JSIS_May 2014

Transcription

JSIS_May 2014

Volume IX Number 3 2014
Journal of Strategic and
International Studies
www.ISISWorld.org
EDITORS-IN-CHIEF
Prof. Dr. Detelin Elenkov
Dr. Carlo Bagnoli
ISIS
Copyright: © 2013 Institute of Strategic and International Studies™
Journal of Strategic and International Studies™
Print
ISSN 2326-3636
Articles, papers or cases submitted for publication should be original contributions and should not be
under consideration for any other publication at the same time. Authors submitting manuscripts for
publication warrant that the work is not an infringement of any existing copyright, infringement of
proprietary right, invasion of privacy, or libel and will indemnify, defend, and hold ISIS and/or its
sponsor(s) harmless from any damages, expenses, and costs against any breach of such warranty. For
ease of dissemination and to ensure proper policing of use, manuscripts and other contributions
become the legal copyright of the ISIS unless otherwise agreed in writing. The ISIS Academic Board
reserves the right to alter any policy without prior notice.
WHILST EVERY EFFORT IS MADE BY THE PUBLISHER AND EDITORS-IN-CHIEF TO
SEE THAT NO INACCURATE DATA, OPINION OR STATEMENT APPEARS IN THIS
JOURNAL, THEY WISH TO MAKE IT CLEAR THAT THE DATA AND OPINIONS
APPEARING IN THE ARTICLES AND ADVERTISEMENTS HEREIN ARE THE
RESPONSIBILITY OF THE CONTRIBUTOR OR ADVERTISER CONCERNED.
ACCORDINGLY, THE PUBLISHER, EDITOR-IN-CHIEF AND THEIR RESPECTIVE
EMPLOYEES, OFFICERS AND AGENTS ACCEPT NO LIABILITY WHATSOEVER FOR
THE CONSEQUENCES OF SUCH INACCURATE OR MISLEADING DATA, OPINION OR
STATEMENT.
Typeset and Graphic Design by Kalina@ISIS, Florida, The United States of America
Published by ISIS, Florida, The United State of America
Published by ISIS Publishing House, Florida, The United State of America
Journal of Strategic and International Studies
ISSN 2326-3636 TABLE OF CONTENTS
CRITICAL SUCCESS FACTORS FOR THE IMPLEMENTATION OF AN E-LOGISTICS
SYSTEM: AN EXPLORATORY STUDY
Refugio Lazaro Hernandez, Claudia Malcon Cervera, Jose Luis Martinez Flores, Judith Cavazos Arroyo..5
TIME-VARYING AND ASYMMETRIC COMPONENTS IN THE ASEAN STOCK MARKETS
VOLATILITY
Vesarach Aumeboonsuke………………………………………………………………………………………….14
WOMEN AS POLITICAL AND ECONOMIC AGENTS IN RWANDA: A GLOBAL PARADIGM FOR
ACHIEVING SUSTAINABLE DEVELOPMENT
Mediatrice Kagaba…………………………………………………………………………………………………22
IMPROVEMENT PROJECT OF LEAN MANUFACTURING IN A TWIN PLANT
Adan Valles, Jaime Sanchez, Salvador A. Noriega, Margarıta G. Luna…………………………………..…..34
SPIRITUAL CAPITAL AND LEADER PERFORMANCE: HOW CAN STRATEGY BE DEFINED?
Ana Martins, Isabel Martins, Orlando Pereira …………………………………………………………………45
RELATIONSHIPS BETWEEN SOCIAL NETWORK OF MULTINATIONAL ENTERPRISES IN
THAILAND
Sutana Boonlua, Natarpha Satchawatee…………………………………………………………………………54
HOW EVALUATE ENVIRONMENTAL UNCERTAINTY: A VALIDATION SCALE FOR DYNAMISM
AND COMPLEXITY
Carlos Martins, Paula Rodrigues, Francisco Vitorino Martins………………………………………………..69
STAKEHOLDER ENGAGEMENT AND INTEGRATED REPORTING: EVIDENCE FROM THE
ADOPTION OF THE IIRC FRAMEWORK
Daniela M. Salvioni, Luisa Bosetti…………………………………………..………………………………..….78
MANAGING SERVICE QUALITY – DIMENSIONS OF SERVICE QUALITY: A STUDY IN EGYPT
Niveen M. El Saghier………………………………………………………………………………………………90
EASTERN CULTURE-ORIENTED LEADERSHIP COMPETENCY SCALE
Salim Atay, Elena Lvina, Banu Çırakoglu, Aslı Dogan, Nese Guulmez……………………………………..100
THE IMPACT OF TECHNOLOGICAL AND MARKET TURBULENCES ON CAPACITY
TO INNOVATE: MEDIATING ROLE OF MARKET ORIENTATION
Borut Milfelner…………………………………………………………………………………………………...112
LEVERAGING INNOVATION IN FAMILY STARTUPS: A STEWARDSHIP
APPROACH
Patricio Mori……………………………………………………………………………………………………...119
ISIS ACADEMIC BOARD
PRESIDENT
Dr. Detelin Elenkov, Angelo State University, San Angelo, TX, USA
VICE PRESIDENTS
Dr. Carlo Bagnoli, Ca' Foscary University, Venice, ITALY
Dr. Dieter Flämig, INFRANEU President, Berlin, GERMANY
Dean Dr. Khalid Alkhathlan, King Saud University, Riyadh, SAUDI ARABIA
VICE PRESIDENTS
(Junior Faculty and Graduate Students)
Dr. Paulene Naidoo, Durban University of Technology, Durban, SOUTH AFRICA
Prof. Maria Jocelyn S. Mariano, University of the East, Manila, PHILIPPINES
MEMBERS OF ISIS ACADEMIC BOARD
Dean Dr. Faridah Djellal, Lille1 University, Lille, FRANCE
Dean Dr. AbdulReda Assiri, University of Kuwait, Kuwait City, KUWAIT
Dean Dr. Ivan Manev, University of Maine, Orono, Maine, USA
Dean Dr. Paula Rodrigues, Lusiada University, Porto, PORTUGAL
Dean Dr. Agnes P. Ladia, Tarlac State University, Tarlac City, PHILIPPINES
Dr. Cecilia Cheng, The University of Hong Kong, Hong Kong, CHINA
Dr. Tania Casado, University of São Paulo, São Paulo, BRAZIL
Dr. Bolajoko Nkemdinim Dixon-Ogbechi, University of Lagos, Lagos, NIGERIA
Dr. Joana Pimentel Kuntz, University of Canterbury, Christchurch, NEW ZEALAND
Dr. Hui-Sung Kao, Feng Chia University, Taichung, TAIWAN
Dr. Lugkana Worasinchai, Bangkok University, Bangkok, THAILAND
Dr. Jay Liebowitz, University of Maryland University College, Adelphi, Maryland, USA
Dr. Anna Nabirukhina, St. Petersburg State University of Economics, St. Petersburg, RUSSIA
Dr. Teodor Sedlarski, Sofia University, Sofia, BULGARIA
Dr. Charles Wankel, St. John’s University, New York, USA
Dr. Fangfang Tang, Peking University, Beijing, CHINA
Dr. Tom F. Badgett, Angelo State University, San Angelo, Texas, USA
Dr. Sudhir Chawla, Gulf University of Science & Technology, Hawally, KUWAIT
Dr. John S. Crocher, Macquarie University, Sydney, AUSTRALIA
Dr. Mark M. Lennon, Pennsylvania State University, Pennsylvania, USA
Dr. James Thomas Kunnanatt, United Arab Emirates University, Abu Dhabi, UNITED ARAB EMIRATES
Dr. Ekaterina Prasolova-Forland, Norwegian University of Science and Technology, Trondheim, NORWAY
Dr. David Wilemon, Syracuse University, New York, New York, USA
Dr. Kamran Ahsan, Federal Urdu University of Arts, Science and Technology, Karachi, PAKISTAN
Dr. Djamel Eddine Laouisset, Alhosn University, Abu Dhabi, UNITED ARAB EMIRATES
Dr. Hiroyuki Yamaguchi, Kyushu University, Fukuoka, Kyushu, JAPAN
Dr. Stephanie Watts, Boston University School of Management, Boston, Massachusetts, USA
Dr. Arnold Schneider, Georgia Institute of Technology, Atlanta, Georgia, USA
Dr. Javier Rojas, Executive Office of the President of Mexico, Mexico City, MEXICO
Dr. Lawrence G. Boakye, University of Sydney, Sydney, AUSTRALIA
Dr. Divya Rana, King Abdulaziz University, Jeddah, SAUDI ARABIA
Dr. David Cawthorpe, University of Calgary, Calgary, Alberta, CANADA
Dr. Tina Loraas, Auburn University, Auburn, Alabama, USA
Dr. Abdullah Basiouni, Ynabu Industrial College, Yanbu Industrial City, SAUDI ARABIA
Dr. Michael O. Mojekeh, Anambra State University, Uli, NIGERIA
Dr. Alok Chakrawal, Saurashtra University, Gujarat, INDIA
Dr. Terry Power, Royal Roads University, Victoria, BC, CANADA
Dr. Zsuzsanna Szabo, Marist College, Poughkeepsie, New York, USA
Dr. Henrik Egbert, Anhalt University of Applied Sciences, Bernburg, GERMANY
Dr. Michal Kavan, Czech Technical University, Prague, CZECH REPUBLIC
ISSN 2326-3636
CRITICAL SUCCESS FACTORS FOR THE IMPLEMENTATION OF AN E-LOGISTICS
SYSTEM: AN EXPLORATORY STUDY
Refugio Lazaro Hernandez, Universidad Popular Autonoma del Estado de Puebla, Puebla, Mexico
Claudia Malcon Cervera, Universidad Popular Autonoma del Estado de Puebla, Puebla, Mexico
Jose Luis Martinez Flores, Universidad Popular Autonoma del Estado de Puebla, Puebla, Mexico
Judith Cavazos Arroyo, Universidad Popular Autonoma del Estado de Puebla, Puebla, Mexico
ABSTRACT
In recent years, the use of information communication technologies (ICTs) -such as the internet- has
driven the innovation of logistical processes in a new concept called e-logistics (electronic logistics), its
value lies in the streamlining of business processes and the simplification of operational processes,
providing real-time information and sustaining competitiveness in emerging markets. The critical success
factors (CSFs) play a very important role when it comes to establishing strategies and lines of action, with
a proper implementation of the necessary tools and resources. The aim of this research is to identify the
CSFs for the implementation of an e-logistics system, facilitating a support guide to decision-makers on
those factors that have a strong impact. Through the development and implementation of a measurement
instrument with a Likert scale of five points, a data matrix was obtained, which was evaluated through the
factor analysis, the principal components method was applied with a Varimax rotation. The results
obtained, ten elements were identified as critical factors for the successful implementation of an e-logistics
system, highlighting the establishment of a collaborators network as a major CSFs.
Keywords: Factor analysis, critical success factors, e-logistics system, ICTs.
1. INTRODUCTION
The CSFs integrate components, elements, or variables to consider before and during the execution of a
project because of that, they provide valuable information to establish the guidelines to be followed for the
purpose of achieving the goals and targets set by the organization. The CSFs are a limited number of
areas in which satisfactory results will ensure a successful performance for an individual, a department or
an organization, that is to say, the key areas where all the strategic and operational activities should run
properly for that the company prospers and objectives will be achieved (Bullen and Rockart, 1981). The
implementation of various tools and methodologies require a proper identification of variables that support
the success of the preset strategies, in this way, the identification of the CSFs aims to support the proper
planning of operations and resources, defining the key areas of the company, facilitating the
implementation of activities in accordance with the priority of the same.
On the other hand, e-logistics systems are being implemented as a strategy to respond to the needs of
logistics operations in electronic environments. The existing researches in the literature around the CSFs
to the successful implementation of an e-logistics system are focused on an individual basis to elements
that make up an e-logistics system (Lázaro et al., 2011). E-logistics has gained ground after that
companies have opted for the third party logistics (3PL) and the experiences indicate that the information
and communication technologies (ICTs) are an essential tool for such operations (Gunasekaran and Ngai,
2004). E-logistics is an expression relating to the implementation of the ICTs to the logistics processes,
besides being considered as a key factor for the success of e-business (Scholz-Reiter and Höhns,
2003). In accordance to Dawe (1995) a logistics system is a data set, hardware, software and protocols
that operate in a coordinated manner to carry out an activity. The key factor when deploying an e-logistics
system is to develop a community in the network with appropriate technologies based on internet.
For Gunasekaran et al. (2007) an e-logistics system is composed of four dimensions: strategic planning,
partnership formation, inventory management and the use of information technology. The successful
implementation of an e-logistics system is important because it provides the mechanism to automate the
5
ISSN 2326-3636
traditional logistics processes, providing visibility and real-time synchronization throughout the supply
chain.
2. LITERATURE REVIEW
Among some of the researches related to the CSFs for implementation of various methodologies, tools or
systems, stand out: Rockart (1979) raises a systems approach based on the CSFs identification for
supports the achievement of the objectives. Boynton and Zmud (1984) assessed the strengths and
weaknesses of a method of CSFs for the identification about information needs. Power et al. (2001)
propose some of the critical factors for the success of the agile organizations in the management of their
supply chains. Wilson et al. (2002) recognized the factors that influence the success of the deployment of
the applications for the management of relations with customers. Ngai et al. (2004) conducted an
empirical study on CSFs for supply chain management based on the web. Gunasekaran and Ngai (2004)
studied the implications of a virtual supply chain. Vlachopoulou et al. (2005) suggest a typology for the
management of relationships with Customers in a virtual environment. Eid et al. (2006) focus their
research on a critical analysis of literature and CSFs identification that have a major influence on
international marketing in internet business to business. In general, these investigations have a
comprehensive approach of CSFs without considering some of the main aspects to consider the
technological infrastructure, organizational structure and the human factor as elements of the
organizations own. The little existence (it was only found the proposal of Gunasekaran et al., 2007) of
research projects that integrate different elements that are part of an e-logistics system related to the
identification of CSFs for successful implementation of the same, gives a glimpse of the need to generate
research proposals that integrate mentioned and identified elements in the previous literature review,
under this scheme with the purpose to ensure satisfactory results.
3. RESEARCH METHODOLOGY
An exploratory study was conducted to identify CSFs in the implementation of an e-logistics system. This
study was based on data collected through the application of a measuring instrument to professionals and
experts in the logistics field, supply chain and related areas. The study was carried out in three phases:
The first phase consisted of discussions with experts, it was generated a preliminary questionnaire based
on the literature review and observations of the specialists. In the second phase, a pilot study was
conducted with the feedback, the questionnaire was refined into a survey to measure CSFs for the
implementation of an e-logistics system. In the third stage, information was obtained on the CSFs when
the survey was carried out in a personal way and by electronic means, it has conducted a data analysis
generated through the factor analysis to identify the underlying structure of the variables set.
3.1. Data Collection
It is contacted to professionals and teachers known to the researcher, who are involved in activities
related to logistics, supply chain and related areas, (in the state of Puebla and surrounding States) in their
work centers, via phone and via email, letting them get the questionnaire and asking for his return. The
sample also included students PhD and Master in logistics (from Universidad Popular autónoma del
Estado de Puebla, Universidad Madero and Universidad de las Américas Puebla). A total of 163 surveys
were sent via mail, recovering 43 questionnaires, one of whom was ruled out due to lack of responses in
some of the set forth and will only be considered as valid 42 questionnaires. On the other hand, were
surveyed to 68 professionals in person, by attending to their work places or their universities according to
the case. Of the 68 obtained surveys, three were discarded due to the fact that some answers were not
marked, so only 65 questionnaires were considered as valid. 107 valid questionnaires (rate of recovery
was 33.3 %) were used to data analysis using SPSS 19 version.
3.2. Measurement Instrument
Based on the prior literature review and the expert opinions, 41 variables were considered to formulate the
measuring instrument in order to obtain the perceptions of the respondents in relation to the critical
success factors that they considered important for a successful implementation of an e-logistics system,
6
ISSN 2326-3636
on a Likert-type scale of five points ranging from a critical success factor is not important (with number 1)
to critical success factor extremely important (with number 5).
3.3. Reliability of the Measuring Instrument
To evaluate the reliability (degree to which an instrument gives results consistent and coherent) of the
measuring instrument, it is proceeded to calculate the Cronbach´s alpha coefficient. For an exploratory
research, obtaining values of alpha between 0.50 and 0.60 are sufficient to consider that the instrument
has reliability (Nunnally, 1987). On the other hand, Hernández et al. (2010) suggest that a value of 0.75 is
acceptable and if it is greater than 0.90 reliability is very high to be taken into account. The reliability proof
was 0.932 therefore, the measurement instrument was considered with a high level of reliability.
3.4. Measuring Instrument Validity
To ensure the validity (degree to which an instrument actually measures the variable it intends to
measure) of the instrument, it was considered three types of evidence; the related to the content through
the literature review (theory and preliminary studies), the construct validity through the factorial analysis
and the validity of the experts through the evaluation of the instrument by academics and logistical
advisers. Mainly, it was carried out the factors analysis to assess if each one of those set forth generated
from the establishment of the variables measured what really should be measured and the accuracy of the
same.
4. ANALYSIS OF RESULTS
4.1. Descriptive Statistical
Of the 107 obtained questionnaires, 37.4% of the surveyed professionals were between 31 to 40 years of
age, as well as the 36.4% were between 21 to 30 years of age. The 45.8% had or were studying a
postgraduate degree in logistics and 35.5% had studies of bachelors. The 19.6% had at least one year of
experience in logistics and related areas. The 29.0% worked in the automotive sector, 20.6% in the food
industry, the 12.1% in the chemical industry, the remain in the area of services and education. The 17.8%
of the respondents mentioned that in their workplaces had more than three types of deployed systems
such as ERP (Enterprise Resource Planning), CRM (Customer Relationships Management), EDI
(Electronic Data Interchange) etc. In which, they have made use of the information and communication
technologies.
