 2001, the volume of trade has increased rapidly, and the value of economic production continues to rise.  In 2003, the production value of the Chinese household electrical appliances markets exceeded 20 billion USD, strongly affecting economic development in these three areas across the Straits.  Accordingly, this study seeks to establish a Multiple Criteria Evaluation Model to appraisal the financial performance of the household electrical appliances industry in Mainland China, Taiwan and Hong Kong.  The model is offered as a basis on which investors may evaluate the efficiency of investments. In analyzing share investment efficiency, a healthy and rational attitude must be taken.  Graham(1934), Buffett’s teacher, is famous globally as the originator of ‘Value Investing’, but when Graham introduced the term he was merely applying a very simple mathematical formula to determine the stock’s intrinsic value.  However, the Disclosure Law at that time did not require listed companies to declare their financial information honestly.  Financial reports of that time were unreliable, as were the calculated intrinsic values.  Therefore, Vick(1999) claimed that Graham proposed the concept of Value Investing really to influence investors to engage in stock investment with an objective and rational attitude, rather than not rushing in to an investment and withdrawing quickly as its stock market quotation fluctuates.  Barach(1988) appealed to investors’ need to be “in control”; he noted that fear and greed govern the psychology of investing.  Graham(1949) also offered several examples to illustrate that the emotions of investors frequently cause the stock market to fluctuate.  He stated that an investor’s Number one enemy is not the stock market but himself or herself.  Additionally, Graham told an allegorical story of a man called Mr. Market, who collaborates with an investor, and who reports the purchase prices and sale prices of the firm’s stock to the investor every day.  Mr. Market’s emotions are very unstable so the prices he reports fluctuate greatly.  Graham noted Mr. Market’s reporting of prices reflects only the temporary market, rather than any wisdom.  Hence, if Mr. Market controls the investor’s emotions, then the report will actually be useless.  Dennis repeated this story.  Both Graham and Dennis called on investors to analyze listed companies’ financial reports again, using reasoning and wisdom.  Dennis(2002) found that too many investors rashly enter the market to buy a company’s shares without first studying its capital or financial performance, and warned that such behavior is not investment at all but speculation, and certainly full of crises.

 

Development of a Human Resource Management Effectiveness Measurement Model in Taiwan

Dr. Ming-Ten Tsai, National Cheng Kung University, Taiwan

Dr. Li-Min Chuang, Diwan University, Taiwan

Wei-Ping Hsieh, Doctoral Student, National Cheng Kung University, Taiwan

 

ABSTRACT

The objectives of this research were to construct Taiwan’s high-tech industry human resource management effectiveness dimensions and the associated evaluation indicator, in order to evaluate Taiwan’s current level of ability in this area, and provide a guideline for business. In addition, an organizational innovation model was also constructed to act as a foundation for innovation theory.  The research methods being employed included literature review, an in-depth interview and a small group technique. These were used as a first step in constructing a human resource management effectiveness measurement model.  Before constructing the human resource management effectiveness measurement model for the present study, a weighted measurement indicator was created through an analytic hierarchy process(AHP). After finishing constructing the human resource management effectiveness model, an empirical study conclude that the most important dimensions to measuring human resource management effectiveness included: technical HRME, strategic HRME, HR professional manager mastery, and HR business manager mastery .There is broad agreement that firm performance is influenced by the set of HRM practices and that a firm’s human capital contributes to the achievement of its business objectives. Recent empirical evidence supports this basic assumption(Schuler & Jackson, 1987; Baird & Meshoulam, 1988; Cutcher-Gershenfeld, 1991; Arthur, 1994; Huselid,1995; Jackson & Schuler, 1995; MacDuffie, 1995; Huselid & Becker, 1996; Huselid, Jackson, Schuler,1997). Through the review and analysis of related HRME literature, it was found that continuous human resource management activity undertaken by high-tech enterprises as the key factor in achieving a competitive edge. In the past, measurement on degree of HRME was usually ascertained through a questionnaire evaluated by subjective indicators or simple weighted indices like turnover ratios, training and development expenditures etc. However, results from this kind of approach varied greatly with the subjective perception of the person who replied to the questionnaire. This was because the relative weighted importance of different dimensions was not considered. The foundation of the HRME measurement model being developed in the present study is mainly based on the HRME structure factors proposed by Huselid, Jackson & Schuler (1997). The preliminary measurement model was established through a study of the literature, in-depth interview with experts, assessors and subjects, as wall as the use of small group techniques (SGT) to compile the views and opinions of the dimensions and measurement indicator for the HRME of high-tech enterprises. Objective indicators were also included in addition to subjective indicators. The preliminary measurement model was first designed in the form of a questionnaire and sent to the middle and higher management in the human resource departments of 150 manager-related companies, located in the Hsin Chu Science Based Industrial Park and the Nan Tze Industrial District. Two sets of questionnaires were sent to each company, i.e. a total of 300 questionnaires were dispatched, and 209 (70%) valid returns were collected. Base on the results of factor analysis, different dimensions were identified and named accordingly. A total of two system dimensions, five measurement dimensions and twenty secondary dimensions were obtained, thus completing the construction of preliminary measurement model. The dimensions and indicators of the measurement table are shown in Figure 2. On completion of the hierarchical structure for the present study, ten experts who were familiar with HRME studies were consulted to compare the pairing of the dimensions and indicators. They did this through an analytical hierarchy process (AHP) questionnaire, so as to obtain the relative weights of the hierarchy and indicator, for subsequent development of equations to evaluate HRME. Following the establishment of the first stage hierarchy and indicators, views and opinions concerning the HRME hierarchical structure and measurement indicator of Taiwan’s high-tech enterprises were sought from experts and scholars in order to modify the initial model and set up a more rigorous analytical structure for subsequent study. Ten experts from related area in Taiwan were consulted; five of them were academicians with human resource management as a major research interest, whilst the remaining five were middle to higher management from the human resource departments of high-tech industrial companies. The consultation, carried out at Taipei and Kaohsiung, used in-depth interview and a small group technique. lasted from 2 to 3 hours.

 

Issues in Recruitment and Retention for the IT Workforce

Donatus I. Amaram, Ph.D., Virginia State University, Petersburg, Virginia

 

ABSTRACT

The world economy has enjoyed sustained expansion and growth since the 1990s. This, coupled with the rising dominance of information technology and global competition has put human capital at a premium as a factor of business competition and organizational success.  The exit of the baby boomer generation from the workforce into retirement at a faster rate than the entry of their replacement cohorts, and the job-hopping tendencies of the talented few, among other forces, have made the task of recruiting and retaining skilled workers a daunting exercise for most companies, particularly in the IT industry. This paper, through a review of best practices and innovative strategies, synthesizes and suggests approaches that business organizations can pursue to enhance their efforts at recruitment and retention of the highly educated and skilled workers needed for success in the current workplace.  Most of the Western economies, particularly the United States economy, have, until the last three years, experienced prolonged growth and business boom in the majority of private-sector industries especially in the high-tech areas.  Simultaneously, the pool of knowledge-based workforce has been shrinking as many baby boomers get to retirement age.  Consequently, human resources managers and other recruiters in the technology-intensive industries feel compelled to engage in ruthless competition in the marketplace to find and keep available talents.  With the tight job market clearly in favor of the worker, employers are increasingly forced to deal with an unreliable, poorly motivated and inexperienced workforce, among other hurdles.  Job-hopping by the talented few has become commonplace as the typical employee averages five years or less at a job before moving on in search of greener pastures (Wiener 1999, 1). This paper uses secondary data (BLS, AMA, and other information sources) to examine some trends in our socio-economic system that impinge on the current tight labor market, and the strategies and initiatives which human resources managers should consider in recruiting and retaining needed and talented workers to compete effectively. A 2000 Bureau of Labor Statistics report shows a significantly steady decline in unemployment from 1991 to 2000 (see Table A).  Until the beginning of the current three-year recession, the national unemployment rate held steady at four percent for almost a decade during the Clinton years.  In some regions like Nebraska, the rate was much lower at two percent (Frederick 1999, 24).  Retired and discouraged workers returning to the workforce in response to the labor shortage have not made a significant difference in the demand/supply balance.   The Clinton economic growth, punctuated temporarily by the current recession, is the longest peacetime expansion in the post World War II period in terms of sustained growth as well as gross domestic product. It is also the lowest in unemployment and the mildest in inflation/consumer price index comparison (Guynn 2000, 296).  Global competition and emerging technologies resulting in improved productivity have dramatically extended the United States capacity for sustained growth.  As unit costs drop and output per hour increases, firms are experiencing increased profits that can enable them to hire more workers with better pay without raising output prices (ibid. 297).  This translates to more jobs available than there are qualified workers to fill them, a real challenge to human resources managers. In particular, computer systems analysts, database administrators, and computer scientists are expected to be among the fastest growing occupations through 2012.  Employment in these areas is expected to grow much faster than the average for all occupations as organizations’ needs for sophisticated high technologies continue to increase (BLS, Occupational Employment Projections, April 12, 2004 p. 8). BLS report s show that new entrants into the labor force grew at only 1.1 percent annually since 1996.   This growth rate is expected to continue until 2006 when the so-called “net generation”, consisting of youths born between 1980 and 1999, starts entering the workforce.  This group together with the “generation X” population, consisting of those born between 1965 and 1979 will make up the bulk of the college-educated and/or skilled labor force.   However, there are a few countervailing factors with negative impact on the workforce participation rate.  First, the rate of exit from the workforce into retirement by the “baby boomer” population is projected to outpace their replacement cohorts (see Table B).  This gap has been growing in size and impact since 1986 (Adams 1998, 83).  Furthermore, the declining rate of workforce participation will be exacerbated by a brisk job growth rate.  BLS projections show that eight of the ten fastest growing occupations will be computer related, commonly referred to as information technology occupations (see table 1).  Jobs in seven education or training occupational categories that generally require a college degree or other post secondary award are projected to grow faster than the average across all occupations, accounting for 42 percent of projected new job growth between 2000 and 2010, up from 29 percent in the previous decade (BLS News, Dec. 3, 2001, p. 2).