4.2. Factor Analysis
It was used of the factorial analysis to examine the relationships between variables and to determine if the
information could be condensed or summarized in a series of factors or smaller components. To ensure
that the process of factorial analysis might be appropriate, it was applied the Bartlett test of sphericity for
testing the null hypothesis that the variables did not correlate in the population, as well as the extent of the
adequacy of the sample Kaiser-Meyer-Olkin (KMO) that compares the magnitudes of the coefficients of
the observed correlation with the magnitude of the partial correlation coefficients. For this statistic is
desirable a value greater than 0.5 (Malhotra, 2004). Indices (KMO) between 0.70 to 0.80 are considered
acceptable (Kaiser, 1974). Values of 0.70 to 0.79 are considered regular (Mazursky and Jacoby, 1986;
McEnally and Hawes, 1984). The results were: The KMO was 0.80 and the Bartlett test of sphericity was
2309.83, with significance beyond the 0.000 level. This means the correlation matrix was not an identity
matrix, so, it was carried out factors analysis for the 41 variables. With respect to the sample size, the
investigator should not make use of the factorial analysis for samples less than 50 observations, the
sample size should be 100 or more observations (Hair et al., 1999). It was fulfilled with this criterion
because of it has 107 observations. The factorial analysis was exploratory, the method of extraction of
factors was the principal components analysis, due to the fact that this is recommended when the primary
objective is to determine the minimum number of factors necessary to explain or justify the maximum
portion of the variance represented in the series of original variables (Hair et al., 1999; Malhotra, 2004).
The use of an eigenvalue (or latent roots) to establish a number of factors is more reliable when the
number of variables ranges between 20 and 50 (Hair et al., 1999). This evaluation has 41 variables, so it
was considered appropriate to apply this criterion.
7
ISSN 2326-3636
4.3. Results
In the results of the principal component analysis with a Varimax rotation, were obtained 10 factors with
eigenvalues greater than 1, the total variance explained was 66.95%. However, 9 of the 41 variables were
discarded due to the fact that the weights in their loads factorials were lower than 0.5. For the
interpretation of factors were considered two aspects: (1) The practical significance and (2) the
assessment of the statistical significance. In the practical significance, the burdens of 0.4 are considered
important and those of 0.5 or greater are considered practically significant. According to the valuation of
the statistical significance based on the size of the sample, the criterion for a sample size equal to 100 or
greater is 0.55 with a significance level of 0.05 (α) (Hair et al., 1999). The approach that has taken for this
topic was to accept loads greater than or equal to 0.5 to ensure the maximum significance of the Results.
The variables were grouped into 10 components or factors that explain the 66.95 % of the total variance
(see appendix) that are describe below:
1- Network of collaborators: In this factor were grouped seven variables related to the establishment
of a network of partners considering common interests among the members of the business
community. These variables explain the 9.78% of the variance.
2- Culture and values: This dimension brought together five related variables to the values that are
shared among the members of the network of collaborators, as well as cultural aspects that must
be considered in establishing networks of collaboration. These variables explain the 8.71% of the
variance.
3- Communication: This factor grouped four variables that explain the 7.98% of the variance, these
variables are related to the importance that has an accurate and timely communication throughout
the network of collaborators and the supply chain of the e-logistics system.
4- Management commitment: Three variables were grouped in this factor which explains the 7.89%
of the variance. These variables indicate the importance of the support and commitment of the
management before and during deployment of the system.
5- Cluster: It was collected two variables in this factor closely related to the physical location of the
members of the network of collaborators, as well as the importance of ICTs employed in the
same. The 6.36% of the explained variance is made up these variables.
6- Human Factor: Two variables were grouped in this component around to skills and knowledge of
the personnel involved in the organizations, whose explained variance is 6.22%.
7- Information exchange: Two variables describe this factor and explain a variance of 5.41%, the
visibility and transparency in the exchange of information throughout the supply chain of the
network of partners is essential.
8- Shared Vision: In this factor, three variables were grouped with an explained variance of 5.37%
around the act and the communication of the personnel involved.
9- Response capacity: The factor comprises two variables that involve the geographical location of
the distribution centers, in order to provide an adequate response capacity. These variables
explain 5.08% of the variance.
10- Transaction Security: This component consists of two variables that explain the 4.16% of the
variance, related to the safety and reliability during the both internal and external operations.
5. DISCUSSIONS
In this study, ten CSFs for the implementation of an e-logistics system have been identified: Network of
collaborators, culture and values, communication, management commitment, cluster, human factor,
exchange of information, shared vision, responsiveness and safety in the transactions. These CSFs are
discussed below:
Network of collaborators: The degree to which the partners share knowledge, infrastructure, facilities and
technology will depend on your needs and to establish rules in whole, in this way, they can collaborate
and compete at the same time in order to be more competitive. A business relationship based on mutual
trust, sincerity, shared risks and rewards, offers a competitive advantage more than it would be if you work
individually (Vlachopoulou et al., 2005). The collaboration allows the conversion of the individual
knowledge within the interorganizational knowledge (Huotari and Livonen, 2004), which allows to increase
the knowledge within the enterprise networks.
8
ISSN 2326-3636
Culture and values: Consider the social and business culture of the particular companies that are
members of the community in the network it is important to avoid conflicts which may affect the
performance of the same. Recently, some studies have pointed out the importance of the individual
culture of each company as well as the consideration of values, beliefs and guidelines for each
organization that affect it and in turn the practice of the professionals activities (Krumbholz and Maiden,
2001). The beliefs and attitudes can affect the exchange of information and the proper implementation.
Communication: An open and effective communication through the different areas of the organization
ensures a clear understanding of the goals and objectives (King and Burgess, 2006). The need to
generate appropriate channels of communication is important to create an atmosphere where all the
members of the community should have the necessary information in real time to allow them to obtain the
expected results (Pinto and Slevin, 1987). The communication is not only necessary within the
organization itself, but in addition to the rest of the community and along the network, the communication
involves feedback mechanisms, as well as the need for reliable information exchange, open
communication and reliable is one of the most difficult tasks and challenging in any field.
Management commitment: The commitment of the management, it has been recognized as a key element
to provide the financial support and the deployment of the necessary resources for a successful
implementation, in addition to ensuring that the project should take priority and constant attention within
the organization (Gard, 2010; Ngai et al., 2004). Schultz and Slevin (1975) indicate that the commitment
of senior management has been considered of great importance to distinguish between the ultimate
success or failure. Manley (1973) points out that the degree of support for the management of a project on
the part of management, will give rise to significant variations in the acceptance or resistance on the part
of the involved parties.
Cluster: The cluster of companies or cluster is an essential approach for the generation of the networks of
business partnerships due to the competitive capacity that has each region industrial, this competitiveness
lies in the performance of your cluster and the interrelationships among its members (Feser and Bergman,
2000).
Human factor: Human resources can be considered as a situational variable whose knowledge, skills,
goals and personalities must be previously evaluated, including the recruitment, selection and training.
The factor human as a critical success factor has to do with the skills necessary for an individual to carry
out a particular function (Pinto and Slevin, 1987).
Exchange of information: Information and communication technologies are a fundamental support for the
current management in the exchange of information, because it facilitates the registration, distribution and
processing of information for a proper fundamental decision-making as the optimization of the supply
chain and the synchronization of the processes (Pentland and Feldman, 2007; Kane and Alavi, 2007). The
interorganizational systems infrastructure supports the exchange of information and configures the
invisible fabric of the same (Weill et al., 2002).
Shared vision: A shared vision through strategic alliances and confidence, is based on the need to
respond to the corporate globalization, uncertainty in the markets and the constant complexity in the
organizational environment through agreements between two or more companies to collaborate in an
activity or several specific activities, benefit from the strengths of each of them and the competitive
advantages (Isoraite, 2009). The generation of trust is limited by cultural differences and the experience in
interactions, making it necessary for an adequate organizational relationship spread confidence beyond
personal relationships and individual (Blomqvist and Stahle, 2000).
Response capacity: A flexibility and adequate responsiveness are two important elements to consider in
the moment when makers designing want to plan correct strategies to respond effectively and efficiently in
any circumstance that may be arise along their supply chains.
Transaction security: The reliability software and hardware is essential to guarantee the performance of
the system and to ensure the accuracy of data during commercial transactions (Ngai et al., 2004). The
security and confidentiality of the information between the parts, is a priority for the exchange
of information in the network of collaborators (Pray et al., 2011). To implement actions in the management
9
ISSN 2326-3636
of security and reliability of the software, hardware and data, it must consider aspects such as: the
confidentiality of the information, the integrity of the data and the timely availability of information
accessible to the authorized personnel.
6. CONCLUSIONS
The objective of this research was to identify the critical factors for the successful implementation of an elogistics system, facilitating a support guide to decision-makers on those factors that have a strong
impact. Through a proper identification of CSFs, strategies can be established and lines of action,
focusing on the most important aspects and prioritizing these actions, with a proper implementation of the
necessary tools and resources. This research began with an exploratory design and subsequently was
empirical quantitative and non-experimental. It was designed and implemented a measuring instrument
(Likert-type scale five-points) structured with variables set by the researcher, based on the literature
review and expert commentary. The data analysis was via the principal components analysis, with rotation
Varimax orthogonal, through the use of the SPSS software 19 version. In the data analysis, it was used
the factorial analysis to examine the relationship between the number of variables and to determine if the
information could be summarized in a series of factors or smaller components of the 41 variables that
formed the measuring instrument, 9 of them were dismissed by not having the level of required
significance. The 35 remaining variables were grouped into 10 factors that explain the 66.95% of the total
variance. These factors were: Network of collaborators, culture and values, communication, management
commitment, cluster, human factor, exchange of information, shared vision, response capacity and
transaction security. For future researches, it is suggested that it wear to practice the ten CSFs for the
implementation of an e-logistics system identified in order to validate them. The researchers interested in
continuing this research may focus on the analysis companies of logistics services specifically, due to the
strong impact that they have in the performance of the logistics and supply chain in the national business
environment. In spite of the fact that e-logistics is not a new topic for the economies of emerging
countries, in the mexican area still are not counted with studies to support the development and growth of
e-logistics in domestic companies, which opens up a range of future lines of investigation.
REFERENCES
Blomqvist, K. and Stahle, P. "Building Organizational Trust", 16th Annual IMP Conference 7th-9th
September 2000 in Bath, UK.
Boynton, A. and Zmud, R. 1984. "An Assessment of Critical Success Factors", Sloan Management
Review, Vol. 25, no. 4, pp. 17-27.
Bullen, C. and Rockart, J. 1981. "A primer on critical success factors", MIT Sloan School of Management,
CISR 69.
Christian, E. Laguna 2010. “Production Chains: Spinal Cord of Mexico's industrial clusters",
Economy Mexican New Era, Vol. 19, no.1, pp. 119-170.
Dawe, R. L. 1995. "Systems put your house in order", Transportation & Distribution, Vol. 36, no.10, pp.
102-106.
Eid, R., Elbeltagi, I., and Zairi, M. 2006. "Making Business-to-business International Internet Marketing
Effective: A Study of Critical Factors Using a Case-Study Approach", Journal of International
Marketing, Vol. 14, no. 4, pp. 87-109.
Feser, E. J. and Bergman, E. M. 2000. "National Industry Cluster Templates: A Framework for Regional
Framework for Applied Cluster Analysis", Regional Studies, Vol. 34, no.1, pp. 1-19.
Gard, P. 2010. "Critical success factors for Enterprise Resource Planning implementation in Indian Retail
Industry an exploratory study", International Journal of Computer Science and Information Security,
Vol. 8, no. 2, pp. 358-363.
Gunasekaran, A. and Ngai, E. 2004. "Virtual supply-chain management", Production Planning & Control,
vol. 15, no. 6, pp. 584-595.
Gunasekaran, A., Ngai, E., and Cheng, C. 2007. "Developing an e-logistics system: a case
study", International Journal of Logistics: Research and Applications, Vol. 10, no. 4, pp. 333-349.
10
ISSN 2326-3636
Hair, J., Anderson, R., Tatham, R. and Black, W., Análisis multivariante, Pearson Prentice Hall, Madrid,
España, 1999.
Hernández, R., Fernández, C. and Baptista, P., Metodología de la investigación, McGraw Hill, México,
2010.
Bishop Voitto Huotari, M. and Livone, M., Trust in knowledge management and systems in
organizations, Idea group publishing, US, 2004.
Isoraite, M. 2009. "Importance of Strategic Alliances in Company's activity", Intellectual economics, Vol. 1,
no. 5, pp. 39-46.
Kane, G. and Alavi, M. 1974. "Information technology and organizational learning: An investigation of
exploration processes", Organization Science, Vol. 18, no. 5, pp. 796-812.
Kaiser, H. F. 1974. "An index of factorial simplicity", Psychometrika, Vol. 39, s/n, pp. 31-36.
King, Stephen F. and Burgess, Thomas F. 2006. "Beyond critical success factors: A dynamic model of
enterprise system innovation", International Journal of Information Management, Vol. 26, no. 1,
pp. 59-69.
Krumbholz, M. and Maiden, N. 2001. "The implementation of enterprise resource planning packages in
different organizational and national cultures", Information Systems, Vol. 26 no. 1, pp. 185-204.
Lázaro, R., Malcon, C., Martínez, J. L. and Cavazos, J. 2012. "A critical success factors model for
implementing an e-logistics system", Proceedings of the IABE- 2012 global Venice, Italy, Summer
Conference Vol. 12, no. 1, pp. 309-314.
Malhotra, Naresh, K. 2004. Investigación de mercados. Un enfoque aplicado, Pearson Prentice Hall,
México.
Manley. J. H. 1973. "Implementation Attitudes: A Model and a Measurement Methodology", in
implementing Operating Research and Management Science, Schultz. R. L. and Lucky Number
Slevin, D. P., New York.
Mazursky, D. and Jacoby, J. 1986. "Exploring the development of store images", Journal of Retailing, Vol.
62, no. 2, pp. 145-165.
McEnally, M. R. and Hawes, J. M. 1984. "The market for Generic Brand Grocery Products: A Review and
Extension", Journal of Marketing, Vol. 48, winter. pp. 75-83.
Ngai, T., Cheng, E. and Ho, M. 2004. "Critical success factors of web-based supply-chain management
systems: An exploratory study", Production Planning & Control, Vol. 15, no. 6, pp. 622-630.
Nunnally, Jum, C. 1987. Teoría psicométrica, McGraw Hill, México.
Pentland, B. and Feldman, M. 2007. "Narrative networks: patterns of technology and organization",
Organization Science, Vol. 18, no. 5, pp. 781-795.
Pinto, J. K. and Slevin, D. P. 1987. "Critical factors in successful project implementation" IEEE
Transactions on Engineering Management, Vol. 34, EM, pp. 22-27.
Power, D. J., Sohal, A. S., and Rahman, S. 2001. "Critical success factors in agile supply chain
management - An empirical study", International Journal of Physical Distribution & Logistics
Management, Vol. 31, no. 4, pp. 247-265.
Reza, M., Cheshmberah, M., Tofighi, S. and Hadizadeh, A. 2011. "An empirical study to identify and rank
CSFs in customer relationship management (CRM): A case study of oil products distribution",
Management Science Letters, Vol. 1, No. 4, pp. 595-606.
Rockart, J. F., "Chief executives defines their own data needs", Harvard Business Review, Vol. 57, no. 2,
pp. 81-93.
Schultz, R. L., and Slevin, D. P. 1975. "Implementation and Management Innovation," in Implementing
Operations Research and Management Science, Schultz, R. L. and Lucky Number Slevin, D.
P., New York.
Scholz-Reiter, B. and Höhns, H. 2003. "Integrated software agents: enabling technology for collaborative
E-logistics and E-business", International Journal of Computer Integrated Manufacturing, Vol. 16, no.
7/8, pp. 517-525.
11
ISSN 2326-3636
Vlachopoulou, M., Manthou, V. and Folinas, D. 2005. "Partner Relationship Management of e-logistics
networks", Asia Pacific Journal of marketing and logistics, 17, no. 3, pp. 40-50.
Weill, P. Subramani, M., and Broadbent, M. 2002. "Building IT Infrastructure for Strategic Agility," MIT
Sloan Management Review, Vol. 44, no. 1, pp. 57-65.
Wilson, H., Daniel, E., and McDonald, M. 2002. "Factors for Success in Customer Relationship
Management (CRM) systems", Journal of Marketing Management, Vol. 18, no. 1/2, pp. 193-219.
AUTHOR PROFILES
Dr. Refugio Lazaro Hernandez (Ph.D., Universidad Popular Autonoma del Estado de Puebla, UPAEP) is
an independent business consultant in Logistics and Supply Chain Management. Her areas of research
include e-logistics, operations research and facility location.
Dr. Claudia Malcon Cervera (Ph.D., Universidad Popular Autonoma del Estado de Puebla) is a full time
professor of the Business School at UPAEP.
Dr. Jose Luis Martínez Flores (Ph.D., Universidad Autonoma de Nuevo Leon) is a full time professor at
the Interdisciplinary Center for Postgraduate Studies, Research and Consulting at UPAEP.
Dr. Judith Cavazos Arroyo (Ph.D., Universidad Popular Autonoma del Estado de Puebla) is a professor
at UPAEP Business School. Her recent research projects have taken focus on consumption culture and
marketing strategies of electronic and mobile commerce in Mexico. She is co-author in two books.