 

A Study on the Relationship of a Strategic Asset Seeking Subsidiary with MNC Headquarter

Tai-Ning Yang and Chuan-Lin Kang, Chinese Culture University, Taiwan

 

ABSTRACT

Based on the research on the Taiwan-based MNCs with strategic knowledge asset-seeking foreign investment, this study found that the degree of autonomy of a strategic assets-seeking subsidiary has a direct and significant positive correlation with the profusion of the subsidiary owned strategic assets.  It is also found that the embeddedness of the local context of the host country subsidiary is an intervening variable. Furthermore, the phenomenon of the parent company’s corporate immune system will be directly affected by the increase in autonomy of subsidiary; in addition, the degree of autonomy of subsidiary will be affected by the subsidiary owned strategic assets and the embeddedness of local context of the host subsidiary. Dunning (2001) indicated that the recent business environment has been significantly changed more than ten years.  Multinational corporation’s (MNC) strategic assets-seeking foreign direct investment (FDI) has become not only the use of the ownership-specific advantages of firms, but also a main method of strengthening the development of its ownership advantage to raise its international competitiveness, owing to rapid technology evolution, severer competition business faces from rival, the opening of new markets and the increasing international transfer of firm-specific assets. The competence development of an organization is seen as crucial to the long term survival of corporation and company success on the market. It is found from dynamic perspectives that sustained competitiveness of a corporation are able to unceasingly improve its competitiveness, not merely on static efficiency (Porter, 1994); innovation and competence development can be regarded as the response to external environment stimulation that a corporation faces (Cohen and Levinthal, 1990; Levitt and March, 1988; Nelson and Winter, 1982). The more complex stimulation a MNC receives from external environment, the newer organizational competitiveness it will be created (Porter, 1990).  By comparing with local corporations, overseas subsidiaries of a MNC may have more latent capabilities to develop competitive advantages under various environmental contexts from all kinds of challenges, opportunities and threats (Bartlett and Ghoshal, 1986; Forsgren, 1997; Porter, 1986).  As many researches have demonstrated that many MNCs are progressively cross the border to acquire or develop resources and capabilities  the MNCs need in order to make up or strengthen their existing core competence (e.g. Tolentino, 1993; Narula, 1996; Buckley and Castro, 1998; Bellak, 2000; Dunning, 2001).  The nature of strategic assets, which are desired to be attained by MNCs, has been shifted to knowledge-intensive assets and learning experience oriented (Dunning, 1998).  According to Dunning, there is an obvious difference between the strategic asset-seeking FDI and other foreign investments for obtaining natural resources, heightening efficiency and seeking for new markets, regarding the selection of location. The aforementioned three motives of other foreign investments are for the purposes of decreasing production cost, surmounting trade barriers and utilizing scale economy. Nevertheless, these strategic asset-seeking FDI are for protecting or increasing the firms’ core competence; therefore, the sources of these assets and all factors in the course of obtaining these assets are a matter of concern, including physical resources, infrastructure of human resources, politics and business conditions in the host country (Dunning, 2001).  Relevant researches on strategic asset-seeking FDI can provide useful information for managerial to put to use in the planning and formulation of international business strategies and further competitiveness enhancement of MNC.  Existing researches on the kind of investment involve in the three fields of the objectives of knowledge-intensive assets and learning experience(Dunning, 1998), the attainment of particular technology to enhance a firm’s competitiveness and the course and means of obtaining such technology(Wesson, 1999).  No matter what kind of investments shall be made, the development and management between the parent-subsidiary relationships will be affected. Among researches of conventional approaches referring to the control and coordination of parent-subsidiary, process school assumed that strategic process in a large complex MNC comprises strategic activities at different managerial levels within the organization; however, those strategic activities within its subsidiaries are induced by the firm’s current concept of corporate strategy (Bartlett, 1979; Bower, 1970; Burgelman, 1983; Prahald, 1976).  Based on this assumption, the subsidiary’s managerial would follow the MNC’s expectation to operate the corporation under the control of managerial of the headquarter (HQ), who imposes an appropriate structural context on the subsidiary. The dimensions of said context comprise autonomy, formalization of activities, control resources and social control (Birkinshaw, Hood, and Johnsson, 1998). Consequently, to the subsidiary who is established for the strategic asset-seeking investment, managerial mentality of the parent company would influence autonomy of subsidiary, transnational sharing of the subsidiary assets, and intra-assets flows, in addition, the competition or cooperation interactions between both parent and subsidiary companies. Such co-opetition(cooperation + competition) impact is likely to diverge from the original investment purposes and damage the MNC’s overall long-term competitiveness.  Therefore, it is crucial to understand relevant researches on MNCs regarding the co-opetition relationships between a subsidiary for the strategic assets investment and its parent company. 

 

Information Asymmetry, Creative Accountings and Moral Choice: An Apocalypse of Procomp Informatics Ltd.

Dr. Ling-Feng Hsieh, Chung Hua University, Hsinchu, Taiwan

Yao-Tsung Tsai, Chung Hua University & Nan Kai College, Taiwan

 

ABSTRACT

Neutral numbers coinciding with sophisticated accounts and greedy corporate administrators will result in a deceitful trick of the century. This study aims at a cause and influence analysis of fraudulent companies based on the perception of game theory, and gives assistance to related personnel in the diagnosis of target business operations and evaluation of investment risk. In addition, this study offers effective self-preservation approaches for financial institutes and investors when they are encountering corporations involved in financial scandals. At first we develop a conceptual structure with disclosure on operative information asymmetry. Next we combine game theory with the causal-comparative research method to analyze existing fraudulent companies, so as to have an insight into the strategy decision process of the case company and unveil the secrets to the published ‘financial statements’ regarding its deployment of financial fraud. The last part of this study will be to discuss relevant problems with financial fraud. From the study results, we may effectively identify and avoid those financial traps and scams by malicious administrators. A varnished corporate governance model does not actually reflect its business competitiveness, nor can a brilliant financial statement predict the corporate prospects. When decision-makers are confronted with a speculative or risky investment environment, business operators may adopt risk-aversion strategies by policy analysis tools. In recent years, there have been many financial distresses taking place in listed companies. Apart from corporate governance failures, many corporate owners are suspected of embezzling from the corporate assets by ‘creative accounting’ practices (Schilit, 2001), which not only leads to corporate financial distress but also acutely fluctuates the securities market and affects investors’ equities. Such events reveal structural problems of early warning which, including information asymmetry, moral hazards of corporate agents and concealment of fraud by intended creative accounting tricks, need to be improved (Henry, 2004; Schilit, 2001). The concept of ‘Creative’ (creativeness), a depiction contrary to ‘consistency’ and ‘conservative’ in accounting principles, is typically used as a cynical remark for corporate advanced executives who secretly ‘prettify’ financial reports without complying with long-established practices and conventions. The prettification, seemingly, fits in with generally accepted accounting principles, but, in fact, is a measure for these executives to seek personal gain within the ambiguous regulatory boundaries. Taiwan’s Securities and Futures Institute (SFI), therefore, indicates that “The corporate governance is targeted on effective administrations of organization activities and robust business operations through legal control methods to prevent any illegal operational fraud.” Thus whether a corporate governance system is robust will directly affect the corporate business performance and critically impact on social resource deployment, industry competitiveness and the nation’s long-term development. A ‘financial distress corporate or fraudulent company’ may be defined by several professionals who, followed by independent and repeated evaluations of a company, consistently conclude the company’s financial incapability to meet its short-term debts due to lack of operation funds. Also, these professionals believe that the company is short of financial information transparency regarding its own assets and, as a result, fails to pay off its debts when total debts exceed total assets, and they anticipate that such a dilemma can’t be solved immediately (Johnson, 2000; Wong, 1991; Hoffman, 1996; Luo, 2001; Loebbecke et al. 1989). Schilit (2001), however, presents an analysis of financial scams by some U.S. notorious fraudulent companies with creative accounting practices, and creates an issue on ‘creative accounting’ that required to be studied in the new generation (Schilit, 2001). In 2001 Taiwan Stock Exchange Corporation assigned Luo for a study program on “Analysis and Detection of Significant Fraudulent Cases of Listed Companies” to carry out an in-depth study of significant fraudulent cases happened in Taiwan and foreign countries recently to identify why and how did these cases come into being, and deliver further discussions over various measures detecting such frauds, giving references for adjustment of related audit systems (Luo, 2001). Therefore, a company’s financial activities, business operations, and moral choices for corporate administrators will have a direct impact on ‘conservative accounting’, ‘neutral accounting’, and even the ratio of the market price to the book value (Feltham & Ohlson, 1995). As this study supposes the view on corporate valuations is determined by administrators’ financial policy decision quality, a solution may be identified by consolidating and interpreting financial information, offered by listed and OTC companies, and strategy announcements, and comparing the consolidation with practical operation results.

 

Ethics: An Urgent Competency in Financial Education

Dr. Mei-hua Chen, National Changhua University of Education, Taiwan

 

ABSTRACT

Financial education curricula must meet all of the needs of the financial industry. This study attempted to identify the finance students’ most important competencies. The in-depth interview, a modified Delphi, and a questionnaire were the research methods used in this study. Fifteen experts, finance professors, and outstanding finance managers served on the panel to identify which finance competencies were important for college finance students. In three rounds, panel members assessed 87 competencies within 11 dimensions. General managers and finance professors provided their perceptions in further investigating the necessary competencies for the college finance students. The results showed that ethics are the most important competency for college finance students in Taiwan. However, ethics is a missing part in financial education in Taiwan. Therefore, it should be integrated  into the finance education curriculum. With international economic competitiveness, it is critical to have a well-educated,  innovative workforce that owns the international business competencies considered important by both industry and institutions. Increasingly, employers have begun to require core business competencies for their employees, such as budgeting and finance skills (Marken, 2001).  In fact, business students taking the competency-based courses appear to be much more skilled than their peers both in the academic and vocational areas. With needed competencies, students are receiving higher grades and have a better chance to succeed in their jobs (Arguelles and Gonczi, 2001; Hill and Houghton, 2001).  What are competencies?  Strebler et al. (1997) described competencies as being either expressed as behaviors that a person needs to demonstrate or described as minimum standards of his/her performance. Hoffmann (1999) further described that competencies refer to knowledge, skills, attitudes, or other personal attributes in order to achieve a certain quality of performance.  Charlton and Johnson (1999) examined perceptions of finance academicians in the United States on the appropriateness and value of incorporating the Charter Financial Analyst Program in their curricula and found out those respondents would like to increase integration between the CFA Program and their finance curricula. Chen and Chen (2003) also indicated that finance faculty in Taiwan would like to provide more information about the CFA program to meet students' needs. After all, the exams, curricula, and seminars designed for the CFA Program are primarily based upon realizing what is important to practicing financial professionals all over the world (Block, 1999). The CFA Candidate Body of Knowledge (CBOK) is divided into 10 topic areas: ethical and professional standards, quantitative methods, economics, corporate finance, financial statement analysis, analysis of derivative securities, analysis of fixed-income securities, analysis of equity investments, analysis of alternative investments, and portfolio management. The CBOK is defined as the knowledge, skills, and abilities that finance practitioners should have (Charlton, 1998).      Most of the CBOK topics are covered in the present finance curriculum in Taiwan except ethical and professional standards. Even though there has been an increasing importance of ethics in finance, finance educators still did not pay enough attention to either financial-ethics education or research till the late 1990s (Dufrene and Wong, 1995). If finance professionals are required to maintain the highest ethical and technical standards, finance professors must provide them the appropriate ethics education. Meanwhile, recruiters select only ethically competent college graduates for the finance industry (Cohen, Pant and Sharp, 2001).  Under the consecutive corporate scandals of Enron, Anderson, Tyco, and WorldCom, business professors have begun to treat ethics seriously as a discipline and discuss how to incorporate ethical issues into classes such as finance and accounting (Hindo, 2002).  Can finance educators have an influence on students’ ethics? The answer is positive. Absolutely, finance professors need to work harder at influencing their students about business ethics and responsibility (Gioia, 2002). The current scandals certainly prompt serious reflection on the financial industry and institutions. It is a great opportunity to strengthen required ethics course that have been slowly disappearing from many business curricula or never existed in their financial curricula (Adler, 2002). After all, high levels of work performance were directly attributable to high levels of individual ethics (Wu, 2002).

 

Does Tax Knowledge Matters In Self-Assessment Systems? Evidence from Malaysian Tax Administrative

Mohd Rizal Palil, Universiti Kebangsaan Malaysia,Bangi, Selangor, Malaysia

 

ABSTRACT

Malaysia is currently implementing Formal Ssytem in administering the individual tax laws and regulation. Starting in year of assessment 2004, the self assessment systems (SAS) will be fully implemented replacing the previous system. Therefore, knowledge about tax law is assumed to be importance for preference in order to fulfill the tax return (in Malaysian, Form B) especially in self-assessment systems (SAS). Nevertheless, there is little research that explicitly considers how attitudes toward taxation are influenced by specific tax knowledge of tax regulations and their economics effects. SAS is essentially an approach whereby taxpayers are required by law to determined their taxable income, compute their tax liability and submit their tax returns based on existing tax laws and policy statements issued by the tax authorities. A notice of assessment would not be issued under SAS. The tax return furnished by the taxpayer is deemed to be a notice of assessment. Tax return would therefore, not subject to a detailed technical scrutiny by the Inland Revenue Board (IRB) as under the Formal System. The objective of this paper is to examine the level of Malaysian individual taxpayers knowledge. Research was conducted through questionnaires of 153 respondents around Klang Valley. The study reports that the level of Malaysian tax  knowledge is below the average. In agreement of previous research, these tax knowledge has an influence toward the implementation of SAS especially during the inception. Taxation is one of the important elements in managing national income, especially in developed countries. Most of the countries around the world develop their nation primarily from income tax sources, either direct taxes or indirect taxes. In year 2002, Malaysia has collected sum of RM12.3 billion, 79.5% from overall national income. Out of this figure, 45.3% or RM5.6 billion were comes from direct taxes. Since Malaysian income tax emerged at January 1, 1968 (according to Income Tax Act 1967), Malaysia adopts an Official Assessment System (also referred to as 'Formal System') whereby taxpayers are required to submit their returns within 30 days from the date of service. Under the Formal System, the taxpayers receive their annual tax returns from the Inland Revenue Board (IRB), normally in March of each year. It is the taxpayers' statutory duty to declare all the necessary particulars pertaining to their income and expenses for that particular year of assessment and submit the completed returns to the IRB. Under the Formal System, it is assumed that taxpayers do not possess the necessary knowledge to compute their tax payable. If a taxpayer is doubtful as to whether a certain expense is allowable under the ITA, he may make a claim to be considered by the Revenue authorities. Under self assessment, a taxpayer has to ensure that an expense is deductible before making a claim in his or her return. During the last couple of years, the IRB issued approximately 2.5 to 3 million returns annually to registered and potential taxpayers and processed 80% of those returns. Past experience indicates that the rate of non‑submission of returns is in the region of 20 ‑ 25% of the total returns issued. Where a person who is chargeable to tax but has not submitted his or her return, the Director General of Inland Revenue (DGIR) may, to the best of his judgement, determine the person's chargeable income and make an assessment accordingly. The taxpayer may, however, object to the assessment in writing within 30 days from the date of service of the notice of assessment (Sec. 99, ITA). Upon an appeal, if the DGIR and the taxpayer cannot come to an agreement, the taxpayer can appeal to the Special Commissioners (Sec. 102, ITA). In either case, the taxpayer or the DGIR can further appeal to the courts against the decision of the Special Commissioners.An appeal to the courts, however, can only be made on a point of law. The new systems known as Self Assessment Systems (SAS) will be implemented stage by stage. The Government would be implementing SAS in stages as follows: Several tax administrations in both advanced and developing countries have adopted the self assessment system (Kassipillai 2000). These countries include, Sri Lanka (1972), Pakistan (1979), Indonesia (1984), Australia (1986‑87), Ireland (1988), New Zealand (1988) and the United Kingdom (1996‑97). As for the United Kingdom, the first self assessment tax forms were issued in April 1997 and by 1999, the self assessment system was fully implemented. These self assessment returns were originally sent to the self‑employed, business partners, employees and pensioners (Certified Accountant, 1997).

 

Does FDI Imply Productivity Growth for the Host Economy?