12
ISSN 2326-3636
APPENDIX
Factor
Summary of factor analysis
1
2
3
4
5
6
Interpretation
factor
(%
explained
variance)
of
of
Network
collaborators
(9.78 %)
of .543
Weight
Variables of factor
Key
Strong relationships of long-time collaboration
V20
.650
Shared risks and benefits
V21
.667
Criteria for the partners selection
V22
.571
Establishing strategic alliances based on trust
V23
.521
Openness and credibility among partners
V24
.519
Will and cooperative attitude of the partners
V26
.659
Competitive environment
V27
Cultural differences among members of the business community
V15
Language barriers
V16
.715
Shared values and a high level of collaboration
V17
.528
Shared objectives and strategies
V18
.618
Response capacity
V34
.640
Accurate and timely communication along the supply chain
V6
.723
Transparency in the management of supply chain
V7
.755
Easy communication between customers and suppliers in the supply chain
V8
.512
Permanent availability of information in the supply chain
V9
Management
commitment
(7.89%)
.715
Knowledge and good understanding of e-logistics by management
V1
.769
Management commitment in the implementation project
V2
.820
Strategic planning for implementation
V3
Cluster (6.36%)
.673
Reliability and security of software and hardware
V30
.673
Companies concentrated and specialized sectorally
V41
Culture
and .719
values (8.71%)
.570
Communication
(7.98%)
Human
(6.22%)
factor .582
.652
7
8
9
10
Persuasion to
implementation
employees
by
management
to
participate
in
the
V4
Skills and previous knowledge of e-logistics
V14
Electronic Data Interchange (EDI)
V31
Transparency in information sharing
V32
Understanding the benefits of e-logistics for involved personnel
V13
.543
Transparency in the good act
V25
.533
Constant communication
V35
Response
capacity (5.08%)
.501
Geographical location of distribution centers and storage
V39
.665
Distribution mediums and distribution capacity
V40
Transaction
security (4.16%)
.692
Security of transactions
V33
.508
Supply chain aligned to the common goals
V37
Exchange
information
(5.41%)
Shared
(5.37%)
of .702
.779
vision .545
Total explained variance : 66.95%
Source: own
13
ISSN 2326-3636
TIME-VARYING AND ASYMMETRIC COMPONENTS IN THE ASEAN STOCK
MARKETS VOLATILITY
Vesarach Aumeboonsuke, International College of National Institute of Development Administration,
Bangkok, Thailand
ABSTRACT
The paper aims to investigate the volatility of ASEAN stock markets based on the time-varying and
asymmetric model. The temporal variation in the volatility and the asymmetric relationship between news
and volatility are taking into account by estimating the GJR-GARCH(1,1) model. The daily stock indices
from major markets in ASEAN including Malaysia, Indonesia, Philippines, Singapore, Thailand, and
Vietnam are used to estimate the market returns and volatility. The period under study ranges from
January 2004 to December 2013. The GJR-GARCH(1,1) is employed to estimate the volatility series of
market return. The results show that the parameters estimated from the GJR-GARCH model are
significant which indicates that the volatility of the stock market index is not constant over time and can be
estimated by this model. Moreover, the sign bias tests show that there is asymmetric impact of good
news and bad news on the market volatility in four markets.
Keywords: GJR-GARCH, Heteroskedasticity, ASEAN, Stock Market
1. INTRODUCTION
Stock Market plays an important role in the development of country’s economy. The expected return and
risk on stock markets are the focus interests of many practitioners. Market risk or variance is an important
input in many financial models including asset pricing, portfolio performance evaluation, and hedging.
Therefore, there has been an enormous interest amongst researchers and practitioners to model the
conditional variance. A large number of such models have been developed, starting with the ARCH model
of Engle (1982).
A large number of evidences from research study show that volatility of stock market is not constant over
time. Moreover, good news and bad news have different magnitude of impact on the stock market
movement. In specific, market is more fluctuated during bad times than during good times. Many research
put more emphasis on testing the characteristics of volatility on the developed market such as the U.S.
market or the European Markets and found similar results i.e., volatility is not constant and there is
asymmetric effect of news on volatility. However, there has been little study conducting the test on
developing markets. Most stock markets in ASEAN including Malaysia, Indonesia, Philippines, Singapore,
Thailand, and Vietnam are in the stage of developing markets. ASEAN countries are currently in the
stage of growing and forming the ASEAN community (AEC) therefore it would be interesting and
beneficial for practitioners and investors to understand the nature of volatility in these markets. As a
result, this study aims to investigate the stock market volatility based on the Conditional
heteroscedasticity model that includes the asymmetric impact of good news and bad news on the
volatility.
The rest of the paper is structured as follows: Section 2 reviews the literature on the volatility model and
its extension. Section 3 describes the methodology and data used in this study. Section 4 presents the
empirical results. Section 5 summarizes and discusses the future research.
The conditional heteroscedasticity of volatility model has been developed by Engle (1982) and is known
as the ARCH (autoregressive conditional heteroscedastic) model in order to capture the time-varying
property of the second moment in time series by the squared of the lagged residuals. Bollerslev (1986)
14
ISSN 2326-3636
added the squared of the lagged variance to generalize the ARCH MODEL and this is known as the
GARCH model. Since then, the model has been widely applied to model many economic and financial
time series including stock price, interest rate, and exchange rate.
Although the GARCH model capture the time-varying property in the volatility, it fails to account for the
asymmetric impact of news on the volatility. Glosten, Jagannathan, and Runkle (1993) proposed that the
good news and bad news have different magnitude of impact on the market volatility. They have given the
rational for asymmetric impact as following:
Any unanticipated decrease in expected future cash flows decreases the stock price.
If the variance of the future cash flows remains the same or does not fall
proportionately to the fall in stock prices, the variance of future cash flows per dollar of
stock price will rise an future returns will be more volatile. Hence, if most of the
fluctuations in stock prices are caused by fluctuations in expected future cash flows
and the riskiness of future cash flows does not change proportionally when investors
revise their expectations, then unanticipated changes in stock prices and returns will
be negatively related to unanticipated changes in future volatility.
As a result, they introduced the GJR GARCH model to capture for the asymmetric component. By using
the monthly data of return on the CRSP value-weighted Index of Status on the NYSE during 1954 to
1989, they found that negative residuals are associated with an increase in variance, while positive
residuals are associated with a slight decrease in variance.
The Conditional heteroscedasticity market model was employed by successive literature including the
followings. Reyes (1999) found that accounting for GARCH effects in the market model yields systematic
risk estimates that are markedly differently from those when conditional heteroscedasticity is ignored.
Furthermore, event studies that ignore conditional heteroscedasticity may bias the abnormal returns of
small and large firms, thereby leading to a different conclusion regarding the significance of an
information event. Andersen et al. (2001) found that the unconditional distributions of the variances and
covariances for all stocks in their study are leptokurtic and highly skewed to the right, while the
distributions of the returns scaled by the realized standard deviations are Gaussian. Therefore, taking into
account the temporal factor improves the asset pricing model and should hold promise for the
development of better decision making in practical situations of risk management, portfolio allocation, and
asset pricing. Hansen and Lunde (2005) compared different modifications of the GARCH models by using
inter-day returns as estimation sample and intra-day returns as the out-of-sample and found that
ARCH(1) was significantly outperformed by other models. However, the evidence on GARCH(1,1) model
showed that we cannot reject that none of the competing models are better than the GARCH(1,1). Adrian
and Franzoni (2009) applied the time-varying component in the asset pricing model and the results
showed that the time-varying factor loadings achieves a significant reduction in pricing errors. Fu (2009)
employed the U.S. stock market data and found that the idiosyncratic volatilities are time-varying.
Christiansen et al., (2011) applied the time-varying systematic risk into currency trade strategies and
found that it provides significantly smaller pricing errors than a traditional model. Based on the results, the
carry trade performance is better explained by a time-varying systematic risk that increases in volatile
markets. Milionis (2011) examined whether or not the residuals of the market model are conditionally
heteroscedastic and examined the effect of conditional heteroscedasticity on the estimation of systematic
risk. Cam and Ramiah (2012) have performed event studies to analyze the influence of systematic risk
factors and econometric adjustments on the abnormal stock return during catastrophic events, four
terrorist attacks on the U.S. equity market. They have employed various estimation techniques including
GARCH and CAPM. The evidence showed that the results varied according to the choice of the
technique in estimating an expected return. Other recent research about GJR GARCH model include
Duan et al. (2006), Chen et al. (2008), Becker et al. (2009), Bildirici and Ersin (2009), and Wang (2009).
15
ISSN 2326-3636
3. DATA AND METHODOLOGY
The daily stock indices are collected from Datastream are used to estimate the market returns. Ten years
of data starts from 1 January 2004 to 31 December 2013. Six stock markets in ASEAN include Malaysia,
Indonesia, Philippines, Singapore, Thailand, and Vietnam. The GJR-GARCH(1,1) is employed to estimate
the volatility series of market return. Then based on the GJR-GARCH(1,1), the time-varying component
and the asymmetric news impact component are investigated.
The stock market return is defined as:
, 𝑅!,!
= log 𝑃!,! − log (𝑃!,!!! )
(1)
where 𝑅!,! is the daily return on market index m at time t and 𝑃!,! is index of market m at time t.
The conditional variance in GARCH(p,q) is defined as:
𝜎!! = 𝜔 +
!
!
!!! 𝛼! 𝜀!!!
+
!
!
!!! 𝛽! 𝜎!!! ,
(2)
!
, and𝛽! is the coefficient of the
where 𝜔 is a constant, 𝛼! is the coefficient of the lagged residuals 𝜀!!!
!
lagged conditional variance 𝜎!!! .
In this research, GARCH(1,1) model is employed (p = q = 1):
!
!
𝜎!! = 𝜔 + 𝛼 𝜀!!!
+ 𝛽 𝜎!!!
.
(3)
The conditional variance in GJR GARCH(p,q) is defined as:
𝜎!! = 𝜔 +
!
!!!
𝛼! + 𝛾! 𝐼 !!
!!! !!
!
𝜀!!!
+
!
!
!!! 𝛽! 𝜎!!! ,
(4)
!
, 𝛾! is the coefficient that capture the
where 𝜔 is a constant, 𝛼! is the coefficient of the lagged residuals 𝜀!!!
asymmetric impact of good news and bad news on volatility (the ‘leverage’ term), 𝐼 !! !! is the dummy
!!!
variable of information (=1 if the information is positive i.e. the residual in the previous day is positive, =0
!
. The use of the indicator function I
else, and 𝛽! is the coefficient of the lagged conditional variance 𝜎!!!
represent the positive and negative shocks on the conditional variance asymmetrically.
The GJR GARCH(1,1) is therefore:
!
!
! !! 𝜀!!! + 𝛽 𝜎!!! . ,
𝜎!! = 𝜔 + 𝛼 + 𝛾𝐼 !!!!
(4)
To examine the asymmetric of news impact on volatility, the GARCH(1,1) and the GJR GARCH(1,1) of
each market are compare based on the log likelihood and Akaike Information Criteria. Moreover, the sign
bias tests and the significance of the gamma coefficient (𝛾) of the GJR GARCH(1,1) are investigated.
4. EMPIRICAL RESULTS
Table 1 reports the key empirical results based on the GARCH(1,1) estimation showing optimal
!
!
+ 𝛽 𝜎!!!
.
parameters based on the robust standard errors. Regarding equation (3), 𝜎!! = 𝜔 + 𝛼 𝜀!!!
The alpha coefficient in all markets is significant at 5% expect for the Malaysia, Philippines, and
Singapore market. The beta coefficient in all markets is significant except for the Philippines market.
Table 2 reports the key empirical results based on the GJR-GARCH(1,1) estimation and optimal
!
parameters based on the robust standard errors. Regarding equation (4), 𝜎!! = 𝜔 + 𝛼 + 𝛾𝐼 !!!!
! !! 𝜀!!! +
!
𝛽 𝜎!!!,
for the normal standard errors t-test, all of the coefficients (alpha, beta, and gamma) are
significant at 5% except for the gamma in the Vietnam market. However, when the robust standard errors
are employed, some of coefficients that are no longer significant include the alpha in Malaysia and
Singapore, and the gamma in Singapore and Vietnam. The beta coefficient in each of the six markets
remains significant in the robust standard error models. According to Table 1 and Table 2, the log-
16
ISSN 2326-3636
likelihood of the GJR GARCH(1,1) model is higher than the log-likelihood of the GARCH(1,1) model in all
markets. Moreover, the Akaike Information Criteria (AIC) of the GJR GARCH(1,1) model is lower than the
AIC of the GARCH(1,1) model in all markets. The results imply that the GJR GARCH(1,1) outperform the
GARCH(1,1) in all markets.
Table 3 reports the sign bias test in each market. According to Table 3, the sign bias test shows that the
sign bias is not significant at 5% except in Malaysia and Singapore. The positive and negative sign bias
tests are not significant in all markets. The negative/positive sign bias test implies the impact of
magnitude of negative/positive returns shocks on predicted volatility. If the coefficient of one factor is
significant, it means that the model have not adequately captured the effect of that factor. The results
from Table 3 imply that there is a difference between the impact of a negative and positive shock to
GARCH model in Malaysia, Philippines, Thailand, and Vietnam. Therefore, the GJR GARCH(1,1) models
capture successfully the asymmetric behavior of the conditional volatility in these markets. However,
there is no significant difference between the impact of a negative and positive shock to GARCH model in
Indonesia and Singapore.
TABLE 1. OPTIMAL PARAMETERS BASED ON THE GARCH (1,1)
Malaysia
omega
alpha1
beta1
LogLikelihood:
Indonesia
omega
alpha1
beta1
LogLikelihood:
Philippines
omega
alpha1
beta1
LogLikelihood:
Singapore
omega
alpha1
beta1
LogLikelihood:
Thailand
omega
alpha1
beta1
LogLikelihood:
Vietnam
omega
alpha1
beta1
LogLikelihood:
Estimate
Std.Error
0.0000
0.1053
0.8769
Estimate
t value
0.0000
0.1004
0.1136
9463.86
Std.Error
0.0000
0.1189
0.8652
Estimate
0.0000
0.0189
0.0388
7743.84
Std.Error
0.0000
0.1168
0.8612
Estimate
0.0001
0.1013
0.6065
7890.43
Std.Error
0.0000
0.0958
0.8970
Estimate
0.0000
0.1107
0.1099
8508.01
Std.Error
0.0000
0.1027
0.8346
Estimate
0.0000
0.0126
0.0311
7760.84
Std.Error
0.0000
0.1663
0.8327
0.0000
0.0396
0.0584
7657.48
Pr(>|t|)
0.1540
1.0494
7.7159
AIC:
t value
0.8776
0.2940
0.0000
-7.2502
Pr(>|t|)
0.5462
6.3099
22.2975
AIC:
t value
0.5849
0.0000
0.0000
-5.9316
Pr(>|t|)
0.0359
1.1528
1.4199
AIC:
t value
0.9714
0.2490
0.1556
-6.0440
Pr(>|t|)
0.1331
0.8647
8.1587
AIC:
t value
0.8941
0.3872
0.0000
-6.5174
Pr(>|t|)
20.8687
8.1195
26.8603
AIC:
t value
Pr(>|t|)
0.3050
4.1990
14.2712
AIC:
0.0000
0.0000
0.0000
-5.9447
0.7603
0.0000
0.0000
-5.8654
17
ISSN 2326-3636
TABLE 2. OPTIMAL PARAMETERS BASED ON THE GJR-GARCH(1,1)
Malaysia
Estimate
omega
0.0000
alpha
0.1008
beta
0.8738
gamma
0.2050
Log Likelihood:
Indonesia
Estimate
omega
0.0000
alpha
0.0905
beta
0.8618
gamma
0.3999
LogLikelihood:
Philippines
Estimate
omega
0.0000
alpha
0.1095
beta
0.8510
gamma
0.2300
LogLikelihood:
Singapore
Estimate
omega
0.0000
alpha
0.0780
beta
0.9041
gamma
0.2878
LogLikelihood:
Thailand
Estimate
omega
0.0000
alpha
0.0860
beta
0.8155
gamma
0.4888
LogLikelihood:
Vietnam
Estimate
omega
0.0000
alpha
0.1662
beta
0.8328
gamma
-0.0033
LogLikelihood:
Normal Standard Errors:
Std.Error
t value
0.0000
1.6129
0.0135
7.4889
0.0142
61.7503
0.0439
4.6735
9476.34
Std.Error
t value
0.0000
15.8086
0.0074
12.1940
0.0084
102.9562
0.0398
10.0539
7771.584
Std.Error
t value
0.0000
7.6961
0.0093
11.8209
0.0098
86.4696
0.0366
6.2767
7905.1
Std.Error
t value
0.0000
1.1876
0.0159
4.9164
0.0155
58.5175
0.0657
4.3787
8524.419
Std.Error
t value
0.0000
87.4043
0.0062
13.8880
0.0092
88.8336
0.0590
8.2911
7797
Std.Error
t value
0.0000
1.8408
0.0159
10.4591
0.0151
55.3197
0.0285
-0.1174
7657.48
Pr(>|t|)
0.1068
0.0000
0.0000
0.0000
Pr(>|t|)
0.0000
0.0000
0.0000
0.0000
Pr(>|t|)
0.0000
0.0000
0.0000
0.0000
Pr(>|t|)
0.2350
0.0000
0.0000
0.0000
Pr(>|t|)
0.0000
0.0000
0.0000
0.0000
Pr(>|t|)
0.0656
0.0000
0.0000
0.9066
Robust Standard Errors:
Std.Error
t value
Pr(>|t|)
0.0000
0.1839
0.8541
0.0748
1.3469
0.1780
0.0974
8.9687
0.0000
0.0632
3.2430
0.0012
AIC:
-7.259
Std.Error
t value
Pr(>|t|)
0.0000
11.8355
0.0000
0.0132
6.8710
0.0000
0.0139
61.9799
0.0000
0.0697
5.7345
0.0000
AIC:
-5.9522
Std.Error
t value
Pr(>|t|)
0.0000
4.8597
0.0000
0.0134
8.1498
0.0000
0.0156
54.6955
0.0000
0.0655
3.5114
0.0004
AIC:
-6.0545
Std.Error
t value
Pr(>|t|)
0.0000
0.1783
0.8585
0.0857
0.9103
0.3627
0.0884
10.2250
0.0000
0.1848
1.5568
0.1195
AIC:
-6.5293
Std.Error
t value
Pr(>|t|)
0.0000
41.4915
0.0000
0.0167
5.1489
0.0000
0.0286
28.5262
0.0000
0.1164
4.1975
0.0000
AIC:
-5.9716
Std.Error
t value
Pr(>|t|)
0.0000
0.3029
0.7620
0.0399
4.1662
0.0000
0.0586
14.2000
0.0000
0.0399
-0.0838
0.9332
AIC:
-5.8647
18
ISSN 2326-3636
TABLE 3. SIGN BIAS TEST
Malaysia
Sign Bias
Negative Sign Bias
Positive Sign Bias
Indonesia
Sign Bias
Negative Sign Bias
Positive Sign Bias
Philippines
Sign Bias
Negative Sign Bias
Positive Sign Bias
Singapore
Sign Bias
Negative Sign Bias
Positive Sign Bias
Thailand
Sign Bias
Negative Sign Bias
Positive Sign Bias
Vietnam
Sign Bias
Negative Sign Bias
Positive Sign Bias
t-value
prob
1.9448
0.8551
0.8481
t-value
0.0519
0.3926
0.3964
prob
3.2502
0.0675
0.6452
t-value
0.0012
0.9462
0.5189
prob
1.1646
0.7864
0.4371
t-value
Sig
prob
0.0002
0.0086
0.1313
prob
1.1566
0.1822
0.1733
t-value
Sig
***
0.2443
0.4317
0.6621
3.6780
2.6310
1.5100
t-value
Sig
*
Sig
***
Sig
0.2475
0.8555
0.8625
prob
1.3661
1.6566
0.5815
Sig
0.1720
0.0977
0.5609
Figure 1 shows the news impact curve. In most markets, the news impact curve shows that the impact is
asymmetric and the market is more sensitive when there is bad news. Market volatility increased more
during the downturn than during the upturn.
FIGURE 1. THE NEWS IMPACT CURVE
Malaysia
Singapore
Indonesia
Thailand
Philippines
Vietnam
19
ISSN 2326-3636
5. SUMMARY AND CONCLUSION
The main objective of this study is to investigate the time-varying and asymmetric impact of news on
volatility of ASEAN stock markets. The temporal variation in the volatility and the asymmetric relationship
between news and volatility are taking into account by estimating the GJR-GARCH(1,1) model. The daily
stock indices from major markets in ASEAN including Malaysia, Indonesia, Philippines, Singapore,
Thailand, and Vietnam are used to estimate the market returns and volatility. The GARCH and GJR
GARCH models are estimated on the daily stock return indices of each market from January 2004 to
December 2013. The GJR-GARCH(1,1) is employed to capture the asymmetric news impact component
of the market volatility. The results show that the parameters estimated from the GJR-GARCH model are
significant which indicates that the volatility of the stock market index is not constant over time. Moreover,
the sign bias tests show that there is asymmetric impact of good news and bad news on the market
volatility in four markets which are Malaysia, Philippines, Thailand, and Vietnam and it could be captured
well by the GJR-GARCH(1,1) model.
6. ACKNOWLEDGEMENT
The research is funded by the International College of National Institute of Development Administration
(ICO NIDA), Bangkok, Thailand.
REFERENCES
Adrian, T., Franzoni, F. 2009. “Learning about beta: Time-varying factor loadings, expected returns, and
the conditional CAPM”, Journal of Empirical Finance, vol. 16, no. 4, pp. 537-556.
Andersen, T. G., Bollerslev, T., Diebold, F. X., & Ebens, H. 2001. The distribution of realized stock return
volatility. Journal of Financial Economics, vol. 61, no. 1, pp. 43-76.
Becker, R., Clements, A. E., & McClelland, A. 2009. The jump component of S&P 500 volatility and the
VIX index. Journal of Banking & Finance, vol. 33, no. 6, pp. 1033-1038.
Bollerslev, T. 1986. Generalized autoregressive conditional heteroskedasticity. Journal of econometrics,
vol. 31, no. 3, pp. 307-327.
Bildirici, M., & Ersin, Ö. Ö. 2009. Improving forecasts of GARCH family models with the artificial neural
networks: An application to the daily returns in Istanbul Stock Exchange. Expert Systems with
Applications, vol. 36, no. 4, pp. 7355-7362.
Cam, M. A., & Ramiah, V. 2012. The influence of systematic risk factors and econometric adjustments in
catastrophic event studies. Review of Quantitative Finance and Accounting, pp. 1-19.
Chen, C. R., Su, Y., & Huang, Y. 2008. Hourly index return autocorrelation and conditional volatility in an
EAR–GJR-GARCH model with generalized error distribution. Journal of Empirical Finance, vol. 15, no.
4, pp. 789-798.
Christiansen, C., Ranaldo, A., & Söderlind, P. 2011. The time-varying systematic risk of carry trade
strategies. Journal of Financial and Quantitative Analysis, vol. 46, no. 4, pp. 1107-1125.
Duan, J., Gauthier, G., Simonato, J., & Sasseville, C. 2006. Approximating the GJR-GARCH and
EGARCH option pricing models analytically. Journal of Computational Finance, vol. 9, no. 3, pp. 41.
Engle, R. F. 1982. Autoregressive conditional heteroscedasticity with estimates of the variance of United
Kingdom inflation. Econometrica: Journal of the Econometric Society, pp. 987-1007.
Fu, F. 2009. Idiosyncratic risk and the cross-section of expected stock returns. Journal of Financial
Economics, vol. 91, no. 1, pp. 24-37.
Glosten, L. R., Jagannathan, R., & Runkle, D. E. 1993. On the relation between the expected value and
the volatility of the nominal excess return on stocks. The journal of finance, vol. 48, no. 5, pp. 17791801.
20
ISSN 2326-3636
Hansen, P. R., & Lunde, A. 2005. A forecast comparison of volatility models: does anything beat a
GARCH (1, 1)?. Journal of applied econometrics, vol. 20, no. 7, pp. 873-889.
Milionis, A. E., & Patsouri, D. 2011. A conditional CAPM; implications for the estimation of systematic risk
(No. 131).
Reyes, M. G. 1999. Size, time-varying beta, and conditional heteroscedasticity in UK stock
returns. Review of Financial Economics, vol. 8, no. 1, pp. 1-10.
Wang, Y. H. 2009. Nonlinear neural network forecasting model for stock index option price: Hybrid GJR–
GARCH approach. Expert Systems with Applications, vol. 36, no. 1, pp. 564-570.
AUTHOR PROFILE
Dr. Vesarach Aumeboonsuke (Ph.D., National Institute of Development Administration) is a lecturer of
Finance at International College of National Institute of Development Administration, Thailand. Her areas
of research include financial markets, volatility, and simulation studies.
21
ISSN 2326-3636
WOMEN AS POLITICAL AND ECONOMIC AGENTS IN RWANDA: A GLOBAL
PARADIGM FOR ACHIEVING SUSTAINABLE DEVELOPMENT
Mediatrice Kagaba, University of Rwanda, Huye, Rwanda
ABSTRACT
Since the Rwandan genocide in 1994, the Government of Rwanda has prioritized women as key agents
in the achievement of sustainable development. Collaborations between government and civil society
have resulted in women attaining prominent positions in politics, business and finance, education and civil
society. Rwanda was featured in global headlines for the attainment of the highest percentage of female
Parliamentarians in the world – 56 percent and the first in the world to have a majority of women. This
paper focuses on the essential role of economic and political empowerment of women in government
efforts to move toward sustainable economic and political development for Rwanda. It argues that
government-led policies and programs promoting equal representation of women in the political and
economic arenas have been crucial to national development successes. Rwanda has experienced rapid
development, which must be attributed to the prominent role of women. In this way, the role of women in
Rwanda is a microcosm example of the importance of women’s empowerment to successful and
transformative sustainable development.
Keywords: Women’s participation, economic and political empowerment of women, Rwanda, sustainable
development, East African Community (EAC)
1. INTRODUCTION
In many societies women do not enjoy the same political and economic opportunities as men, thus
limiting the ways in which women can contribute to national development (UNDP, 1997). The 1994
genocide exacerbated the challenges faced by women in Rwanda as approximately 800,000 people were
killed in Rwanda over the course of about 100 days (Newbury, 1998) and up to 500,000 women were
raped. The aftermath left many widows and orphans, and a society both socially and economically
damaged. In 2008, 54 percent of the population was female and 60 percent of households under the
poverty line were female headed (Rwamasirabo, 2008).
Over the last 16 years following the genocide, the position of women in Rwanda has improved. The
Government of Rwanda (GoR), in its strong determination to create a future for its population discharged
of poverty, has undertaken a series of initiatives with the common objective of ensuring the social,
economic and political rights of its citizens. It is within this framework that the national program against
poverty, the Economic Development Poverty Reduction Strategy 2008-2012 was put in place, outlining
coherent actions for sustained development (MINECOFIN, 2007a). In Rwanda Vision 2020 Rwanda’s
strategic goals for the future, GoR emphasizes the development of entrepreneurship and private sector
promotion as a tool of economic development (MINECOFIN, 2000).
GoR recognizes that development strategies will fail unless women are central players in all policies of
peace building and reconstruction. This belief has empowered Rwandan women to participate in the
political, economic and development processes of Rwanda. For example, today Rwanda has the highest
number of women parliamentarians in the world with 56 percent in the Chamber of Deputies—35 percent
in the Senate, and 36 percent in the Cabinet. In addition, 43 percent of district councilors (local
government) and 41 percent of judges in the Supreme Court are women (Basinga, 2007). In the informal
economic sector 58 percent of enterprises are headed by women, contributing 30 percent of national
output (MINECOFIN, 2007b). Women have been given and made aware of their rights and have
recognized the role they can play in society as decision makers. As Herndon and Randell (2010) argue,
22
ISSN 2326-3636
other countries can learn from Rwanda’s gender advancement, in addition to being impressed by its
economic progress.
This research paper shows how the economic and political empowerment of women is a key instrument
for sustainable development. Women are revealed to have participated publicly rather than staying
indoors and behind the curtains. The paper argues that women leaders in Rwanda have played a
significant role in addressing the specific problems faced by women and in turn increased their income. In
addition, it shows how women have worked together with men in Parliament to make changes to the law
that favor women’s empowerment. Women have also launched campaigns to raise other women's
awareness of their rights; expanded women's organizations to promote credit programs targeted to poor
women; and promoted girls enrollment at all levels of education.
However, despite GoR’s efforts in realizing gender equality, there is still a long way to go. In the past
women were left behind in employment opportunities and entrepreneurship, and women’s employment
and entrepreneurship remain low when compared to men’s employment and entrepreneurship despite
women making up the majority of poor people in Rwanda.
2. THEORETICAL FRAMEWORK
This section considers women’s empowerment, giving particular attention to defining and discussing
women’s political and economic empowerment.
2.1. Women’s Empowerment
Empowerment is a process that can apply to many different groups of people, including the poor and
women. According to Kabeer (2001, p.13), empowerment is a process by which those who have been
denied power gain power, in particular the ability to make strategic life choices in a context where this
ability was previously denied. Poverty is viewed as a condition of social, political and psychological
disempowerment with respect to the household's access to the bases of social power (Friedmann, 1992,
1996 cited in Mashack, 2001). Hence, empowerment is the key to overcoming mass poverty.
The mid‐1980s gave birth to the term ‘women’s empowerment’, which then became popular in the
development field (Batliwala, 1994). According to Shahra (2007, p.12) women’s empowerment is ‘a
process whereby women are enabled to organize themselves to increase their own self-reliance, to assert
their independent right to make choices, and to control resources that will assist in challenging and
eliminating their own subordination’. Both Kabeer’s and Shahra’s definitions of empowerment refer to the
ability of people to make choices for their own life and to have power to control resources; these are
crucial elements of women’s empowerment. ‘Choice’, ‘control’ and ‘power’ are three overlapping terms
that are often included when defining empowerment.
For Malhotra et al. (2002) women’s empowerment must be distinguished from the empowerment of other
disadvantaged or socially excluded groups. First, women are not just one among several disempowered
sub-populations; instead they are a cross-cutting category of individuals that overlap each of these other
groups. Second, women’s disempowerment is caused and reinforced through household and family
relations much more so than is true for the disempowerment of other socially disadvantaged groups.
Third, while empowerment of all disadvantaged groups requires a transformation of the power relations
and hierarchies embedded in social and political institutions, empowering women requires, in particular, a
focused transformation of all norms and institutions that support patriarchal structures. Malhotra et al. add
the useful element of ‘change’ necessary to alter biased traditional gender norms.
Drawn mainly from the feminist perspective, many definitions of empowerment contain the idea that a
fundamental shift in perceptions, or inner transformation, is essential to the formulation of choices. At the
core of the meaning of women’s empowerment is the ability of women to control their own destiny. It is in
this line of thinking that Reeves and Baden (2000 cited in Chen, et al., 2005) argue that empowerment is
essentially a bottom-up process rather than something that can be formulated as a top-down strategy.
23
ISSN 2326-3636
This means that to be empowered women must first recognize that they have been disempowered, and
then show commitment towards their empowerment. Without this recognition and commitment, any
attempt to empower women will fail.
Women’s empowerment is considered as an essential step towards achieving ‘gender equality’ and is
why the two concepts are presented together as the United Nations Millennium Development Goal 3.
Empowerment is essential if women are to strive for their basic human rights and life options, which are
currently much broader and more easily accessible to men than women. It is also essential for facilitating
development.
2.2. Women’s Political Empowerment
Women’s empowerment in politics influences the prioritization of political issues and the way in which
politics is carried out. Drude (1991), when analyzing the effect of women’s participation in Norwegian
governance, showed how women in politics placed women’s issues on the agenda and as a result
changed the political culture.
An Australian female politician pointed out that it was only when women entered Australian parliament in
significant numbers that issues such as child care, violence against women and the valuation of unpaid
labor were even considered by policy makers (Corner, 1997). As a result of these issues being placed on
the agenda, Australia now promotes family-friendly employment policies, including work-based child care.
Initiatives such as this not only benefit women, but the entire society. Participation of women in political
offices where they have a direct role in decision making is a means to achieve many goals of
development, through gender-aware, efficient, and widespread policies that directly benefit women.
Dialogue on the social issues affecting women’s lives and communities can lead to greater awareness of
the causes of problems they face and allow them to take more effective action in addressing problems
that are holding them back. Discussion of women’s rights, community problems, politics, and common
family problems can foster a sense of solidarity that can empower women both as individuals and as a
group to address problems that hinder economic development (Rukundo, 2006). Advocates of women’s
political empowerment have always held a fundamental belief that the most direct route to empower
women is through politics. The surest means to address gender inequalities in public policy is for women
to become policy makers. It can be argued that the exclusion of women’s voices in governance has been
one of the root causes of underdevelopment. Women in parliament influence not only the political
agenda, but also the way women and men are perceived in society. For example, when Margaret
Thatcher became Prime Minister in the United Kingdom and Dame Ellen Sirleaf Johnson was elected
President in Liberia, perceptions of possible women’s roles in society were changed for both sexes. In
terms of culture change Drude gives an example of a little boy asking his mother: ‘Mama, can a woman
become prime minister?’ a question impossible to imagine at a time when all prime ministers were men
and before women achieved this position.
2.3. Women’s Economic Empowerment and Development
While political empowerment is certainly important, Oakley (2001, pp.44-45) emphasizes the need to
support poor people in gaining access to tangible economic resources or in income generation projects;
these are crucial strategies for helping to develop the people themselves and bring about national
development.
For many years the World Bank and other development agencies have argued that economic
empowerment is essential for the improvement of people’s lives. Empowerment strategies can help poor
people enter new markets and promote their productivity. Economic growth cannot continue if poor
people are excluded from optimal engagement in productive activities. As women are more likely than
men to be poor, empowering women to exercise their choice is not only valuable in itself but it is the
surest way to economic growth. Strengthening women's economic capacity and enabling women to
become key players in the economy is one of the instruments for promoting growth and development.
The World Bank has noted that societies which discriminate on the basis of gender pay the price of
greater poverty, slower economic growth, weaker governance, and a lower living standard for their people
24
ISSN 2326-3636
(2002). Empowering women by providing capital and allowing them to earn an independent income will
help both secure their household incomes and make them less vulnerable. Economic empowerment
generates self-esteem and respect and constitutes one of the ways through which women can achieve
their emancipation and hence, contribute to development.
Women must, however be involved in designing and implementing development projects. Harcourt (1994,
p.129) concludes that development requires a political system that gives communities an effective say
over the resources on which they depend. It requires promoting citizens’, women inclusive, initiatives,
empowering people’s organizations, and strengthening local democracy. At the World Summit for Social
Development in Copenhagen in March 1995, the United Nations (UN) (1995, p.55) recognized that
women contribute significantly to economic, social and political development and thus sustainable
development is possible only if women are empowered and involved in development activities. The UN,
therefore, works to ensure that women are both participants and beneficiaries of their projects and
programs. Women’s participation creates productive jobs, as proclaimed in the international agreement
adopted at this World Summit attended by 117 countries (UN, 1995).
Most of the scholars cited here acknowledge the role of empowering women in the development process.
Some however, have focused particularly on the traditional and cultural barriers that prevent women from
entering into the development process. A report for the Canadian International Development Agency
(CIDA) on its ability to impact on gender equality concludes that development results cannot be
maximized and sustained without explicit attention to the different needs and interests of women and men
(Vercillo, 1999, p.15).
One way to achieve the above according to Marilee Karl in her book Women and Empowerment (1995) is
to structure the decision making process in such a way as to ensure widespread consultation at all levels
of society about development goals, the processes to achieve those goals, and the resources needed.
Women have often been victims of development programs rather than beneficiaries. They have been
ignored in development policies leading to a negative effect not only on women but in the development of
the community (Boserup, 1970). It is now recognized in development circles that ‘economic growth and
social betterment are best achieved when the mass of the population is informed and involved in
development aims and plans’ (Young, 1993). Therefore, economic development needs female
participation in policy decision-making and the planning process.
2.4. Women’s Empowerment in Rwanda
Drawing on this theoretical framework, this section begins an analysis of the progress of women’s
empowerment in Rwanda, from a political, economic and development perspective.
FIGURE 1. WOMEN’S POLITICAL EMPOWERMENT IN RWANDA:
WOMEN IN PARLIAMENT, 1961-2008
Women parliamentarians in Rwanda,
1961-2008
60%
40%
20%
0%
1961
1981
1990-1994
2003
2005-2008
Source: UNDP, 2007a
In Rwanda, before the civil war in the early 1990s and the genocide in 1994, women never held more
than 18 percent of seats in the country’s parliament. The war and genocide had a disproportionately
25
ISSN 2326-3636
strong impact on women, as rape victims, genocide survivors and widows. In addition, many became the
heads of household and caretakers of orphans. The active participation of women and the incorporation
of women’s perspective at all levels of decision-making in Rwanda are therefore essential to the goals of
equality, development and peace.
By 2005, as the graph shows, the number of female parliamentary representatives had reached 49
percent, surpassing Sweden as the country with the highest percentage of women in elected office. In
2010, Rwanda has the highest number of women parliamentarians in the world with 56 percent in the
Chamber of Deputies. Having such a large percentage of women lawmakers enables Rwanda to create
legislation that helps women. Women themselves already know the problems they and other women are
facing and can propose laws that address these problems. So, women’s participation in leadership results
in their empowerment and improvements to their wellbeing.