Dr. Khaled Elmawazini, ITSRD, Gatineau, QC, Canada

Samir Saadi, University of Ottawa, Canada

Ibrahim Ngouhouo, Ph.D., Candidate, University of Ottawa, Canada

 

ABSTRACT

This paper investigates foreign direct investment (FDI) as a source of productivity growth in developed and developing countries. The paper results show that: (1) recent empirical models, relying on firm-level data, yields results contradicting those derived from the early literature, which relied on industry-level analysis. (2) These recent empirical models indicate that the impacts of FDI on productivity growth in developing countries are generally not significant, and are less than in the developed countries. However, these recent models are single-country studies, and their results are difficult to generalize. (3) The weakness of technological capabilities of local firms and human capital level are the key challenges for developing countries to benefit from foreign direct investment inflows.  In 2000, Foreign direct investment (1) (FDI) grew faster than world production, capital formation, and trade; its growth rate was 18.2% in 2000 (UNCTAD, 2001). There exist two approaches in economic theory to the study of the effects of foreign direct investment. The first approach, whose founder is Macdougall (1960), comes from the theory of international trade. This approach examines the host country’s gains from foreign investment. In general, the trade theory approach focuses on the direct effects of foreign investment (direct and portfolio) on factor rewards, employment, and capital flows. The second approach, whose founder is Hymer (1960), follows from the theory of industrial organization. This approach addresses the question of why firms undertake investments abroad to produce goods. The answer is that firms undertake investment abroad due to some imperfection in the goods’ or factors’ (including technology) markets or due to some interference with competition by governments or by firms. In general, the industrial organization approach focuses on the indirect effects, externalities, or spillovers. Blomstrom and Sjoholm(1998) mention that external effects or spillovers from FDI can be due to two factors. First, the Multinational Corporations (MNCs) have new advanced technology that allows them to compete successfully with local firms. Second, the entry of MNCs affects the existing equilibrium in the market by forcing local firms to take action to maintain their market shares and profits. These two factors can affect the productivity and growth of local firms by changing their financing methods, their marketing and production techniques, and their managerial skills. This paper will focus on the first factor, productivity spillovers. The significance of spillovers from FDI may rely on the host industry characteristics and on the policy environment in which the foreign affiliates operate. The technological capabilities and the production techniques of foreign affiliates may “spill over” to the local firms through many channels. Section 2 will discuss the main channels of spillovers from FDI. Section 3 will review the literature and empirical studies to find out if the FDI spillovers have a significant and positive impact on the host country productivity growth. Section 4 will discuss the role of host country governments in deepening these spillovers. Section 5 summarizes the main results of this study. The literature and empirical studies found five channels affecting the scope and significance of the productivity spillovers from FDI: (1) the linkages between foreign affiliates and local firms; (2) R&D efforts undertaken by foreign affiliates; (3) training of local firms employees in the foreign affiliates; (4) Demonstration effects of FDI on local firms; and (5) ownership sharing of foreign affiliates. There are two linkages between foreign affiliates and local firms. The first are “backward linkages”; they arise from the relationship between foreign affiliates and local suppliers. The second are “forward linkages”; they stem from the relationship between foreign affiliates and local customers. Empirical studies on the linkages show that forward linkages grew in the same way as backward linkages (Branstetter, 2000). A similar result is obtained by (McAleese and McDonald, 1978). However, backward linkages are the most powerful channel to spill over technology and production techniques from MNCs to the host countries (UNCTAD, 2001). The capabilities of local suppliers, local content, and foreign affiliates’ market orientation are the key determinants to create and strengthen backward linkages (Reuber et al., 1973). A similar result can be found in (Lall, 1980) and (Liu et al., 2000). Governments and MNCs have incentives and duties to promote and deepen those linkages.     I shall discuss this point in detail section 4.

 

The Transnational Corporation, Corporate Social Responsibility and the ‘Outsourcing’ Debate

Marc T. Jones, Macquarie University, Sydney, Australia

 

ABSTRACT

 Current popular debates in the United States and Australia on the topics of ‘jobless recoveries’ and the ‘outsourcing’ of skilled IT jobs to India (most conspicuously) evidence a confusion as to the institutional role of the business firm and its obligations to the broader stakeholder community, as well as to the more specific differences between outsourcing and the spatial restructuring of corporate value-chains.  This paper will take up several issues in the hope of clarifying this confusion, including the essential nature of the business firm as an economic, political and social institution; the possibilities for social responsibility and stakeholder management in large internationalised firms; and the critical distinctions between domestic and international outsourcing and spatial restructuring.  Data from the ‘outsourcing’ debate will be referenced to illustrate the differing logics/rationalities of relevant stakeholder groups.   Current popular debates in the United States and Australia on the topics of ‘jobless recoveries’ and the ‘outsourcing’ of skilled IT jobs to India (most conspicuously) evidence a confusion as to the institutional role of the business firm and its obligations to the broader stakeholder community, as well as to the more specific differences between outsourcing and the spatial restructuring of corporate value-chains.  This paper will take up several issues in the hope of clarifying this confusion, including the essential nature of the business firm as an economic, political and social institution; the possibilities for social responsibility and stakeholder management in large internationalised firms; and the critical distinctions between domestic and international outsourcing and spatial restructuring. 

 

Factors Affecting Oral Communication Apprehension Among Business Students: An Empirical Study

Dr. Ibrahim Aly and Dr. Majidul Islam, Concordia University, Montreal, Canada

 

ABSTRACT

 The current research empirically suggests that GPA, gender, job status and number of years of experience affect the communication apprehension (CA) of business students. The researchers used McCroskey’s 24-item Personal Report of Communication Apprehension (PRCA-24) (1) instrument for the collection of data about business students from a large university. The results of the study show that all the four factors studied in this research—GPA, gender, job status and years of experience—affect the level of CA individually in the subscales—public speaking, meeting, group and dyad—and overall. This research attempted to provide some additional results to those in existing literature about factors affecting the level of CA of business students and, based on the results, suggested some remedial measures.  Research suggests that the communication skills of accountants are a determining factor in getting information across to an audience (Aly and Islam, 2003; Burk, 2001; Roach, 1999; Winiecki and Ayres, 1999; Maes, Weldy and Icenogle, 1997; Shelby, 1993; Hirsch and Collins, 1988; Rebele, 1985). Research conducted by Estes (1979), Addams (1981), Andrews and Sigband (1984) and Rebele (1985) found that communication skills are considered to be important for achieving success in accounting. Business research has identified communications apprehension (CA) as a problem for improving communication skills (Aly and Islam, 2003; Winiecki and Ayres, 1999; Ruchala and Hill, 1994; McCroskey, 1984, 1982, 1977, 1976; Scott et al., 1978; McCroskey and Anderson, 1976). CA needs to be addressed before progress can be made in developing the communication skills to which employers attach considerable importance (Hassall et al., 2000).

 

Australia’s Major Corporate Collapse: Health International Holdings (HIH) Insurance “May The Force Be With You”

Tina Mak, Dr. Hemant Deo, and Dr. Kathie Cooper, University of Wollongong, Australia

 

ABSTRACT

 Auditing disclosures play an important role within accounting reports as they provide a level of assurance to the users (public). These disclosures will be discussed in light of the collapse of Health International Holdings (HIH).  The HIH collapse warranted a Royal Commission investigation and also recorded the biggest corporate collapse in Australia's history. Corporate failures of similar magnitude such as Enron and Parmalat have occurred elsewhere and sparked large scale investigation and media scrutiny. In all of these corporate failures, the level or absence of disclosure has had a lot to do with the unexpectedness of the collapse. This paper analyses the HIH collapse within a Foucaldian framework to demonstrate the need for accountants and auditors to work together so as to avoid criticism of the profession arising from unexpected corporate failures in the future.  The purpose of this paper is to analyse the collapse of HIH and the role of its auditor, Andersen, within a Foucauldian framework encompassing archeology and genealogy of power and knowledge. The mythical Jedi force is used as a metaphor for power attained by the accounting profession through its claim to superior knowledge and skill to be applied in the public interest. Accordingly, the force includes professional ethics.

 

The Effects of Emotions in Risk-taking

Shin Chieh Chuang and Chaang-Yung Kung, Chao-yang University of Technology,Taiwan

 

ABSTRACT

 Academics and manager know relatively little about how emotions affect people’s risk-taking. An experiment is conducted to demonstrate and explain the relationship between risk-taking and people’s decisions. Experiment showed that subjects in negative emotional condition were more systematically risk-taking behavior than subjects who were in a positive emotional state. The effects are discussed in relation to the literature on emotions, risk-taking, and choice.  How do positive and negative emotions influence an individual’s willingness to take risks in everyday life? The behavioral decision making and social psychology literatures suggest that people in negative emotions are more likely to take risks than positive emotion in gambling, strategical decision and lottery tasks (Arkes et al., 1988; Isen & Patrick, 1983; Mittal & Ross, 1998; Kuvaas & Kaufmann, 2004). However, there has been little research on the relationship between emotion and risk-taking in everyday contexts such as buying a tour commodity without involving gambling or probability. Because people are not always confronted with opportunities to gamble or participate in lotteries, the relationship of emotion and risk-taking from previous studies may have only limited relevance to everyday choices, which are normally made in the face of uncertainty and ambiguity.

 

  Intertemporal Cross-Border Investment Structures Subjected to the Foreign Leverage Constraint

Dr. Yuan-Hung Hsu Ku, National Kaoshiung First University of Science and Technology, Taiwan

Dr. Jai Jen Wang, Jin Wen Institute of Technology, Taiwan

 

ABSTRACT

 This paper explores optimal international asset allocation policies subjected to the foreign leverage constraint within an intertemporal framework. To deal with the co-existent realities of agents’ heterogeneous preferences and the international market friction, the perturbation method is employed to derive the approximate analytic solutions.  The proper liberalization degree of foreign capital is an open question for many countries, especially after the infliction of the Asian financial crisis in 1997. Although the answer is not yet clear-cut, it raises another important aspect of portfolio theory, that is, how to determine the optimal asset allocation under international investment barriers. This problem was first addressed by Black (1974), Stulz (1981) and Eun & Janakiramanan (1986). Although intuitively appealing, their one-period model is based on the preference homogeneity or the complete market assumption.

  

The Structure of Corporate Ownership: A Comparison of China and Taiwan’s Security Markets

Jeng-Ren Chiou, Ph.D. and Yi-Hua Lin, Doctoral Student, National Cheng Kung University, Taiwan, R.O.C.

 

ABSTRACT

 We compare China and Taiwan’s structure of corporate ownership and investigate whether corporate performances are affected by different ownership concentrations. The major findings are: (1) state-owned shares and ownership concentration in China are higher than in Taiwan, but insider shares and institutional shares in China are lower than in Taiwan; (2) In China, the firm’s operating performance is negatively correlated with the ownership concentration by state-owned shares, but positively correlated with institutional shares; (3) In Taiwan, there is a positive relationship between ownership concentration and operating performance.  The establishment of the Shanghai Stock Exchange in December 1990 was a major landmark in the development of the stock markets in China. Although the time is not very long, the number of listed companies has increased drastically, rising from 14 in the year when China’s two stock exchanges commenced operation in 1991 to 1,223 by the year of 2002. By 1995, China had become the world’s third largest economic powerhouse, with a total GDP of $720 billion. The economy in China moved away from the former centrally planned economy to the use of market mechanisms. Institutional transformation makes the ownership structure in China different from other stock markets in developed countries.

 

 Public Sector Aid Organisations:  Philanthropy or Self Interest?

Dr. Alistair M. Brown and Maya Purushothama, Curtin University of Technology, Australia

 

ABSTRACT

 The Australian Agency for International Development’s (AusAID) adoption of core-financial, partial-financial and non-financial virtue bound values is unremarkable, but its willingness to shun non-financial duty bound viewpoints is notable. This study examines the closed membership of the Aid Advisory Council, AusAID’s masters, and its use by AusAID of accreditation and accounting to police the Australian government’s single-minded foreign policy. The results of the study outline the ways the murky world of foreign aid has compromised the values of philanthropy and civic accounting, using aid to advance Australia’s business and government ends ahead of traditional non-financial bound values.  Australia is a small open economy (Bharucha and Kent, 1998). It provides A$2.13 billion as Official Development Assistance (ODA) to its nearest neighbours: the Pacific Island Countries (A$805.2m); East Asian countries ($493.4m); South Asian, African, Middle East and Central Asian countries (A$206.7m); as well as assistance to other government departments not attributed to a country or region (A$168.5m) and to multilateral organisations and other expenditures (A$445.7m) (AusAID, 2004).  The ratio of Australia’s ODA to Gross National Income (GNI) for 2004-05 is about 0.26 per cent, which according to AusAID (2004) is above the donor average of 0.25 per cent, but noticeably well below the Australia’s 1995-96 ODA to GNI ratio of 0.32 per cent (AIDWATCH, 2004).

 

 Ethical Marketing Practices:  An Investigation of Antecedents, Innovativeness and Business Performance

Stephen S. Batory, DBA and William Neese, Ph.D., Bloomsburg University, Bloomsburg, PA

Anne Heineman Batory, Ph.D., Wilkes University

 

ABSTRACT

 The field of marketing ethics has been challenged as having nothing pragmatic or distinctive to offer business practitioners.  The authors explore the relationships among antecedents, ethical marketing mix practices and business performance.  Two antecedents of ethical marketing practices were investigated, the role of top management and the marketing concept.  The research was conducted among senior managers and owners of manufacturing companies.  Results indicate that ethical marketing practices are a positive function of both top management and the marketing concept.  Business performance (sales, profits) is influenced by the company’s innovativeness more than their marketing practices.  Does the practice of marketing ethics by managers have anything to contribute to business performance?   With marketing’s high public visibility, ethics has been of significant interest in the marketing literature. In 1981, Murphy and Laczniak identified over 100 articles focusing on ethics.  Since then marketing ethics has continued to receive attention.

 

What’s Wrong with Japan’s Economy

Dr. Sontachai Suwanakul, Alabama State University, Montgomery, AL

 

ABSTRACT

 Reform in Japan appeared to be finally making progress by the end of 1990’s. Deregulation has been using since 1994 with slow process, administrative took reform took place in January 2001, and the corporate sector was involved in real restructuring. Overall, the process of reform has been quite weak and mild. Japanese politicians and government have the difficult time to identify one problems ends and the new one begins. Because, the Japanese economic model was different behavior patterns and institutional systems were different from the United States and other advance developed countries.  Japan’s postwar economy developed from the remnants of an industrial infrastructure that had suffered widespread destruction during World War II. In 1952, at the close of the allied occupation, Japan was a “less-developed country”, with a per capital income one fifth that of the United States. Over the next twenty years, Japan was able to become the first postwar-era country classified “less developed” to achieve “developed” status. In 1968, Japan’s economy became the world’s second largest, behind only that of the United States.

 

Enterprise Information Systems Strategy and Planning

Joseph O. Chan, Ph.D., Roosevelt University, Schaumburg, IL

 

ABSTRACT

 In order to gain competitive advantage in the knowledge-based economy, businesses are focusing on the value creation along the demand and supply chains. Information systems strategies have also evolved from the focus of automation of discrete transactions to the enablement of the optimization of the value chain. The new paradigm requires the alignment of information systems strategies with business strategies across the entire value chain. An integrated model is required to allow the coordination of activities and sharing of information amongst different organizations and systems through various processes across the extended enterprise. This paper proposes an enterprise framework for the development of information systems strategies and plans. It further presents an approach for IS planning that has been practiced and refined through many IS/IT planning projects.

 

The Impact of Consumer Product Knowledge on the Effect of Terminology in Advertising

Shin-Chieh Chuang, Chao-yang University of Technology,Taiwan

Chia-Ching Tsai, Da-yeh University, Taiwan

 

 ABSTRACT

 The use of terminology in advertising is rather popular and commonplace. Previous research suggested that using terminology in ads was intended to create more vividness effect on the audience, who may adopt the “central path” in the Elaboration Likelihood Model (ELM) and be convinced by the terminology in the advertisement message. However, we found that the better vividness effect occurs, when the subjects possess low product knowledge; conversely, a worse vividness effect is present when the subjects possess high product knowledge.  In recent years, terminology has been used in large quantity, especially in ads, to which lots of terminology is attached. Shibata (1983) pointed out in his study that there was an increase of the use of monolingual message in Japanese society, and the English language was of greater and greater importance and was used more frequently. Mueller (1992) studied the use of Western languages in Japanese ads in 1978 and 1989, and the results showed the percentage of using English in Japanese ads was increasing and there was an upward trend of using English (which is not translated into Japanese) in Japanese ads. The main reasons of adopting terminology is that when audiences receive terminology, a vividness effect will occur to capture audiences’ attention and audiences may process ads containing terminology via the “central route” of the Elaboration Likelihood Model (ELM) and ads become persuasive.

 

Management Model to Create Customer Satisfaction:  An Empirical Research on Suppliers' Perspectives

Nelson N. H. Liao and Arthur C. Y. Chiang, Chaoyang University of Technology, Taiwan

 

ABSTRACT

 Increasing customer satisfaction level is a pivotal strategic issue in the development of business relationships. Based on the mechanism of management model to create customer satisfaction on the view of suppliers’ perspective as this topic, high tech firms are often referred to have the characteristics of high-speed innovation, short product life cycle, rapid changing environment, and highly dependent on advanced technologies. This paper tested together the mechanism of management nature of the high tech optical firms was different from that of the traditional pneumatic hand tool firms. The organizational dimensions related to customer satisfaction in the management model are strategy management, customer relationship, supplier relationship, customer service, and technological innovation.  Customer satisfaction level is usually described as the goal of business performance. The satisfaction level of customers are often examined their opinions and regarded as the important information for management. However, on the view of suppliers, there is a mechanism for firms to satisfy with their customers. The higher the customer satisfaction level is, the higher the market share will be [14, 49].

 

Evaluating Investment Opportunity in Innovation — A Real Option Approach

Dr. Ming-Cheng Wu, National Changhua University of Education, Taiwan, R.O.C.

 

ABSTRACT

 This study employs a real option pricing method to conduct a more general evaluation of the investment opportunity value of high-tech industry innovation.  Simultaneously, consideration is given to the randomness that production and costs jointly constitute.  Jump model considerations are added to this process so as to conform to the major character of innovation activities.  From the simulation and sensitivity analysis results, this paper also presents the investment opportunity value of innovation and the rational phenomenon of the option value increasing in accordance with increases in the project value and reducing in accordance with increases in the investment cost.  Additionally, this study considers the influence of mutual competition between multiple firms on the average innovation time.  Finally, for those firms that are unable to innovate successfully, suggestions are made as to the upgrade behavior they must adopt and the need for an upgrade option pricing model to conduct additional evaluation is explained.  In this way, a greater comprehensiveness is brought to the existing options pricing method in the entire innovation process.  It is hoped that the results of this study will assist managers in investment opportunity evaluation about the innovation project.