The perception that women are better at reconciliation and post-conflict peace building pushed GoR to
empower women politically (Powley, 2006), and quotas for women in Parliament have now been
exceeded as Rwandan society and culture change, especially in terms of the way women are viewed. As
their leadership skills expand, women politicians will gain the influence needed to ensure advancement
and social protection of women especially in rural areas, which is an important source of their
empowerment and development.
3. IMPACT OF WOMEN’S POLITICAL EMPOWERMENT ON DEVELOPMENT IN RWANDA
Soon after the genocide, as the number of female parliamentary representatives increased, several laws
recognizing women’s equality were passed. Particularly significant was the Inheritance Law of 1999,
granting equal inheritance rights to sons and daughters, and the protection of property rights in marriage.
The passage of the new constitution of Rwanda in 2003 was a real turning point. Women in politics,
particularly women in Parliament, embarked on a nationwide campaign to sensitize the population about
gender-based violence and the role of women in achieving sustainable development. In addition, law
reviews forbidding all forms of gender discrimination followed the implementation of this new constitution.
In one example, the Constitution (Special law no. 42/2003, art. 26) provides that ‘only civil monogamous
marriage between man and woman is recognized’, ending the legal practice of polygamy in Rwanda. In
addition, the Organic Law No. 08/2005 ‘determining the use and land management in Rwanda’ has been
promulgated which gives equal land rights to women and men.
As explained in a UNDP (United Nations for Development Program) report (2007a), women in politics,
with the support of GoR, cooperated with the women’s movement, and conducted meetings and training
sessions with women’s organizations to sensitize the population to gender equality and provide
assistance on legal issues. Women’s organizations constitute effective civil society networks, providing
support to genocide widows, orphaned children and people living with HIV and AIDS. They also mobilize
women at the grassroots level to spearhead the promotion of peace, tolerance and non-violence. At the
same time the Ministry for Gender and Family Promotion (MIGEPROF) has established strategic linkages
with national women’s councils, whose base at the grassroots level provides for important linkages
between policy and implementation, ensuring that women’s concerns are integrated in national policies
and programs. These councils are an effective strategy for national development and the promotion of
gender and equality in helping women to overcome their problems.
Several activities since 2003 also demonstrate women’s political empowerment in Rwanda. In March
2004, Rwandan women played a leading role in the proceedings of the international conference on
peace, security, stability and development in the Great Lakes Region (Nyirahabineza, 2004). In October
2004, Rwanda hosted the first regional women’s meeting, which led to the Kigali Declaration in which
women committed themselves to contributing to integration, democracy and good governance, as well as
to humanitarian and social issues (Nyirahabineza, 2004). GoR developed a Women’s District Fund in
1998 to boost women’s economic capacities through microcredit lending. It was later accompanied by a
26
ISSN 2326-3636
Women’s Guarantee Fund enacted in 2004 that helps women who have no collateral for their loans
(Zainab, 2004).
The result and impact of the sensitization and empowerment of women in the development of Rwanda
has been traditionally analyzed under three major indicators: the change in education in Rwanda;
changes in female employment, and changes in economic growth. This paper focuses particularly on the
influence of women in politics on employment and the economy.
4. WOMEN’S ECONOMIC EMPOWERMENT IN RWANDA
4.1. Women and Employment
Investment in women’s economic activities enhances their employment opportunities. The impact of
women’s empowerment on employment can be viewed differently depending on whether one considers
the financial sustainability paradigm, which emphasizes women’s own income-generating activities,
the poverty alleviation paradigm with emphasis on increasing incomes at household level and use of
loans for consumption, or the feminist empowerment paradigm, where individual economic
empowerment is seen as dependent on social and political empowerment.
In the case of Rwanda, Kagaba (2008) found evidence which confirms the first two paradigms. GoR and
policy makers embarked on the development of a labor-intensive, export-oriented industrial structure
specifically motivated by the difficult situation of women after the 1994 genocide. Kagaba’s study (2008)
revealed that sensitization and women’s activist organizations played a great role in encouraging women
to apply for jobs, with equal or higher advantages compared to their male counterparts. This increased
the base of women working in professional areas. GoR has taken measures to reduce discrimination in
the employment sector and gender inequality through changed labour market policies and legislation.
Rwanda considers women’s inclusion in economic activities as a way of empowering women and
achieving gender equality, one of the three cross-cutting areas of Rwanda’s Vision 2020 (MINECOFIN,
2004).
GoR has also implemented programs to enhance women’s integration in the employment process,
including measures to improve water supply, health care and home energy supplies, thus freeing up
women’s time and ability to work outside of the home. Women are now visible and vocal in political and
economic arenas in Rwanda to an unprecedented degree.
The application of affirmative action policies such as legislation to ensure minimum quotas for women’s
participation and labour market equity yielded very positive results in increasing the employment of
women. These achievements are directly linked with the increased number of women in the decision
making arena who strived for both men and women to have equal rights to jobs. This is confirmed by a
MIGEPROF report (2002) which stated that women’s access to employment and earnings needs to be
addressed as part of an overall Rwandan strategy for sustained growth.
However, despite GoR’s effort to include women in economic activities, since 2000, 4,031 jobs have been
cut in the private sector and 4,727 in government enterprises have been cut as a result of privatisation
and structural adjustment. More women than men lost their jobs because of perceived low skill and lack
of capacity as confirmed by the MINECOFIN (Ministry of Finance and Economic Planning) report (2004).
This situation has led to increased unemployment in the public sector and the development of the
informal sector (self-employed). The figure below illustrates that the majority of self-employed
entrepreneurs are women; this is also the result of sensitization, training and workshops led by women’s
activist organisations and women in politics. The informal sector dominated by women is booming in
some of the countries’ villages and partially contributes to the reduction of unemployment. The crucial
problem in this sector is an absence or inappropriateness of credit policies. However, as in the
MINECOFIN report (2004), Kagaba’s empirical study (2008) showed that the informal sector is
27
ISSN 2326-3636
encouraged as the last resort as far as employment is concerned because there are few entrance
requirements.
As a result, GoR, through MIGEPROF, envisaged two specific programs: first, offering technical and
financial support to women-led firms with a view of revitalizing their training activities and refocusing them
toward the needs of the economy and second, strengthening productive micro-project programs for
women (MIGEPROF, 2002). This involved increasing the capacity of individual associations and
enterprises to generate sufficient incomes for women’s basic needs.
FIGURE 2: EMPLOYMENT BY SEX AND SECTOR
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Male
Female
Source: National Institute of Statistics of Rwanda, 2007
FIGURE 3: EMPLOYMENT BY SEX AND PROVINCES, 2001-2006
EICV1 (2000/01)
EICV2 (2005/06)
Men
Women
Men
Women
City of Kigali
78.8
71.5
79.9
75.1
Southern Province
83.4
87.8
80.7
84.3
Western Province
85.3
90.6
80.8
86.2
Northern Province
86.8
90.2
81.3
86.5
Eastern Province
83.8
87.8
83.4
85.9
Source: National Institute of Statistics of Rwanda, 2007
Another major improvement in women’s employment resulted from the organic Law No. 08/2005
Determining the use and land management in Rwanda. Since women in rural areas have had the right to
hold land, things have changed dramatically. They can now use the land as collateral and get credit to be
able to start businesses. This has led to a number of women-led enterprises, including handicrafts, food
processing services and cottage industries. As can be seen from the data in Figure 2, women now
dominate self-employment in the provinces.
28
ISSN 2326-3636
One of the reasons why women’s share of self-employment is moving fast is the effect of associations
such as Gahaya Links, which are offering women training programs on how to create their own jobs and
how to write project proposals so that they can get credit and start their own business. This association
has refined local women’s basket-weaving skills and provides additional training in basket design. Female
parliamentarians have worked via associations of this kind to assist with getting access to markets for
products and donor support. Women in rural areas are being encouraged to join associations, as it is
easier to get this kind of support as a group rather than as individuals.
In many sectors women’s impact is clearly visible. One farmer in a rural area of Southern Provinces said:
[M]y main motivation has been the experience of attending many meetings, seminars in
mobilization and capacity building trainings. The main eye opening factor has been my becoming
a member of a women’s association since the end of the genocide.
She also mentioned that attending meetings, seminars and trainings opened doors to cooperatives and
made her realize that women are also able to do things and that it was possible for her to become an
entrepreneur which would allow her to take care of her children.
Madam Esperance, one of the coordinators of the income-generating activities investigated in the Kagaba
study (2008), was teaching women how to use funds and turn their ideas into profitable ventures. She
explained that women receive loans for six months; the amount of the loan depends on the capacity of
each woman for repayment. Esperance also highlighted that the women’s associations that have
emerged are increasing opportunities and productivity. She also confirmed the success of microcredit
projects, commenting it encouraged more women to form associations and obtain credit because they
see that projects receiving investment are profitable. According to Valerie, a member of a women’s
association, gender promotion is an important element to achieving sustainable development and she is
convinced that it has brought about a positive shift in the thinking of Rwandan people. Women have
become conscious and aware of their rights, through training and meetings.
The above examples confirm the two paradigms of financial sustainability and poverty alleviation, and
clearly explain the role played by female decision makers to improve the wellbeing of other women.
Women-led initiatives at all levels contribute to women’s employment, yet they are just one facet
influencing economic growth.
4.2. Women and Economic Growth
Development policies and programs in many countries tend not to view women as integral to the
economic development process as seen through higher investments in women's reproductive rather than
productive roles, mainly in population programs as argued by Mehra (1997). By contrast, over the past
years after the 1994 genocide, GoR and self-employed women’s associations have been effective in
improving women's economic status because they have started with the premise that women are
fundamental to the process of economic development.
In fact, increased gender equality promises significant returns. Apart from being an important goal in
itself, empowering women by improving their living conditions and enabling them to actively participate in
the social and economic life of Rwanda has led them on the path to long-term sustainable development.
Rwanda has achieved remarkable economic growth since the aftermath of the 1994 genocide. According
to MINECOFIN (2007b) real GDP grew to approximately 10 percent per year as the economy recovered.
As Figure 4 below shows, the economy grew 0.3 percent in 2003 and 7.9 percent in 2007.
29
ISSN 2326-3636
FIGURE 4: TREND OF ECONOMIC GROWTH, 1994 TO 2007
Real GDP (billion Rwf) in Rwanda, 19902006
1200
1000
800
600
400
200
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
0
Real GDP (billion Rwf)
Source: MINECOFIN 2007b
Current research shows that 42 percent of formal and informal business enterprises in Rwanda are
headed by women. This has been enabled by both the 2003 constitution and the matrimonial inheritance
and land law reforms, with Rwanda now a leader among developing nations in creating opportunities for
women. The Kagaba (2008) empirical study found that in the informal sector in Rwanda, 58 percent of
enterprises are headed by women and this represents 30 percent of national output.
Clearly empowerment of women is one factor which influenced the economic growth of Rwanda even
though it is not the sole explanation for economic growth. Women can now contribute to economic
development and hence to the sustainable development of Rwanda.
The empirical work of Faiola (2008) recognizes this situation, ‘Rwandan success in economics mirrored
the rise of women in politics ‘. He explained the issue by comparing the number of businesses owned by
women in Rwanda and other African countries including the Democratic Republic of Congo (DRC) and
Ghana, and subsequent economic growth. He found that according to the World Bank, in 2007, 41
percent of Rwandan businesses were owned by women in comparison to 18 percent in DRC, giving
Rwanda the second-highest ratio of female entrepreneurs in Africa (behind Ghana, which has 44
percent).
Research shows that women are more likely than men to invest profits in the family by improving their
homes, their family’s nutrition and health care and providing better education for their children. This in
turn has affected the younger generation of men who see their mothers and sisters in a different way,
altering their perception of what women can do.
Women’s participation in the labor market and through self-employment has increased Rwandan exports,
and many women’s associations have created principle activities such as weaving and banana exports.
During the Global Summit of Women in Vietnam, Natividad (2008) emphasized that ‘Rwanda is a leading
example of how empowering women can fundamentally transform post-conflict economies and fight the
cycle of poverty ‘. As this paper has shown, this has been brought about by the women’s movement, and
with the help of female politicians, providing training on how to create small income-generating activities.
One member of a women’s association in rural Ngali voiced the same opinion:
[T]he leadership realized that we are doing such a good job, so we started taking part in various
exhibitions around the country, so foreigners would take our products back to their countries, so
30
ISSN 2326-3636
today either inside and outside of Rwanda, in America and Europe, our art work is known and
appreciated.
So this recognition of these activities at a global level positively impacts on communities.
It is important to value the success on the ground for the purposes of providing role models. One person’s
success can encourage another person to try to produce as well. These activities can not only increase
economic empowerment for women, but also reconciliation. The Peace Basket Project is an example of
this, where more than 190 women have created an association to train and support women in meticulous
weaving skills to produce quality products that are sold in Macy’s stores in USA. This project illustrates
the interdependence of Rwandans post genocide. The peace baskets were named so because of the
environment in which they are woven; in communities around the country, women whose husbands were
killed during the genocide sit with the women whose husbands killed them — and they weave baskets
together. Someone may be giving the raw material to make a basket to someone whose husband is in
prison, convicted of having killed the first person’s son. This project shows the amazing value of and
significant impact of forgiveness on reconciliation and peace. It is encouraging to see that in Rwanda,
forgiveness is not only viewed as a valuable end in itself, but as an important strategy for poverty
reduction, national growth and prosperity.
Research into the Peace Basket Project further shows that higher incomes for women leads not only to
increased voice and empowerment, but also to improved wellbeing for the household and greater
outcomes of the nutritional status of children in households (Rwamasirabo, 2008).
The path is still long, but the integration of women in the political arena has affected sustainable
development, as previously defined. Women in politics have contributed a lot whether in terms of
sensitization, changing laws, or creating new businesses.
5. CONCLUSION
This paper has shown that women are now visible and vocal in both political and economic arenas in
Rwanda, to an unprecedented degree. Gender equality and women’s empowerment, particularly with
respect to equal access to employment, education and earnings will continue to be part of the nation’s
overall strategy for sustained growth. Strengthening women's economic capacity and enabling them to
become key players in the economy as well as their political empowerment have been important
instruments for promoting the country’s amazing growth trajectory. Rwanda can indeed be considered by
other countries as a microcosm example of what is possible in advancing development globally if
women’s equal participation with men is taken into account.
REFERENCES
Basinga, A., 2007. The Role of Women in Rwandan Economic Development: Case of Pro-Femme/Twese
Hamwe and Duterimbere. Kigali.
Batliwala, S., 1994. The Meaning of Women’s Empowerment: New Concepts from Action. In G. Sen, A.
Germain & L. Chen, eds. Population Policies Reconsidered: Health, Empowerment and Rights.
Cambridge, MA: Harvard University Press, pp.127‐138.
Boserup, E., 1970. Women’s Role in Economic Development. New York: St. Martin’s Press.
Chen, M. Vanek, J. Lund, F. & Heintz, J., 2005. Progress of
the World’s Women 2005: Women,
Work and Poverty. New York: UNIFEM.
Corner, L., 1997. Women’s Participation in Decision-Making and Leadership: A Global Perspective.
UNIFEM East and Southeast Asia, ACWF, ICAROAP, Philippines.
Drude, D., 1991. Women in political and public life. In: CEDAW. Conference on the United Nations
Convention on the Elimination of all Forms of Discrimination Against Women. New York, 25-31 October
1991, United Nations: New York.
31
ISSN 2326-3636
Faiola, A., 2008. Women Rise in Rwanda's Economic Revival, Washington Post, 16 May A01. Retrieved
8
Feb,
2012,
from
http://www.washingtonpost.com/wpdyn/content/article/2008/05/15/AR2008051504035.html
Harcourt, W. ed., 1994. Feminist Perspectives on Sustainable Development. London: Zed Books.
Herndon, G. & Randell, S., 2010. Rwandan Women’s Power, Occasional Research Report 3, Centre for
Gender, Culture and Development, Kigali Institute of Education, Kigali.
Kabeer, N., 2001. Resources, Agency, Achievements: Reflections on the Measurement of Women’s
Empowerment. In B. Sevefjord, et al., eds. Discussing Women’s Empowerment –Theory and Practice.
SIDA Study No.3. Retrieved Feb 8, 2012, from http://www.sida.se/Documents/Import/pdf/No3Discussing-Womens-Empowerment---Theory-and-Practice.pdf
Kagaba, M., 2008. Women’s Political Empowerment as an Instrument for Sustainable Development in
Rwanda. Seoul: Ewha Women´s University Library.
Karl, M., 1995. Women and Empowerment: Participation and Decision Making. London: Zed Books.
Mashack, M.K., 2001. Empowerment Through Economic Transformation. Durban: African Millennium
Press.
Malhotra, A. Schuler, S.R. & Boender, C., 2002. Measuring Women’s Empowerment as a Variable in
International Development. Background Paper Prepared for the World Bank Workshop on Poverty and
Gender: New Perspectives.
Mehra, R., 1997. Women, Empowerment and Economic Development. The Annals of the American
Academy of Political and Social Science, 554(1), pp.136-149.
MIGEPROF, 2002. Report of the Learning Oriented Assessment on Gender Mainstreaming and Women’s
Empowerment Strategies in Rwanda. Kigali, Rwanda: Republic of Rwanda.
MINECOFIN, 2007a. Economic Development & Poverty Reduction Strategy 2008 – 2012. Kigali: Republic
of Rwanda.
MINECOFIN, 2007b. Final Report on Employment and Education: Analysis of the EICV2. Kigali: Republic
of Rwanda.
MINECOFIN, 2000. Rwanda Vision 2020. Kigali: Republic of Rwanda.
National Institute of Statistics of Rwanda, 2007. Rwanda Integrated Living Conditions Survey 2005-2006.
Kigali: National Institute of Statistics of Rwanda.
Natividad, I., 2008. Opening Statement. In: GlobeWomen, Global Summit of Women in Vietnam. Hanoi,
Vietnam 5-7 June 2008. GlobeWomen: Washington DC. Retrieved Feb 8, 2012, from
http://www.globewomen.org/summit/2008/Speeches/Text/Natividad_Opening.htm
Newbury, D., 1998. Understanding Genocide. African Studies Review, 41(1), p.74.
Nyirahabineza, V., 2004. Forum des Femmes Rwandaises Parlementaires (FFRP). Rapport Annual,
Kigali.
Oakley, P., 2001. Evaluation Empowerment: Reviewing the Concepts and Practices. Oxford: INTRAC.
Powley, E., 2006. Rwanda: Women Hold Up Half the Parliament. Stockholm: International IDEA.
Retrieved Feb 8, 2012, from http://www.idea.int/publications/wip2/upload/Rwanda.pdf
Rukundo, J., 2006. Women’s Empowerment is a Vital Instrument for Development in Rwanda. Taba,
Butare: NUR.
Rwamasirabo, E., 2008. Women Empowerment in Rwanda. Tokyo: United Nations University.
Shahra, R., 2007. Does Paid Work Enhance Women’s Access to Welfare? Evidence from Selected
Industrializing Countries. Social Politics, 14(1).
Snyder, M. & Tadesse, M., 1995. African Women and Development: A History. London: Zed Books.
UNDP, 1997. Human Development Report. Kigali: UNDP.
UNDP, 2007a. Human Development Report 2007-2008. Fighting climate change: Human solidarity in a
divided world. New York: Palgrave Macmillan.
UNDP, 2007b. Turning Vision 2020 into Reality: From Recovery to Sustainable Human Development.
National Human Development Report, Rwanda, 2007. Kigali: UNDP.
UN, 1995. Report of the World Summit for Social Development. A/CONF.166/9. New York: UN. Retrieved
Feb 8, 2012, from
http://www.un.org/documents/ga/conf166/aconf166-9.htm.
Vercillo, S., 1999. The Ineffectiveness of CIDA’s Ability to Impact Gender Equality, CIDA, Gatineaux,
Quebec, retrieved Feb 8, 2012 from http://sieravercillo.wordpress.com/2010/07/09/the-ineffectivenessof-cida%E2%80%99s-ability-to-impact-gender-equality/
Young, K., 1993. Planning Development with Women: Making a World. London: Macmillan.
32
ISSN 2326-3636
Zainab, S., 2004. Women Taking a Lead: Progress Toward Empowerment and Gender Equity in Rwanda.
Women for Women International Briefing Paper September 2004. Kigali: Women for Women.
AUTHOR PROFILE
Kagaba Mediatrice is a Ph.D. student at the University of Gothenburg in Sweden and an assistant
Lecturer at the Political Science Faculty of University of Rwanda. Her area of research includes gender
and development, women studies, peace and security.
33
ISSN 2326-3636
IMPROVEMENT PROJECT OF LEAN MANUFACTURING IN A TWIN PLANT
Adan Valles, Technological Institute of Ciudad Juarez, Chihuahua, Mexico
Jaime Sanchez, Technological Institute of Ciudad Juarez, Chihuahua, Mexico
Salvador A. Noriega, The Autonomous University of Chihuahua, Chihuahua, Mexico
Margarıta G. Luna, Technological Institute of Ciudad Juarez, Chihuahua, Mexico
ABSTRACT
The economic world is increasingly competitive, where companies have been forced to improve their
processes in order to deliver better and cheaper products and its competitive environments exercise great
pressures that constitute the driving force of improvement. Companies and academics focus on creating
and developing the technological capabilities which are the base of competitive advantage. Two of the
best known are the Theory of Constraints and Lean Manufacturing. The first is a tool for the elimination of
the constraints that inhibit production flow and sales, while the second is composed by several tools for
increasing productivity and quality and for the elimination non value added tasks. This project was made
in an electric motor assembly company. Production follows three main processes, which are the winding
process for the manufacture of the motor coil, the process of miscellaneous manufactures the caps,
switches, motors and cable housings and final assembly processes rotors, engine and packaging. This
company was operating under high inventory levels between processes and stacking of materials, with
absence of cleanliness and safety, besides of production delays caused by machines breakdowns.
Management believed that the problems root causes were related to bad balanced lines, poor layout and
workstations design, lack of equipment maintenance, lack of material and wrong master production. This
project was applied with two purposes, to test those assumptions and determine if the problems can be
solved with the joint application of the Theory of Constraints and the philosophy of Lean Manufacturing
System. To finish, results of the implementation indicate the achievement of a great waste elimination and
conclude that the improvements seemed to confirm the initial assumptions.
Keywords: lean manufacturing system, theory of constraints, productivity improvement.
1. INTRODUCTION
The company where this study took place assembles electric motors. Production floor is composed with
three main areas, which are the winding area where the coil is made engine; miscellaneous area, where
the lids are made, switch, motor housing and cable assembly and the area comprising the area of rotors,
assembly and packaging of the engine. This plant operated under high levels of inventory between
workstations and work in process to avoid production delays caused by the machine breakdowns,
conditions that seemed unacceptable to management and triggered an improvement effort. It is generally
accepted that inventory hides problems like bad line balances, poor design of workstations, inadequate
maintenance, material shortages, mistakes of master production schedules; those problems are closely
related to large wastes, defective products and with utmost importance, the company is unable to develop
competitive advantage.
Under this production environment, companies are forced to improve, mainly with tools of Lean
Manufacturing (LM). Lean Manufacturing is a set of tools that allow value increases by maintaining an
environment of continuous improvement for the reduction and elimination all kinds of waste. Specifically,
LM reduces waste, inventory and floor space, the activities that do not add value, creates appropriate
systems of material management without losing time, finds mistakes and improves the tasks, so that they
can be more flexible. Lean Manufacturing covers almost all the functions and activities of the company,
from design and improvement of products to physical distribution. Therefore, the traditional elements of
Lean Manufacturing are related to design new products and services, improving existing products and
34
ISSN 2326-3636
effectiveness material procurement through purchasing, warehousing of raw materials, manufacture and
assembly operations.
In general, the first tasks needed for the deployment of improvement projects is the measurement of the
actual output and performance of the processes. The cycle time is one of the first index that come to the
minds of team members when challenged to improve a process, it is important to measure it, but the team
must keep in mind the customer needs for improvement. (Seth & Gupta, 2005).
Among the LM techniques applied in this project, are Kanban, Total Production Maintenance (TPM),
PokaYoke and Single Minute Exchange of Dies. In the next paragraphs, these techniques are described
and the way they were applied in this project.
Regarding Kanban, its purposes are the variation reduction of wip inventories and simplify the inventory
control. Also is important, according to Nakamura, (1998), the increase in floor control through
decentralization and production and inventory control transfer to supervisors and managers. According to
Roberts (1997), TPM is for the development of a sense of ownerships to operators and high technical
capabilities to them and maintenance personnel, with the purpose that equipment is operational available.
To Tajiri, (1999), for the purpose of zero defects and prevent equipment failures it is important to optimize
the conditions of the plant, using the knowledge and skills of operational staff, while Strut (2001) reports
that the purpose is that production operators are to be suppliers of equipment performance information.
Shimbun (1997) says the intent of the technique of "Poka Yoke" is the use of special devices to avoid
human error, as well as omissions that cause quality defects. Meanwhile Shingo (1986) postulates that a
Poka Yoke device must be used to inspect the parts produced to determine whether it is acceptable or
defective; also Ricard (1987) describes the Poka Yoke devices used by General Motors (GE ) as a
source of inspection of the presence of the right parts in the wip. While Norman (1989) describes the
Poka Yoke as a technique to "tax functions" that can make the process slow, Chao and Ishii (2005)
concluded that the device tests errors, providing feedback, ensuring that the root cause of error is
detected and corrected. The best proof that these methods reduce errors is to make the task much
easier. Active prevention and all kinds of schemes in this regard, are preferred for inspection, which has
proved its ineffectiveness in detecting errors, besides of being costly and late.
The technique “Single Minute Exchange of Dies” (SMED) according to Rieznik (1998) and Barry (1999), is
to reduce the time taken to change the machine's preparation and adjustment for production. Bejarano
(2003) says that "SMED" is applied to reduce production costs, overproduction and inventory
maintenance process, while Verdeman (2004), says that it is a quick response to engineering changes for
better machine utilization.
The Theory of Constraints proposed that constraints are to be determined, constraints constitute
machines, men, operations with the minimal capacity, meaning that independently of the capacity of all
the process elements, throughput yield depends upon the one with the lesser capacity. According to
Goldratt (1989), constraints have to be “exploded”. The process of deployment is exposed in the next
section.
2. METHODOLOGY
The steps followed for the implementation of lean manufacturing with the theory of constraints were: 1.
Introduction to the Theory of Constraints. 2. Training of plant personnel. 3. Measurement of operation
times and motions. 4. Obtaining equipment capabilities. 5. Standardization of routes. 6. Data capture
software program. 7. Inventory control. 8. Operation of the program. 9. Implementation of lean
manufacturing program star.
 Introduction to the Theory of Constraints: Workshop to the staff, on TOC and its application.
 Training of plant personnel: Workshop to the head of the plant personnel with emphasis on
materials; to manage the synchrony between plants. After that, the staff of the plant, along with
35







ISSN 2326-3636
managerial staff and ending with operational staff, received another workshop and its contents
were the basic definitions of the system and its deployment in the plant.
Time and motion studies: A group of technicians and engineers was formed to make time studies
and improve motions.
Measurement of technical capabilities: The same group responsible for the measurement of times
was in charge of the measurement of the capacities of machines and production equipment.
Standardization of routes: All the data was updated and standardized the process routes.
Data capture software program: The above data (time and motion capabilities and production
routes) was captured on PC’s. The program's main function is to use the above data for the daily
production scheduling and synchronization of the plant with other plants.
Inventory control: The main restriction of this program is to nullify the production of any product
with incomplete kits. As inventory control should be as reliable as possible, to achieve the
program's success. The delivery times of materials and incoming-reception, once concentrated in
the system, it will schedule times tasks such as expedition and processing.
Operation of the program: The client sends requests which are fed to the program, calculating
with the data base time, movements and capabilities.
Implementation of lean manufacturing program with star points: For the deployment of the LM
tools star teams were designated as responsible for the deployment, the star points were six,
SMED, TFM, TPM, Lean Culture, 6´s, Value Stream Map
The techniques 6´s and Visual Factory is the basis for the other stars. The project begins developing the
program of visual factory for the standardization of workstations and equipment in each area. To
implement it, the cooperation of the major departments of the plant was obtained, such as: engineering,
maintenance, production and quality, each department defined colors, design and presentation of each
activity to be fulfilled in the program, along with the other steps of the program; this was described by a
Gantt chart.
Several efforts were made to standardize the areas of labor and machinery that were defined as follows:
Production as the department with greater contact with the machinery and work stations were
commissioned to work heavier than the previous painting of all accessories including bases, drawers, etc.
that were in production areas. Figure 1 shows the changes in the production floor. The following colors
were defined;
 Blue for Machines, work tables, racks of materials, material carts, drawers, filing cabinets, and the
boundaries at the corners of pallets, tables, trolleys containing material, racks and drawers
containing materials and equipment necessary tool in the area.
 Orange for Electrical parts of machinery.
 Green fort the establishment of the finished product and to paint non-hazardous fluid piping.
 Red for water pipes against fire attempts, painting and delineation of scrap, hazardous waste,
and drawers lock out, tag out.
 Two yellow paint tones were used. One, for pipe guards and hazardous fluids and the other tone,
for the delimitation of items that have nothing to do with the production of the station as garbage
cans or cleaning drawers, drinking fountains, etc.
FIGURE 1. VISUAL FACTORY IMPLEMENTATION IN THE PRODUCTION AREA
36
ISSN 2326-3636
FIGURE 2. FIRST PIECE STANDARD AND FOLDERS FOR COILS
The Quality department defined the way in which are presented the first pieces in the line. The
Engineering department is responsible for: the presentation of visual aids, identification of the operation,
the place for the tools of the operation area for fixtures, gauges, place for the material of the operation,
layout of the station and the area and the presentation of the metric for the area.
FIGURE 3. STANDARD VISUAL AID AND THE OPERATION MODULE AND THE METRIC OF THE
AREA
The module will be completed by the departments of production, engineering, maintenance, human
resources, quality and LM. The Maintenance department is responsible for the standardization of the
diameter and height of the pipe, also paint according to color code governed by rule 026 of the Ministry of
Labor and Social Welfare. Other activities include the routing of the wiring of the machine, standards
identification, the alignment of the lamps and the line identification.
Each department had a period of 15 days to perform the activities and their advance was audited. An
audit was conducted by the coordinator of LM of the area. The area would be released until they have
complied with each point of the audit after a 15 day period. Any discrepancies found should be completed
in the next 15 days.
A 6S's program was applied to maintain the activities performed by visual factory. For the 6S's project, the
plant was divided into 4 areas, in every area a team was formed with the production superintendents as
leaders, along with a team supported by engineering and maintenance. To each leader was given a folder
with the following documents: the first is a series of issues for the certification in 6S's, the audits were
performed on a fortnightly period and with a format for corrective actions, improvement was planned.
Lean Culture Star
37
ISSN 2326-3636
This phase stars with the implementation of the program of visual factory. The team worked in the design
of a plan; train all personnel operating at the plant; design and materials required and organize special
events of awards. In this phase, kaizen events are organized.
FIGURE 4. STANDARDIZATION OF PIPE COLOR, WIRING ROUTS, AND IDENTIFICATION OF
STANDARD EQUIPMENT
Regarding the Total Productive Maintenance (TPM) Star consisted of the following activities: The
introduction of the TPM techniques to all plant personnel; the generation of a plan for implementation of
events and the selection of members of events and a Kaizen event. During the cleaning routine, the team
reviews the condition of equipment and shall be puts a red card to the discrepancies it finds during its first
review.
FIGURE 5. IDENTIFICATION OF DISCREPANCIES A RED CARD
Once the opportunities are identified, they are classified taking into account their impact, whether high or
low and the deployment speed, slow or fast and set priorities, beginning with the high and quick and
finally the low-impact activities and slow to deploy. Also there are parallel activities such as performing
self-maintenance routines. These routines will help to keep the machinery in good condition, increase life
38
ISSN 2326-3636
time and reduce downtimes. The routines are divided into three parts, which are machine cleaning,
operation and set up activities. Along with this activity indicators will be scored and place program on
control board, Figure 6; tools are provided to facilitate the implementation of the routines. Also is provided
a sheet for data collection for the overall effectiveness of the team. This format will be held in conjunction
with routine maintenance in order to analyze the root problem of the equipment.
FIGURE 6. INDICATOR WITH MARKED BOUNDARIES AND SHADOW BOARD WITH TOOLS
NECESSARY FOR ROUTINES
The folders will be located on a board of TPM, Figure 7, with the routines, preventive maintenance of
machinery, the card system and future graphics overall efficiency of the machinery, it must be located in a
middle point so that all operators have the opportunity of going through folders of autonomous
maintenance.
FIGURE 7. TPM BOARD
The team will track the cards that are prepared during the routine maintenance done by the operator,
using a mail box for placing maintenance orders. The operator fills out a card with the discrepancies
found during the routine check and the TPM team gets a list of parts, determines the critical ones,
programs activities and gives follow-up. Upon completion of the above activities the team leader must
train both line and operators who will perform the self-maintenance routines, ending with the presentation
ceremony of TPM.
• To ease material, training, support throughout the event.
• Schedule presentations of events.
• Monitor events and pending audits have been through two weeks.
• Present results of audits and event planning, the Champion of the plant.
• Present development of the star with the staff of the plant monthly.
39
ISSN 2326-3636
At the end of the month the star of TPM, submits to the staff team the number of events held, their
success, the savings, presents the results of audits and any requirement or need of some help managers.
The main features of the presentation are the metrics, TPM and OEE (Overall Equipment Effectiveness),
information from the forms with the same name. Their main metrics are availability, utilization and quality.
With these results the maintenance department and management can make better decisions about a
machine, either in priority of attention, maintenance, use or repairs.
FIGURE 8. RESULTS OF OVERALL EQUIPMENT EFFECTIVENESS
Automatic Assembler
OEE
Percent
Availability
Utilization
Monday
Wednesday
Friday
Regarding the Star Total Flow Management (TFM), the members of this star administered tool Total Flow
Management. The main activities carried out are:
• Introduction of the tool to all plant personnel:
For the introduction of the tool are used two levels of training: Level 1 is a summary discussion of
the tool for plant operating personnel scheduled every 3 months and will be taught by members of
the Lean culture star. While level 2 is a more specialized training given by staff, future leaders of
stars or kaizen events.
• Generation of plan for implementation of events along with the staff:
The members with the Lean Champion and the plant will generate an implementation plan of
events that will be made based on the constraints on the flow due to opportunity areas that are
within the lines.
• Selection of members of events:
The selection of members is done through a rule made by the team, each event is covered by
integrating 5 persons: a leader (which shall be a clerk), a technical group leader or supervisor of
the area, an operator of the area where the event takes place and either a materials clerk or
personnel from production materials.
• Kaizen Event:
A master plan is developed by the team to conduct the event, with the main points to be covered
for a successful event. The Kaizen of TFM is held in the third week of each month. Before the
event, there is a pre Kaizen, where the leader of the event in conjunction with the process engineer
develops a PQ graph, to determine similar products, integrates them in families accordingly to
production volumes. Day one ended with the visit of the area by the team members to take pictures
of the current status of the line. During the second day, inventory levels are determined, with
between process activities, their way of materials procurement and decision times.
40
ISSN 2326-3636
FIGURE 9. GRAPH OF STD. TIME VS. TAKT TIME
FIGURE 10. LAYOUT WITH WIP
FIGURE 11. LAYOUT MATERIAL OF STOCKED IN THE AREA
Then, the team determines the size of the kanban between workstations that is needed to buffer line
unbalance. Exploring ways to improve them by implementing a close by raw in process market and a
material procurement routine and improving the layout area and the workstations.
On day three, the team will begin implementing what was determined on day two, as improvements in
each place, improvement of layout (if necessary) to accommodate people accordingly to the improved
41
ISSN 2326-3636
balance time, the shape of the raw in process market to be held in the area, run the process with the
amount of inventory between process. Also are prepared instruction sheets when methods change and
personnel is supervised, discipline is enhanced by the common means.