 

Decision Support Systems – An IT and Industrial Perspective

Dr. Shamsul Chowdhury, Roosevelt University, Schaumburg, IL

Dr. Joseph Chan, Roosevelt University, Schaumburg, IL

 

ABSTRACT

 Traditionally a course on DSS examines the role of information systems in assisting management decision-making in all functional areas of organizations more from a management perspective. The course combines information theory with management practices to prepare students to analyze decision support systems and their uses for increasing business effectiveness.  Fundamentals of technical concepts regarding decision support systems are explained with almost no hands-on experiences with any DSSs. As such the impact on the uses of DSSs is very limited. The purpose of the paper is to propose an outline and raise a discussion on the contents for a course on DSS with more hands-on work and practical experiences with related tools for the digital age. The paper will initially focus on what we have (today) and will come up with suggestions as to what we need (both from academic and industrial perspective) and why?  Finally we intend to make a recommendation of the contents to be adopted in the (DSS) course curriculum.

 

Management Entrenchment: Can It Negate the Effectiveness of Recently Legislated Governance Reform?

Teresa M. Pergola, University of Tampa, Tampa, FL

 

ABSTRACT

 Recent legislative reforms have been put in place to try to increase the quality of financial reporting.  Independence and financial expertise of both boards and audit committees, and auditor reform are some of the areas addressed as means of increasing the effectiveness of these governance mechanisms to monitor management and align their interest with owners.   The issue of power as it relates to management control is not addressed.  Agency theory and the management entrenchment hypothesis as a by product of agency theory, suggest that the level of management ownership in a firm can help to align management interests with owners as it approaches high levels but can also negate the effects of other governance mechanisms as management becomes entrenched.  This paper proposes that the earnings quality of financial reports may vary with the level of management equity in a U shaped relationship with earnings quality high at very low and very high levels of management ownership.  Earnings quality may be lower at entrenchment levels of between 30% – 50% even with reforms to boards, audit committees, and external auditors in place.

 

The Development of a Team-Oriented Structure in a Small Business Enterprise

Kevin McNamara, Millington Lockwood, NY

John G. Watson, St. Bonaventure University, NY

 

ABSTRACT

 The paper traces the planned changes that took place in a small business enterprise over a ten-year period from 1992 to 2002 in order to improve upon the overall culture of the company.  The implementation of a team-oriented structure is discussed.  Cross-functional teams were utilized in order to improve the culture of the company.  In addition, changes in technology and service also impacted the company significantly.  The authors point out that with the above changes having been made, the sales and profitability increased significantly over the ten-year period.  The major benefits and learnings of the change are discussed.  Millington Lockwood, Inc., is a contract furniture distributor in Western New York and Western Pennsylvania.  Millington Lockwood, Inc., was founded in Buffalo, NY, in 1884.  Mr. Kevin McNamara purchased the company in 1971 with an initial investment of $12,500.  Under the tutelage of Mr. McNamara, the company grew significantly over the years and sales increased to a level of $7.5 million in 1992. 

 

Weberian Theoretical Implications on Development Banking Historical Research: “Past, Present and Future”

Dr. Hemant Deo, University of Wollongong, Australia

Professor Warwick Funnell, University of Wollongong, Australia

 

ABSTRACT

 Fijian development banking history exposes the paradox between the community based upon orthodox authority and those in which relations are governed by the commercial ideology introduced by the British colonial powers to foster growth within the Fijian traditional setting. Fijian development banking were adapted to the traditional Fijian village economy, ultimately providing the means by which existing structures of power on land ownership and class were significantly enhanced. This conflict between the Fijian culture and the modern growth of development banking can be filtered through the Weberian theoretical framework.  Fiji since the earliest days of interaction with European merchants and later colonisation by the British and has had implications for the latter decades of the 20th century where traditional forms of legitimate authority exercised by native chiefs over their clans as the essence of Fijian government and society has highlighted the problems caused by the coexistence of market values with traditional values and rationalities associated with communal ownership of land, the foundation of traditional Fijian society. Land is the primary productive asset, the tangible expression of economic and hence political power (Eckholm, 1980, p. 55). Struggles over land in Fiji from the mid 19th century which saw the native Fijians progressively alientated from their land, especially during the colonial era between 1874 and 1969, have been the determining factor in Fiji’s development (Ali, 1980; Naidu, 1980; Overton, 1987; Routledge, 1985).

 

A Model for Supplier Selection and Tasks Assignment

Dr. Yuan-Jye Tseng, Yuan Ze University, Taiwan

Yu-Hua Lin, Yuan Ze University & Hsiuping Institute of Technology, Taiwan

 

ABSTRACT

 Collaborative commerce plays a crucial role in supply chain management. This study aims to use Analytic Hierarchy Process (AHP) and Grey Decision Making to help companies establishing a collaborative commerce system model. Regarding the selection of suppliers, our research conducted a relational analysis for all decision making guidelines to determine the decision makers’ level of interest in each proposal and the priority order of the alternative plans. Then, based on the manufacturing process characteristics of work-in-progress and machinery production load, we have defined the machinery production load relational matrix. By applying Grey Relational Analysis to measure the matrix’s Grey Relational Grade, we have established the evaluation guideline for the supplier task assignment. Research result shows that this information helps companies to make decision on choosing the right suppliers and to make appropriate tasks assignments.   Manufacturers have gradually evolved from the stand-alone operation in the past to adopt the modern collaborative manufacturing mode. As a result, integrating the entire production chain from suppliers to end users to form a collaborative production system allows the so-called traditional industries to upgrade and shifts their perspective economic structure. (Lamming, 1996; Lockamy and Smith, 1997; Crane 1999).

 

Technical Change in Developing Countries: A Dynamic Model of Adoption, Learning and Industry Evolution

Asma Raies, CED-TEAM University of Paris1 Pantheon – Sorbonne

 

ABSTRACT

 This paper develops and analyses a dynamic model, which combines both the adoption and the industry evolution theories. We model the decision of adoption, learning entry and exit of firms. These decisions depend on the interaction of technology characteristics(effectiveness, machinery and information costs…) and other economic indicators (firm’s size, technology capability, competition concentration, returns of scale,…). We use the model’s theoretical results to analyze simultaneously the effects on the structure and the average efficiency of the industry and to develop a framework for understanding the effect of competitive policy reform and public policy action necessary to enhance adoption and average productivity. The model we suggest also analyses effects on industry evolution and social welfare.

 

Accounting and Socio-Economic Development Paradigms

Abu Shiraz Rahaman, Ph.D., University of Calgary, Alberta, Canada

 

ABSTRACT

 That accounting has an important role in national socio-economic development is almost taken for granted in the current literature. The “exact role of accounting” has, however, been problematized in very recent times, prompting this critical reflection. The paper reviews the various traditions of development as discussed in the literature and then attempts to suggest the role of accounting within each development tradition. We argue that accounting does not have an “exact” monolithic immutable role (or set of roles) in national socioeconomic development, rather a multiplicity of shifting and ephemeral roles reflecting the development paradigm that a particular nation and its leaders choose to adopt.  Advancement of socio-economic living conditions of their citizenry is arguably one of the most critical issues facing governments of contemporary economies. To tackle this seemingly mammoth task, various development thinkers (such as Adam Smith, Karl Marx, Thomas Malthus, David Ricardo and J.S. Mill) have expoused diverse theorisations as paths for achieving development objectives in countries. The continuing debates about the efficacy of these theoretical positions on development reflect the magnitude of the problem (see Braun, 1990; Kay, 1991; Auty, 1995). In the accounting literature some writers have suggested that accounting can and does play a significant role in the quest for advancement in socio-economic development of nations (see Enthoven, 1973, Mirghani, 1982, Perera, 1989).

 

Accounting Transparency of Korean Firms:  Measurement and Determinant Analysis

Jinbae Kim, Korea University, Seoul, Korea

 

ABSTRACT

 Despite the current global interest in accounting transparency due to some recent high-profile accounting scandals, few studies have actually measured the accounting transparency of individual firms. Using comprehensive survey data from the Korea Stock Exchange, this study measures the accounting transparency of individual Korean firms in 2002, and analyzes its patterns and determinants. The accounting transparency of firms with greater total assets and of firms belonging to chaebols, family-controlled large conglomerates, is respectively greater than the accounting transparency of firms with less total assets and of firms not belonging to chaebols. Firms in the telecommunication, finance, and electronics industries have a high degree of accounting transparency while firms in the transportation, construction, and paper industries have a low degree of accounting transparency. Regression analyses show that a predominant determinant of accounting transparency is whether assets are over two trillion won or not.

 

Goodwill Impairment:  Improvement or Boondoggle?

Dr. Michael Davis, University of Alaska Fairbanks, Fairbanks, AK

 

ABSTRACT

 Goodwill has been an extremely contentious topic for accountants and others for nearly 100 years, with many different treatments allowed.  The Financial Accounting Standards Board recently approved new rules in an attempt to settle some of the controversies.  This paper summarizes those rules and examines their impact during the 1995-2002 time period.  Results indicate that the new rules have apparently solved some of the problems but also resulted in the largest corporate write-offs in history. Goodwill has been a contentious topic for accountants for nearly 100 years.  Acceptable accounting has run the gamut from charging it to equity, to capitalizing it permanently, to amortizing it to earnings, retained earnings or additional paid in capital, and now to testing it for periodic impairment.  At times, even capitalizing internally generated goodwill has been allowed.  About the only treatment that hasn’t been generally accepted is writing it up in value once recorded.  Given this diversity – and the fact that the Financial Accounting Standards Board (FASB) has recently issued another set of new rules for goodwill accounting - it seems reasonable to investigate and evaluate reaction to standard setter’s latest attempt at resolving this troublesome issue.  To better appreciate the difficulties involved, a brief review of recent history is necessary.

 

Made in Effect, Competitive Marketing Strategy and Brand Performance: An Empirical Analysis for Spanish Brands

Dr. Julio Cerviño, University Carlos III of Madrid, Spain

Dr. Joaquín Sánchez, University Complutense of Madrid, Spain

Dr. José María Cubillo, University Polytechnic of Madrid, Spain

 

ABSTRACT

 The Country-of-Origin (CO) or “Made-in” effect has been widely discussed, but some specific areas need further research, specially those focusing on the strategic implications of CO on brand performance.  A model was developed and relationships hypothesised to understand “made in” effects in brand performance, mediated by the degree of standardization of international marketing strategies. A study of 219 executives located in more than 40 countries, using structural equations, shows that Country-of-Origin does affect the perceived valuation of products and brand profitability.  The literature in this area, generally labeled as “country-of-origin”, “country image” or “made-in”, has almost invariable revealed some source-country-related bias toward non-domestic products (Bilkey and Nes, 1982). The implied rationale behind the close scrutiny of the country-of-origin issue is its utility as a predictor of customer attitudes and subsequent choice behaviour.

 

Overcoming Barriers to Change in Management Accounting Systems

Marilyn Waldron, University of Otago, Dunedin

 

INTRODUCTION

 Businesses face an increasingly competitive environment as technology continues to change and international markets are freer, thus creating a need for reengineering, restructuring and rethinking. This transformation process, or change management process, can be daunting with the accompanying uncertainty and possibility of failure. Managers continue to implement change since this change management process can prove beneficial to business organizations that face decline, stagnation or which have goals to improve efficiency and effectiveness in the face of a challenging environment.  As the environment changes, Kotter (1995) suggests several of the increasing options businesses may select for general change management, include reengineering, right sizing, restructuring, cultural change and turnaround.  More specifically, choices companies make for effective change include just in time manufacturing (JIT), flexible-manufacturing systems (FMS), total quality management (TQM) and world-class manufacturing (WCM).  Advanced manufacturing technology to support the general change management options include materials requirement planning II (MRP II), computer aided design/manufacturing (CAD/CAM) and management information systems (MIS). 

 

Tech-Developments and Possible Influences on Learning Processes and Functioning in the Future

Ulrike Hugl, University of Innsbruck, Austria

 

ABSTRACT

 A vision takes shape: Not a person operates a computer, but the computer operates the person. Thus, in the future, “hardware” and equipment will not only be more and more undersized, but also understand our speech, be additionally pervasive and connected with computer power and the internet around the world. Upcoming tech-trends such as “smart” and “pervasive” technologies, wearable computing, and brain-computer-interfaces will influence more and more our working and learning processes in present and in the future. This paper tries to give a survey of technological initiatives (of the European Union), some (ubiquitous) learning tendencies, and trends in the field of possible computing and learning in the future. Last but not least there will be mentioned aspects of privacy.  The world's first electronic digital computer was a revolution. Thomas Watson, chairman of IBM, argued in 1943: “I think there is a world market for maybe five computers.” Nowadays, nearly all of the estimated 826 million computers are connected to the Internet, in addition, there exist about 160 million notebooks and 12 million Personal Digital Assistants (PDA) and an increasing “convergence” of (multimedia) technical systems and applications.

 

Examining Pay Level Satisfaction in the UK Grocery Retail Sector: A Focus on Supermarket Employees

Ogenyi Omar, Ph.D. and Ola Shittu, London South Bank University, London

 

ABSTRACT

 There have been various investigations carried out by researchers on pay level comparisons and pay level satisfactions based on employees from both private and public sectors, but little is known about pay level satisfaction of the UK supermarket employees. This study investigates pay level satisfaction among the UK supermarket employees. Using questionnaire methodology, it was found that over seventy percent of the respondents expressly states that they were dissatisfied with pay.  The result of the three-ways analysis of variance (ANOVA) reveals that female employees are more satisfied with their pay when compared with their male counterparts.  When job position was compared in relation to pay, the result reveals that while store staffs are generally unhappy with their pay, senior managers are most unhappy. The findings of this research are likely to assist retail managers when contemplating refocusing their pay structure and policy.  Retailing is the business activities of selling goods or services to the final consumer.  According to (Brockbank and Airey, 1994; Omar, 1999 and Kent and Omar, 2003), what differentiates retail activities from both wholesales and manufacturing is its emphasis on “final consumer”.

 

Competency Cluster Validation Model an Empirical Study

Jeff Stevens, Ph.D., Texas State University, Webster University and Park University

 

ABSTRACT

 The introduction and purpose of this empirical research created a foundation from which this study would evolve as it pertained to the MIFV. Within the introduction portion of this study, an analysis at the evolving workplace as well as the lack of competency clustering was undertaken. This was an important component in that the hypothesis of this research is to introduce a new competency cluster validation model. The introductory section of this study also detailed the many variables facing business survival and workforce development where delineated. Further, this section describes what a company needs to undertake so as to evolve as an industry.  The world for employees of today has evolved into a rapidly changing and highly complex, knowledgeable worker environment. This environment is based on simple-­to-complex and complex-to-simple processes that require varying degrees of competency cluster mastery (Noe, 1998).

 

The Factors Influencing Expatriates

H. W. Lee, M.B.A., Ph.D., National Chia-Yi University, Chia-Yi City, Taiwan

 

ABSTRACT

 In today’s economic environment, corporations were realizing that to grow they must expand overseas. Successful cross-cultural assignments can increase the corporation's international reputation and profits. While organizations may perceive expatriation as an attractive method for accumulating foreign markets, they face the challenges of selection, management of the most appropriate individuals. The international movement of human resources has generated the development of research which targets the adjustment of expatriates in the foreign cultures. However, previous research have been developed, designed and conducted mostly for the needs of other expatriates who are preparing for international assignments. Information on Taiwanese who are preparing for American assignments was rare and needed. This study investigated Taiwanese financial institution expatriates in the United States. Thus, the factors contributing to the successful expatriation experience were significant to MNCs. The purpose of this research focused on examining the relationship between independent variables, job satisfaction, family support, learning orientation, organizational socialization, and cross-cultural training and dependent variable, cross-cultural adjustment in a proposed model of cross-cultural adjustment.

 

Museum Marketing and Strategy: Directors’ Perception and Belief

Dr. Jin-Tsann Yeh, Vanung University, Taoyuan, Taiwan

Dr. Chyong-Ling Lin, Lunghwa University of Science & Technology, Taoyuan, Taiwan

 

ABSTRACT

 Many people do not visit museums because the images of museums are boring, private, and irrelevant.  Museums should shift their role from static storehouses to providing interactive learning environments for visitors. The purpose of this study was to determine and compare museum directors’ perceptions regarding the adoption of marketing strategies, product management, customer services, and online services in museums.  A researcher-developed survey instrument consisting of 45 items was designed and used to collect data from 400 randomly selected museum directors in the United States. Findings indicated that:  (1) The typical museum director was female, 41-60 years old, who had completed a master’s degree and less than five years experience as a museum director in art museums or history museums.  (2) Most museum directors adopted newspapers, magazines, and held community activities to increase visitors’ attendance to the museums.  (3) Most museum directors believed museums should offer programs for diverse groups, have interactive activities to match visitors’ learning styles, and have trained docents to explain exhibits.  (4)

 

Activity-Based Costing in Saudi Arabia’s Largest 100 Firms in 2003

Alsaeed Khalid, CPA, Institute of Public Administration, Saudi Arabia

 

ABSTRACT

 The study is based on a questionnaire survey, incorporating data from 39 of the largest 100 companies in Saudi Arabia.  The findings show that there is a positive relationship between ABC adoption and firm size and diversity of products.  However, there is no evidence on the association between the level of overhead and ABC adoption.  For the ABC users, some descriptive statistics are provided on the factors motivated firms to adopt ABC, the difficulties encountered in applying it, and the benefits achieved following implementation.  For the non-users, the reasons for not using ABC are also explored.   The chief purpose of this study is to report on the degree of activity-based costing system (ABC) implementation in Saudi Arabia.  It also contributes to our understanding of the reasons that could drive companies away from ABC.  Furthermore, it gives some insight into the characteristics of ABC adopting firms, such as their size and overhead level.  Additionally, it provides evidence on the contextual factors motivating them to embark on ABC, the difficulties encountered while instituting the system, and the benefits perceived following ABC implementation. 