On day four, the work is done with the improvements made and are established standard operating
sheets with the activities and tasks that must do the operator to make the operation more efficient, as well
as adding the self-inspection before and after their routine activities, the inventory of process that should
have and the distribution of the workstations and the material and levels.
Once implemented the standard operation sheets, the operators know the line, understand its behavior
and use their knowledge to improve it.
By the fifth day, a presentation of the event is given to the staff of the plant. This presentation creates the
will, commitment and drives to the next event. It was during this presentation that the kaizen team
detected the opportunities for a SMED in the line.
Finally, a process for the Star was developed, with the activities:
• To ease material, training, support throughout the event.
The star will help the team with training, delivering the materials required to take advantage of
opportunities and the equipment necessary to perform the routines. The team also provides
guidance when problems arise at the time of the event or during the improvement of layout.
• Schedule presentations of events.
During the presentation, the star will deliver the invitations and program the presentation of the
event to the staff and the people in charge of the area where the improvement was made.
• Monitor events and pending audits have been through two weeks.
Once finished the project, the team gives follow-up of the work conditions. Audits are conducted
every 15 days and are considered of the utmost relevance to the success of the event, along with
the audits that are conducted, will be reviewed pending activities. During the audit, if the team
finds a discrepancy, corrective action is requested of immediate change of the area, to be audited
in the next fortnight.
If the audit meets each of the points during a period of three consecutive months the event is free,
meaning it will no longer be audited. If not then the team continues the audit.
• Present results of audits and event planning, the team will give the plant the results of each event
at the end of it, audits and event planning.
• Present development of the star with the staff of the plant monthly. At the end of the month, the
star of TFM, submits to the team the development: the number of events held, their success, the
savings obtained and any requirement or need of some help managers.
In relation to the Star SMED (Setup preparation in a minute), the members of this star were in charge of
the SMED application. The main activities carried out were:
• The introduction of SMED to all plant personnel by means of two types of training: Level 1 and
Level 2. Level 1 is a summary discussion of SMED for plant operating personnel scheduled every
3 months and will be taught by members of the Lean Culture Star. While level 2 is a more
specialized training, it is given by staff, future leaders of stars or from kaizen events.
• The development of the plan for implementation of events is made by the staff. The members with
the Lean Champion and the plant developed an implementation plan of the events that will be
made with SMED, based on the constraints on the areas due to the delays and downtime lost
when a change of model.
• The selection of members of events is done through a rule made by the team, each event is
covered by a set of 4 persons: a leader (which shall be a clerk), a technical group leader or
supervisor of the area and an operator of the area where the event take place.
• Kaizen Event. There is a SMED Kaizen event if the last week of the month. A master plan is
developed to conduct the event, with the main points to be covered for a successful event. It
begins, the first day, with a training course on Lean Manufacturing and the tools, ending with a
diagnosis of the machine setup, videos are recorded and used to classify the elements of the
preparation into internal and external. The second day will begin searching for improvements to
42
ISSN 2326-3636
be made to eliminate or reduce the times of the formerly divided operations. On the third day
improvement activities are evaluated, changes are made and video recorded. Finally, changes
are approved and used for standard operation sheets, this information enables the operator to
interpret and perform the operations. In the fourth and final day, the event is presented.
• To ease material, training, support throughout the event. The star will help the team with training,
the materials required to take advantage of opportunities and the equipment needed to perform
the routines.
• Monitor events and pending audits have been through two weeks. Once delivered the event to the
area, the team will follow-up. Audits are conducted every 15 days which are considered with
utmost relevance to success. If the audit meets all the points during a period of three consecutive
months the event is free, meaning it will no longer be audited.
• Present results of audits and event planning. The champion team will expose to the personnel,
the results of each event.
• Present development of the star to the staff of the plant monthly. At the end of the month the star
of SMED, must submit the number of events held, their success, the savings, the results of audits
and any requirement or need of some help managers.
System Integration. Once the system constraints are established, follows the implementation of the visual
factory, which is maintained through 6S´s audits. Once implemented the TPM kaizen events on
machinery and equipment in the pilot area, they will coincide with TFM events to streamline the line flow
and mark the most critical opportunities, the possible changes and facilitate the implementation of SMED
events.
In the above kaizen events, work is done with standard operations, kanban, and other tools to achieve
greater success in the area.
4. CONCLUSIONS
Having applied Lean Manufacturing to synchronize the flow and from the philosophy of theory of
constraints to remove them, the company gained speed in identifying opportunities for improvement and
developed solutions.
The system of lean manufacturing was implemented successfully through star teams and managed the
application of lean tools.
The integration of teams allowed a better and faster implementation of visual factory within the production
line and its maintenance through 6S's, multidisciplinary teams, SMED, TPM, standard work and kaizen.
The elimination of constraints increased the line efficiency from 74% up to 96%. In terms of ppm's the
area did not get the goal of 900 per month, but decreased constantly throughout the year of 2011 with a
downward trend.
And the stock level fell to 2 days. Kaizen had no events during 2010 but had 19 events in the winding
area in 2011, achieving savings of more than $ 70,000 USD.
REFERENCES
Barry, F. (1999). A Revolution in Manufacturing: The SMED System by Shigeo Shingo. A Power Point
Training Presentation. Editorial Delphi Packard Electric Systems. Casas Grandes, Chihuahua, México.
Bejarano, G. (2003). Aplicación del SMED Para la Reducción del Tiempo Muerto en el Proceso de
Inyección de Plásticos. Tesis de Grado de Maestría. Editorial Instituto Tecnológico de Cd. Juárez. Cd.
Juárez, Chihuahua, México. pp. 19-20.
43
ISSN 2326-3636
Nakamura, M., S. Sakakibara, et al. (1998). "Adoption of just-in-time manufacturing methods at US-and
Japanese-owned plants: some empirical evidence." Engineering Management, IEEE Transactions on
45(3): 230-240.
Norman, D. A. (1989). The design of everyday things. New York:Doubleday
Rieznik, P., (1998). Trabajo Productivo, Trabajo Improductivo y Descomposición Capitalista
http://www.po.org.ar/edm/edm2trabajo.htm.
Roberts, J. (1997). Total Productive Maintenance (TPM). The Technology Interface.
Seth, D. and Gupta, V.,(2005). Application of value stream mapping for lean operations and cycle time
reduction: An Indian case study, International Journals of Production Planning and Control, Vol. 16,
No.1, pp. 44-59.
Shimbun N. K. (1997). “V2500 jigyô, hatsu no kuroji” (V2500 Enterprise, In the Black for the First Time).
Shingo, Shigeo (1989), A Study of the Toyota Production System, Productivity Press.
Tajiri, M. y Gotoh, F. (1999). Autonomous Maintenance in Seven Steps: Implementing TPM on the Shop
Floor (TPM), Productivity Press, Portland, OR. USA.
Verdeman. (2004). http://www.cdi.org.pe/tema_0072004.htm.
AUTHOR PROFILES
Adan Valles is a Professor of the Technological Institute of Ciudad Juarez. He has a Masters and a Dr.
Sc. Degrees in Industrial Engineering from the Technological Institute of Ciudad Juarez. He has a Black
Belt Certification in Six Sigma. His areas of specialty include lean manufacturing, statistical quality control,
experimental optimization, design of experiments and Six Sigma. He has more than twenty years
experience in the industry. He worked at Delphi, United Tecnologies Automotive, and Lear.
Jaime Sanchez is a Professor and former Principal of the Technological Institute of Ciudad Juarez. He
has Bachelor and Masters Degree in Industrial Engineering from the Technological Institute of Ciudad
Juarez and also has a Master Degree in Mathematics and a Ph. D. in Industrial Engineering from New
Mexico State University. His areas of specialty include applied statistics, statistical quality control, and
experimental optimization, design of experiments, response surface methodology and mathematical
programming. He is author of two books of statistics and design of experiments and co-author of a
number of national and international journal publications.
Salvador A. Noriega is a Professor at the Universidad Nacional Autonoma de México and Head of the
Department of Industrial and Manufacturing Engineering at the Universidad Autonoma de Ciudad Juarez.
He has the Masters and Dr. Sc. Degrees in Industrial Engineering from the Ciudad Juarez. His areas of
specialty include manufacturing-technology strategies, quality improvement and ergonomics. Coauthor of
a book about Occupational Ergonomics published by the International Journal of Industrial Engineering
Press.
Margarıta G. Luna is affiliated with Technological Institute of Ciudad Juarez, Chihuahua, Mexico.
44
ISSN 2326-3636
SPIRITUAL CAPITAL AND LEADER PERFORMANCE:
HOW CAN STRATEGY BE DEFINED?
Ana Martins, Zirve University, Gaziantep, Turkey
Isabel Martins, Harold Pupkewitz Graduate School of Business, Namibia
Orlando Pereira University of Minho, Portugal
ABSTRACT
The quantum theories have become widely accepted within the fields of management and social
sciences. These theories re-enforce and enhance organisational sustainability. The principles of the
quantum approach are humanizing in nature and act as a panacea in organisational life. As a result, in
those organisations that adopt this mindset, employees tend to accept common goals and objectives.
The objective of this paper is to ascertain whether management of higher education institutions,
specifically Universities, follow the quantum principles as is evident in other sectors. Furthermore, in view
of universities being regarded, par excellence, the source for creation and sharing of knowledge, this
paper reflects on whether there can indeed be sustainability even in the absence of spiritual capital.
Moreover, reflection will highlight whether major challenges in organisations, namely knowledge creation
and sharing, appear to be neglected resulting from the oversight of spiritual capital – a vital component in
the new age organisational paradigm. In view of the abovementioned concerns the paper aims to identify
the characteristics of the spiritual capital in profit oriented organisations by converging these with the
higher education sector, namely universities. The paper highlights major organisational challenges knowledge creation and sharing, appearing to be neglected resulting from the oversight of spiritual
capital, vital component in the new age organisational paradigm.
Keywords:
Learning.
Higher Education Institutions, Shared Leadership, Spiritual Capital, Values, Knowledge,
1. INTRODUCTION
In recent years, the role of Universities in creating and sharing knowledge has been purpose of reflection.
In view of the fact that Higher Education Institutions (HEIs) fulfil a strategic function in economic, social
and personal development, we perceive that the professional performance of alumni arising from HEIs
should be tangible and measurable. This issue is also associated with intellectual capital, especially
spiritual capital. This capital, from a voluntary, responsible and esprit de corps perspective, affords
individuals to be consciously aware of themselves, their life, their role in society and especially the tasks
and activities to be performed in organisations. Therefore, spiritual capital is a strategic asset associated
with individual, group and organisational performance which positively affects society. Spiritual capital
enables efficient productivity and also the creation of a harmonious and cohesive workplace. The
spiritual construct fosters critical and constructive thinking, strengthening cooperation, tolerance, creativity
and sharing. Moreover, spiritual capital enables commitment towards unconditional participation and
organisational flexibility leading to innovation and sustainable competitive advantage.
The main aim of this paper is to identify the perception that gainfully employed HEI alumni have towards
‘values’. This perception enables the definition of employee profiles as well as those organisations which
are in tune and receptive to the often forgotten intangible assets which coexist with tangible assets. It is
also our objective to ascertain the effects of these ‘values’ on organisational performance.
We
developed and distributed a questionnaire which includes a Likert scale of 7 response options, ranging
from 1 (Totally Disagree) to 7 (Totally Agree). The data was gathered in the first semester of 2013 and
analysed using SPSS Statistics 20. Descriptive statistics and variable associations were obtained via
Spearman Rho. This paper is divided into the following sections. A contextualisation of spiritual capital
as a strategic pathway for organisations and the association of this construct with the notions of new age
management and the quantum paradigm in organisations. The empirical application of this construct is
45
ISSN 2326-3636
set forth in the presentation, analysis and discussion of primary data gathered from a sample of gainfully
employed HEI alumni based in the Northern region of Portugal.
2. THE SPIRITUAL CAPITAL CONSTRUCT: A CONTEXTUALISATION
The spiritual capital construct arises from three distinct routes: (i) from sociological constructs developing
the work of Bourdieu (Verter, 2003), (ii) from attempts to align the individual concept of spiritual
intelligence to the organizational level (Zohar and Marshall, 2004), and (iii) from challenges that pursue
quantifying the value of spirituality and religion in economic terms (Metanexus Institute, 2006). Berger
and Hefner’s (2003) postulate that this construct endeavours to bridge the gap between economics and
sociology in relation to the approach embedded in the cultural capital of Bourdieu. Therefore, from the
perspective of Bourdieu’s writing on religion, Verter (2003) further identified three types of spiritual capital
that are in tune with the three types of cultural capital posited by Bourdieu, namely, spiritual capital as (i)
an embodied state, (ii) as an objectified state, and (iii) as an institutionalized state. These three states go
beyond the dissociated perceptions of spiritual capital and present a model for acknowledging a more
comprehensive representation of that which the individual represents in the organization.
According to the Metanexus Institute (2006), spiritual capital has been broadly viewed as the effects
arising from spiritual and religious practices, beliefs, networks as well as institutions that have a
measurable influence on individuals, communities and societies at large. It is thus pertinent that, in the
rapidly changing business environment of the knowledge economy, intrinsic motivation should play a vital
role compared to extrinsic motivation in contemporary organizations if these are to become learning
organizations, according to Fry (2003). Moreover, Fry (2003) opines that those organizations that do not
apply workplace spirituality may fail in becoming learning organizations. In their groundbreaking study on
the role of spirituality in the workplace, Mitroff and Denton (1999a) corroborate that applying conventional
organizational techniques will not necessarily lead to ground breaking fundamental and sustainable
changes. These authors further opine that contemporary organizations lack the benefits associated with
spirituality which thus leads to the array of setbacks organizations suffer.
The notions of spirituality are associated with organizational leadership (Benefiel, 2005; Fry, 2005; Mitroff
and Denton, 1999a). Furthermore, individual development is fostered with the support of workplace
spirituality (Dent et al, 2005). Reave (2005) maintains that spirituality is considered a tangible added
value element at the organizational level. This is supported by several studies which demonstrate a
strong association between spiritual values and practices as well as effective leadership between
follower, group and leader viewpoints. It is thus pertinent to bring forth the alignment between the
theories of capital and to highlight the construct of spiritual capital in the quest for a comprehensive scope
of ‘value’ prevalent in contemporary society.
Indeed, several definitions have arisen for the construct of spiritual capital, Verter (2003), Zohar and
Marshal (2004), as well as the Spiritual Capital Research Program (Metanexus Institute, 2006). Lillard
and Ogaki (2005:1) defined spiritual capital as “a set of intangible objects in the form of rules for
interacting with people, nature and spiritual beings ... and believed knowledge about tangible and spiritual
worlds” which “govern and direct behaviour between individuals or between an individual and the natural
world”. Baker and Miles-Watson (2008) acknowledge spiritual capital in a more recent assertion in that it
also influences and can be applied to secular activities. Secular spiritual capital is viewed as the values
and actions resulting from active secular areas of accomplishment in concurrence with spiritual and social
capitals arising from individuals and organisations or the community.
Spirituality is thus strengthened through beliefs, attitudes and behaviours (Marcic, 1997), while Zohar and
Marshall (2000) consider spirituality not to be the continuation of existing values but rather a construction
of an environment which fosters the actual creation of those values. Spirituality thus enables a value
system to exist, according to Fairholm (1997, 1998), both in and out of the organisation. This value
system transpires to have a positive impact on the performance of employees and citizens at large and it
is our endeavour to reflect upon this impact at the personal and organisational levels from the results
arising from the ongoing data gathering and analysis.
46
ISSN 2326-3636
2.1. Shared Leadership and the Shift in Paradigm
According to Avolio et al. (2009) shared leadership has gained significance in organisations because
structures have changed from hierarchical to team-based. Moreover, O’Toole et al. (2002) substantiates
that there has been a shift from concentrating power in one person by distributing it among top-level
leadership. Furthermore, Yukl (2006) corroborates that an interactive approach to decision making is
successful when it includes different individuals who have capability to produce a desirable effect on each
other.
Studies demonstrate that shared leadership is considered to be a relational, collaborative leadership
process or phenomenon which deals with teams or groups that mutually influence one another and
collectively share duties and responsibilities which would traditionally be relegated to a single, central
single person – the leader. However, research on shared leadership is still in its early stage, albeit some
pros and cons have already become apparent. The axiom that two heads are better than one is
appropriate as leaders can apply their individual strengths Bligh et al. (2006) and O’Toole et al. (2002).
Lee-Davies et al. (2007) highlight the distinguished benefits of shared leadership as it develops talent in
an organization and channelling it to create a unique competitive advantage. The resistance to the
shared leadership model resides in the fact that, according to O’Toole et al. (2002:64) “from thousands of
years of cultural conditioning”. Locke (2003) further corroborated this viewpoint.
The contemporary world does not adhere to fortuitous situations and innovation does not result from
isolated geniuses but instead from activists inherent in organisations. In order for these to be genuinely
different, innovation needs to be regarded as an added value and also as a source of value. The classical
paradigm, i.e. the top-down approach is considered as planned change. This approach has mostly
revealed to be unsuccessful as lower-level managers were not included in the change process. The
bottom-up approach to change, also known as “systems/quantum paradigm” (Druhl, 2001: 382) is
centered on the living-systems approach. This approach is based on the individual learning and social
interactions prevalent in organisations. Furthermore, in this systems/quantum paradigm organisational
change strategies nurture the individual’s ability for self-discovery, enhance communication and
encourage teamwork.
The primary source of organizational value, as O’Donnell (2004) posits, is linked to Intellectual Capital
(IC) which is a dynamic process characterized by situated collective knowing capable of being leveraged
into economic and social value.
The value drivers, known as the intangible assets, lead to the
transformation of productive resources into value added assets, Hall (1992). Managing the intellect is the
very core of value. According to the systemic and new age view of capital (Allee, 2000), it can be defined
as transcending the Industrial age which views the hard asset of capital formation related to the
mechanistic models and value chain thinking – typical of the Industrial age production line. However, in
this new age of the knowledge economy, capital can be linked to IC, creating value through awareness
and integration of the larger value, such as social, value and knowledge networks, dynamic exchange.
Value must be seen as a whole, multi-faceted more organic system which means shifting our view from
the value chain to the more dynamic world of value network.
The strength in the intangible approach is the power of IC and intangible analysis to understand a
company’s unique capability and strategy thus identifying the purpose, values and uniqueness.