  

The Activation Level of Crises and the Change of Strategic Targets of Enterprises in Turkey during the Depression Era

Dr. Cemal Zehir, Gebze Institute of Technology, Istanbul, Turkey

 

ABSTRACT

 During the crises in the last decade, companies have changed their marketing competition strategies in Turkey. Turkey recently has undergone a series of crises in the last decade: two of them in 1994, 1999, and  the last one in 2001. Recent crises have affected not only the financial sector but also the real sector in a negative way. Therefore, firms had to adjust their strategies in order to cope with those crises. In this research, we focused on the February 2001 crisis. We conducted the survey  in the Marmara Region in the second half of 2002 and in the first half of 2003  in order to examine how the firms have been affected by the Crisis and how they adapted their strategies during the depression period. 271 firms operating in the Marmara Region have participated in our survey.  In an increasingly vague and competitive environment, it becomes more and more important for the companies to perceive the threats and opportunities quickly, take measures, and make an optimal choice. So, monitoring the environment, rivals and the company itself and making long term decisions with the proper study of these observations is a precondition of success. 

 

Effect of Signal to Noise Variance Ratio on Parameter Uncertainty in Signal Extraction Approach for Time Series

Jae J. Lee, State University of New York, New Paltz, NY

 

ABSTRACT

 Many observable economic time series Zt can be modeled as the sum of an unobserved signal component and nonsignal component.  The signal extraction problem is to find a minimum mean square estimator (MMSE) of the unobserved signal component and its mean square error (MSE) at some point in the sample, given the observed time series.  Since models for stochastic processes of the components are often unknown, determination of the models for the components will lead to errors due to uncertainty in the hyperparameters.  These errors are referred to as parameter uncertainty in signal extraction problem.  A Monte Carlo simulation study explores questions raised regarding parameter uncertainty in signal extraction.  The study shows that parameter uncertainty should not be ignored when signal to noise variance ratio is small.  Many observable economic time series Zt can be modeled as the sum of an unobserved signal component and a nonsignal component.  For example, a series of data from repeated sample surveys (Scott and Smith, 1974; Bell and Hillmer, 1992) can be modeled as the sum of an unobservable true population value for time t, and sampling error.  Another example is in seasonal adjustment of an observed time series (Bell and Hillmer, 1984). 

 

Determinants of the Establishment of Marketing Activities by Subsidiaries of MNCs

Prof. João Pedro Couto, Prof. José Cabral Vieira and Dr. Maria Teresa Borges-Tiago

University of Azores, Portugal

 

ABSTRACT

 This paper examines the factors that influence the establishment of marketing activities in subsidiaries of multinational companies. The results support the idea that marketing activities are influenced by cultural factors, the organizational structure of the MNC and the existence of subsidiary decision autonomy with respect to markets, production and R&D. However, a hypothesis relating to the impact that the type of management model, captured by the national origin of the multinational company, has in the development of subsidiary marketing initiatives is not supported.  The global context in which firms develop and implement business strategies has changed significantly over the past few years. The globalization process has evolved to a regionalized approach with more country-specific adaptation than predicted. Multinational companies seek to increase the transfer of marketing processes to their foreign subsidiaries in order to adapt their products and services to local needs and to make use of the knowledge locally available.

 

The Market and Operating Performance of B-share Initial Public Offerings in China

Shin-Rong Shiah-Hou, Yuan Ze University, Taiwan

 

ABSTRACT

 This paper investigates both long-term and short-term performances of B Shares in China. The study reviews the market performance of B shares as well as the operating performance for those companies issuing B shares. From the results, we can see occurrence of similarity in performance of China's B shares to Initial Public Offerings (IPOs) or to Season Equity Offerings (SEOs) in other countries. The results of the empirical tests are partially consistent with predictions that B shares have no significant market performance after going public, which is inconsistent with assertions in previous literature on IPOs. Issuing firms, after going public with B shares, display a substantial decline in post-issue (B shares) operating performance, a significantly lower decline than for other matching firms in the same industry. This inferior operating performance relative to matching firms in the same industry occurs because of under-investment and a decline in sales.  In the two major stock markets in China, the Shanghai market and the Shenzhen market, the same company is entitled to issue A shares and B shares. A shares, which are settled and exchanged in Yuan or Renminbi, are issued only to Chinese citizens. B shares, which are settled and exchanged in U. S. dollars on the Shanghai market and in Hong Kong dollars on the Shenzhen market, were issued only to foreign residents before February 18, 2000.   

 

Accounting Education: Designing a Curriculum for the 21st Century

Virginia Anne Taylor, Ph.D. and Martin Rudnick, NJ

 

ABSTRACT

 This study investigates both the reasons why and the various ways accounting education fails to adequately prepare students for professional success in today’s business environment. The primary objective of this report is to uncover suitable criteria for the design and improvement of accounting programs and curriculum. Our more specific goal is to compare the recommendations of the American Accounting Association, AAA, and the American Institute of Certified Public Accountants, AICPA, with regards to this important matter. We want to discover the relevance or lack thereof for the “150 hour requirement” which has been promoted by the AICPA The main problems that emerge are the ambiguity created by the 150 hour requirement and the lack of consistency between the current accounting profession and the accounting educators.  The primary objectives of this paper are twofold:  a review of the history and current status of this proposal and then a discussion of how to develop suitable criteria for the design and improvement of accounting programs and curriculum. The first section will consider the relevance or lack thereof for the “150 hour requirement” which has been promoted by the AICPA as the best thing since apple pie.

 

Environment Scanning for Strategic Information: Content Analysis from Malaysia

Manuel Yunggar, Ph.D., LA

 

ABSTRACT

 Scanning for information in the environment is essential for sound formulation of business strategy. This paper assesses the content of scanning generalized from data gathered in Malaysia during the period of the 5th Malaysia Plan. Specifically this paper addresses the following questions:- What kinds of information do the responding managers consider to be important? What kind of information do they acquire? What sources do they use? How are these choices affected by personal, organizational and environmental attributes? Findings are compared with previous studies done in the U.S.  This paper attempts to shed more understanding of environmental scanning at the individual manager level by using data gathered from Malaysia during the 5th Malaysia Plan. Specifically the following questions are being addressed: What kind of information do the responding managers consider to be important? What kind of information they acquire? What sources do they use? And, are their choices affected by personal, organizational and environmental attributes.

 

Globalizing Malaysia’s Human Resources: Removing the Language Barrier

Manuel Yunggar, Ph.D., N LA

 

ABSTRACT

 This paper attempts to assess the current concern in Malaysia on the adequacy or inadequacy of the national language Bahasa Melayu (BM) as an important vehicle towards achieving the country’s national objective - Vision 2020.  Comments abound that the present level of mastery of the English language in Malaysia (seen as an international language of commerce and technology) is not up to international standard and therefore is deemed as substantial veil or deterrent to Malaysia’s international competitiveness worthy of government intervention. Is it a valid statement to say that “BM is not as ready to be used or considered as an international commercial and technical language” valid? Is it time that if Malaysia is to continue using solely BM as it does in the country, its efforts towards achieving Vision 2020 may be considerably  impeded, and therefore BM usage is seen as a deterrence towards the soon ushering of this small nation into a developed country status in the target year 2020. Recently, the Mahathir leadership made a daring and decisive move to “lift” the usage of BM and announced the re-adoption of English in the teaching of sciences and mathematics in the country’s educational system.

 

Evaluating Biometrics as Internal Control Solutions to Organizational Risk

Dr. Virginia Franke Kleist, Richard A. Riley, Jr., and Dr. Timothy A. Pearson, WV

 

ABSTRACT

 In this paper we outline an organizational risk analysis process will help you to determine that biometric solutions will soon become a valid and cost effective tool in your corporation’s arsenal of security solutions designed to reduce and control organizational risk.  Biometrics refers to the automated identification of an individual based on his or her distinguishing characteristics (Bolle, et. al., 2004).  More specifically, biometrics measure physiological or behavioral traits and use those measurements as subsequent points of comparison to determine or verify identity. Discussed below are the most highly developed biometrics that are available on the market today.  Finger-scan or fingerprint biometrics have a long history and are the most well-known of biometrics due to their extensive use in law enforcement.  For example, the United State’s Federal Bureau of Investigation’s created and maintains the national Integrated Automated Fingerprint Identification System (IAFIS) system.  The system currently houses over 400 million fingerprints and searches require approximately 1 hour of processing time.  Due to the delay between the submission of the fingerprint and computerized feedback, IAFIS is not a biometric in the truest sense of the word but is a technology that most individuals recognize. 

 

Impact of Globalization of Public Administration Practices on Hofstede's Cultural Indices

Dr. Gerald Venezia, Taiwan

 

ABSTRACT

 Governments face new challenges with the deliverances of services in the 21st Century. No longer constrained by borders, the facilitative state demonstrates a new freedom with the globalization of administrative practices. These practices have been exported around the world with little or no concern for the cultures they impose upon. It is the aim of this paper to look at the affect and changes as well as measure the differences between the national cultures of the United States, Belgium and Kenya to understand the concept of "one size fits all".  Globalization has impacted every level of government as well as the delivery of services, locally and across the globe. Local and state governments and their representatives interface with foreign companies and governments on a daily basis. Recruiting employees who understand cultural differences and their values guarantees success in the new global paradigm (Chadwin, Rogers, and Pan, 1995).  There is disagreement concerning Hofstede's premise that culture influences management approaches and performance within organizations. Kim (1999) agrees with Hofstede, while Common (1998) adopts the stance that globalization imposes convergence of social structures and ideology of affluent societies despite culture or histories. The impact of globalization on workplace values has been studied extensively since Geert Hofstede published Cultural Consequences in 1980.

 

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