“Developmental and emotional values are essential to create new opportunities for action. They are
values related to trust, creativity, freedom and having fun in the workplace. Examples of such values are,
creativity/ideation, life/self-actualization, self-assertion/directedness and adaptability/flexibility” (Dolan and
Richley, 2006:238). This shift in values is evident in organizations and is especially prevalent in Managing
By Values (MBV) which has replaced Managing by Objectives (MBO) and which had already replaced
management by instruction. The use of MBO as a means for controlling the behaviour of individuals has
become obsolete because of the uncertainty in the current external environment makes management
more complex. Furthermore, new age management has exposed the need to manage people in line with
their personal values as they are more motivated to develop and remain in an organisation that
demonstrates such a strategy (Lam and Lambermont-Ford, 2010).
47
ISSN 2326-3636
New age management moves beyond corporate social responsibility and thus represents a return to
Bourdieu’s (1986) sociological and humanitarian view of SC and reflects the ethos of the SC Initiative of
the World Bank (1998), whose definition of SC has particular resonance when considered from this
perspective and although dated represents quantum thinking for its time. “SC is the glue that holds
societies together and without which there can be no economic growth or human wellbeing. Without SC,
society at large will collapse and today’s world presents some very sad examples of this” (World Bank,
1998:4). According to Nahapiet and Ghoshal (1998), IC is given better opportunities to develop in firms
as opposed to markets. KBV of the firm therefore forms a conceptual/theoretical framework which
nurtures both specifically SC and IC as a whole. Firms, thus, develop the networks inherent in social
capital and this, in turn, both develops and creates IC.
This shift in paradigms may also be a starting point for change in the social organisation, from capitalist
post-industrial, where the service-based society has replaced the industry manufacture, towards postcapitalist economy (Dolan et al., 2003). To better understand this paradigm shift, Christensen (2003)
noted that while an industrial company uses knowledge to produce tangible products, a knowledge
company uses current knowledge to produce new intangible knowledge. However, the author further
corroborates that much more important is the intangible, knowledge input, the software itself, which
creates majority of the product’s value and accordingly price. In today's service-based society, knowledge
plays a vital role, as it is the main source of competitive advantage for most of the firms (Hunter et al.
2002).
3. PRACTICAL APPLICATION
Our target sample included gainfully employed alumni in order to ascertain whether their perceptions
about the value system directly affects the levels of performance and well being in the organisations they
work with. We applied a questionnaire which we constructed and included a Likert scale of 7 response
options ranging from 1 (Totally disagree) to 7 (Totally agree). Section D of the questionnaire is of core
importance because it embraces values and competencies with the intent to identify alumni perceptions
towards soft / interpersonal skills and their link with spiritual capital. For the purposes of this paper four of
the 35 values were included to gather the perception of respondents of whether they had gained these
values at University and subsequently applied them in the workplace. This paper focuses on those
specific findings obtained from questions: Responsible attitude to work, Interpersonal skills, Capability to
listen to others and Capability for self-control of the values. Thereafter, our analysis centres on the
relationship between spiritual capital and the variables age and Net Monthly Salary, in order to discover
the link between the academic and professional paths. Our sample population consisted of graduate
students and alumni. However, because our response rate was relatively low, we also distributed the
questionnaire online during the first semester in 2013.
Notwithstanding our constant endeavour to obtain a large response rate, our sample remained relatively
small, n=253, of which 34% (n=86) is male and 66% (n=167) is female. The age group includes 22,3%
which are below 25 years old, 47,8% are between 25 -34, 20,3% are between 35-44. The remaining
9,6% is above 45. From the total number of respondents, 42,6% are graduates, 36,3% are currently
pursuing post-graduate studies, 19,9% have Masters degrees and 1,2% have PhDs. The majority of
respondents arise from the Economic and Business Sciences, 45%. While 34,1% arise from the
Humanities. Then remaining respondents are essentially arising from Engineering and Social Sciences. It
is noteworthy that 18,9% or respondents are working with organisations that are made up of less than 10
employees while 42,9% are linked to organisations that are larger and include more than 250 employees.
The remaining respondents are linked up with organisations that range from 10-250 employees.
In
relation to monthly salaries, 13% earned less than 500 Euros, 20,5% earn between 500 and 749, while
21,9% earn between 750 and 999 Euros. Despite the level of high literacy, 55,3% do not earn more than
1000 Euros. Only 20,5% earn more the 1500 Euros. This can be associated with a policy of low salaries
regardless of the high level of academic qualifications, years of professional experience and strategic role
performed in the organisations.
48
ISSN 2326-3636
In an attempt to analyse the perceptions of individuals regarding what they had learned at University and
what is indeed applied in the organisation, we decided to only take into account the findings from those
respondents who are gainfully employed, n=206 (81,4%). The remaining n=47 respondents (18,6%) were
unemployed.
3.1. Responses
In view of the seven response options, for the purposes of our analysis, we have grouped response
options 1, 2 or 3 as being associated with the respondents’ negative perceptions. While response options
4, 5 or 6 are associated with the respondents’ positive perceptions. Response option 4 is regarded as a
neutral perception.
Regarding the value ‘Responsible Attitude to Work’, there seems to be a
juxtaposition in the perception regarding whether that which is learned at University and that which is
actually applied in the workplace. In this regard, 42,2% of responses disagree or have a neutral
perception. While 95,6% agree that this value is applied in the workplace and 58,8% totally agree in that
26,5% and 11,4% are associated with high levels of agreeableness, respectively (see Table 1).
TABLE 1: RESPONSIBLE ATTITUDE TO WORK (UNIVERSITY AND ORGANISATION)
At university
In the organisation
(n)
Minimum Level
8
Percent Valid
Percent
3,9
4,8
Cumulative
Percent
4,8
(n)
Percent
1,0
Valid
Percent
1,3
Cumulative
Percent
1,3
2
Level 2
11
5,3
6,6
11,4
Level 3
23
11,2
13,9
25,3
2
1,0
1,3
2,5
Level 4
28
13,6
16,9
42,2
3
1,5
1,9
4,4
Level 5
33
16,0
19,9
62,0
15
7,3
9,4
13,8
Level 6
44
21,4
26,5
88,6
44
21,4
27,5
41,3
Maximum Level
19
9,2
11,4
100,0
94
45,6
58,8
100,0
Incomplete Total
166
80,6
100
160 77,7
100
Missing System
40
19,4
46
TOTAL
206
100,0
206 100
22,3
In relation to Interpersonal skills, 59% regard these to be important at University, while 91,9% regard this
value to be positive. It is essential to highlight that 70% attribute total agreement to this value regarding it
to be a strategic variable in individual and organisational performance (see Table 2).
TABLE 2: INTERPERSONAL SKILLS (UNIVERSITY AND ORGANISATION)
At university
In the organisation
(n)
Minimum Level
8
Percent Valid
Cumulative
Percent Percent
3,9
4,8
4,8
Level 2
8
3,9
4,8
9,6
Level 3
18
8,7
10,8
Level 4
34
16,5
Level 5
43
Level 6
(n)
1
Percent Valid
Cumulative
Percent Percent
,5
,6
,6
20,5
5
2,4
3,1
3,8
20,5
41,0
7
3,4
4,4
8,1
20,9
25,9
66,9
35
17,0
21,9
30,0
39
18,9
23,5
90,4
66
32,0
41,3
71,3
Maximum Level
16
7,8
9,6
100,0
46
22,3
28,8
100,0
Incomplete Total
166
80,6
100,0
160
77,7
100,0
49
ISSN 2326-3636
Missing System
40
19,4
46
22,3
TOTAL
206
100,0
206
100,0
The responses to the value ‘Capability to listen to others’ reveal that 62,7% agree this is acquired in the
University while 85,6% perceive it to be applied in the workplace. It is noteworthy to highlight that
26,9% and 40% respectively, are associated with high positive responses (see Table 3).
TABLE 3: CAPABILITY TO LISTEN TO OTHERS (UNIVERSITY AND ORGANISATION)
At university
In the organisation
(n)
Minimum Level
10
Percent Valid
Cumulative
Percent Percent
4,9
6,0
6,0
(n)
1
Percent Valid
Cumulative
Percent Percent
,5
,6
,6
Level 2
5
2,4
3,0
9,0
4
1,9
2,5
3,1
Level 3
18
8,7
10,8
19,9
5
2,4
3,1
6,3
Level 4
29
14,1
17,5
37,3
13
6,3
8,1
14,4
Level 5
48
23,3
28,9
66,3
30
14,6
18,8
33,1
Level 6
46
22,3
27,7
94,0
64
31,1
40,0
73,1
Maximum Level
10
4,9
6,0
100,0
43
20,9
26,9
100,0
Incomplete Total
166
80,6
100,0
160
77,7
100,0
Missing System
40
19,4
46
22,3
TOTAL
206
100,0
206
100,0
Responses for the value ‘Capability for self-control’ demonstrate that 48,8% perceive it to be acquired at
University, while 83,1% perceive it to be important and applied in the workplace (see Table 4).
TABLE 4: CAPABILITY FOR SELF-CONTROL (UNIVERSITY AND ORGANISATION)
At university
In the organisation
(n)
Minimum Level
14
Percent Valid
Cumulative
Percent Percent
6,8
8,4
8,4
(n)
4
Percent Valid
Cumulative
Percent Percent
1,9
2,5
2,5
Level 2
13
6,3
7,8
16,3
2
1,0
1,3
3,8
Level 3
23
11,2
13,9
30,1
3
1,5
1,9
5,6
Level 4
35
17,0
21,1
51,2
18
8,7
11,3
16,9
Level 5
38
18,4
22,9
74,1
35
17,0
21,9
38,8
Level 6
35
17,0
21,1
95,2
59
28,6
36,9
75,6
Maximum Level
8
3,9
4,8
100,0
39
18,9
24,4
100,0
Incomplete Total
166
80,6
100,0
160
77,7
100,0
Missing System
40
19,4
46
22,3
TOTAL
206
100,0
206
100,0
There is a general perception among respondents that intangible values are considered very important.
This perception arises from the fact that respondents actually apply these values in the workplace.
However, responses seem to be more evasive regarding the acquisition and development of these values
while at University, representing a high rate of unfavourable responses. Thus, a weakness has been
identified in the HEIs academic programmes for these to be amended and adapted to the urgent needs
50
ISSN 2326-3636
arising from the new economic and social paradigms, in alignment and harmony with the new pathways
prevalent in contemporary society. There is a positive and significant correlation between values, 0.01
being the level of significance which is associated with a confidence level of 0.99% (see Table 5). These
are relevant values pertaining to the intangible domain and foster a motivating, enthusiastic, encouraging
workplace environment which is conducive to mutual respect. Notwithstanding the positive responses, it
was our intent to also relate these variables with the demographic data gathered such as age group and
monthly income levels of respondents in order to ascertain whether the qualitative responses had any
bearing to the quantitative ones. Herein, we perceive that when age group is associated with the value
‘Capability to Listen to others’ the result indicates 0,05 as its level of significance 0.01. When the same
value is associated with monthly income, a significantly negative coefficient is obtained, 0,179, a result
that could contradict with what is expected. There is no significance regarding the remaining variables.
It can be inferred that responses to the qualitative values can be regarded as being independent from
demographic and income level issues.
Spearman Rho
TABLE 5: CORRELATIONS MATRIX
(x1)
(x2)
(x3)
(x4)
(x5)
Age (x1)
1,000
Net Monthly Income (x2)
,508**
1,000
Responsible Attitude in the workplace
(x3)
Interpersonal Skills(x4)
-,048
-,035
1,000
-,127
-,113
,430
**
1,000
Capability to Listen to Others (x5) (x5)
-,171*
-,179
,521
**
,559
**
1,000
,616
**
,592
**
,627
Capability for Self Control (x5) (x6)
-,126
-,137
*
**
(x6)
1,000
**. A significant level of correlation l 0,01 (2 extremes).
*. A significant level of correlation 0,05 (2 extremes).
4. CONCLUSION
This study is valuable in the sense that it compares, from the perspective of intangible values,
organisational and societal needs and academic curricula provided at HEIs. In order to nurture this
perspective, HEIs organisations and citizens at large need to undergo a shift mindset to value intangible
assets and particularly spiritual capital which are the core of the organisation and society. From our
analysis, we consider the following issues need to be further reflected on, namely: academic curricula
should not only focus on technical skills but also on soft skills in order to effectively support organisations
to adapt to the current times of constant economic, social, cultural and political changes pertaining to this
new century; there is a need to decide which particular soft skills and how these should be drawn up and
implemented in specific academic curricula; the creation of a new skills set should be mapped out and
which should irrevocable include the spiritual set as these are the foundation for creating a capable
individual; ascertaining the needs of a particular organisation which distinguishes the different profiles for
their employees; ascertain the leadership style and approach evident in organisations, whether a
humane perspective dominates wherein all individuals participate and have common goals, wherein
leaders are imbued with the awareness of spiritual capital which is viewed in their attitudes, commitment
and empathy - skills which individuals value highly and respect. Indeed, the research seems to indicate
a behaviour that is imbalanced at times, between that which is gained at University and that which is
actually applied in the workplace. If this reality is to stay, individuals may become more frustrated,
leading to disharmony, dissatisfaction, a decrease in morale and commitment. In order to achieve
organisational sustainability, individuals’ professional and personal wellbeing as well as that of society at
large, the abovementioned issues should be carefully reflected on by all. This activity should produce a
redefinition of policies that will reconcile the shifts in needs evident in organisations and HEIs.
51
ISSN 2326-3636
REFERENCES
Avolio, B., Walumbwa, F. and Weber, T. 2009. “Leadership: Current Theories, Research and Future
Directions”, Annual Review Of Psychology, vol. 60, no. 1, pp. 421-449.
Baker, C. and Miles-Watson, J. 2008. “Exploring Secular Spiritual Capital: An Engagement In Religious
And Secular Dialogue For A Common Future?”, International Journal Of Public Theology, vol. 2, no. 4,
pp. 442-464.
Benefiel, M. 2005. “The Second Half Of The Journey: Spiritual Leadership For Organizational
Transformation”, The Leadership Quarterly, vol. 16, pp. 723–747.
Berger, P. L. and Hefner, R. B. 2003. Spiritual Capital In Comparative Perspective. Unpublished Paper
Prepared For Spiritual Capital Research Program Planning Meeting. Institute For The Study Of
Economic Culture, Institute On Religion And World Affairs, Boston University, Boston Mass.
Bligh, M. C., Pearce, C. L. and Kohles, J. C. 2006. “The Importance Of Self And Shared Leadership In
Team Based Knowledge Work: A Meso-Level Model Of Leadership Dynamics”, Journal Of Managerial
Psychology, vol. 21, no. 4, pp. 296-318.
Bourdieu, P. 1984. Distinction: A Social Critique Of The Judgment Of Taste (R. Nice, Trans.). Harvard
University Press, Cambridge, MA.
Bourdieu, P. 1986. The Forms Of Capital. In J. G. Richardson (Ed.), Handbook Of Theory And Research
For The Sociology Of Education, Greenwood Press, Westport, Conn.
Christensen, P. H. 2003. Knowledge Management: Perspectives And Pitfalls, Business School Press,
Denmark: Copenhagen.
Coleman, J. S. 1988. “Social Capital In The Creation Of Human Capital”, American Journal Of Sociology,
vol. 94, p. 26.
Dent, E., Higgins, M. and Wharf, D. 2005. “Spirituality And Leadership: An Empirical Review Of
Definitions, Distinctions and Embedded Assumptions”, The Leadership Quarterly, vol. 16, no. 5, pp.
625-653.
Dolan, S. L., Garcia, S. and Auerbach, A. 2003. ‘Understanding And Managing Chaos In Organisations’,
International Journal Of Management, vol. 20, no. 1, pp. 23-35.
Fry, L. W. 2003. “Toward A Theory Of Spiritual Leadership”, The Leadership Quarterly, vol. 14, pp. 693–
727.
Fry, L. W. 2005. “Introduction To The Leadership Quarterly Special Issue: Toward A Paradigm Of
Spiritual Leadership”, The Leadership Quarterly, vol. 16, pp. 619-622.
Hunter, L., Beaumont, P. and Lee, M. 2002. “Knowledge Management Practice In Scottish Law firms”,
Human Resource Management Journal, vol. 12, no. 2, pp. 4-21.
Kenny, E. 2007. “Gifting Mecca: Importing Spiritual Capital To West Africa”, Mobilities, vol. 2, no. 3, pp.
363-381.
Lee-Davies, L., Kakabadse, N. K. and Kakabadse, A. 2007. “Shared Leadership: Leading Through
Polylogue”, Business Strategy Series, vol. 8, no. 4, pp. 246-253.
Lillard, D. R. and Ogaki, M. 2005. The Effects Of Spiritual Capital On Altruistic Economic Behavior,
Unpublished Research Proposal, Cornell University And Ohio State University.
Locke, E. 2003. Leadership: Starting At The Top. In C. L. Pearce and J. A. Conger (Eds.), Shared
Leadership (pp. 271-284), Sage, Thousand Oaks, CA.
Metanexus Institute. 2006. Metanexus Spiritual Capital Research Program. Retrieved
31 January 2014,
Http://Www.Metanexus.Net/Archive/Spiritualcapitalresearchprogram/Index.Asp.Html
Middlebrooks, A. and Noghiu, A. 2010. “Leadership And Spiritual Capital: Exploring The Link Between
Individual Service Disposition And Organizational Value”, International Journal Of Leadership Studies,
vol. 6, no. 1, pp. 67-83
Mitroff, I. I. and Denton, E. E. 1999a. A Spiritual Audit Of Corporate America: A Hard Look At Spirituality,
Religion and Values In The Workplace, Jossey-Bass, San Francisco.
Mitroff, I. I. and Denton, E. E. 1999b. “A Study Of Spirituality In The Workplace”, Sloan Management
Review, vol. 40, no. 4, pp. 83-92.
O’Toole, J., Galbraith, J. and Lawler, E. E. 2002. “When Two (Or More) Heads Are Better Than One: The
Promise And Pitfalls Of Shared Leadership”, California Management Review, vol. 44, no. 4, pp.65- 83.
Zohar, D. and Marshall, I. 2004. Spiritual Capital: Wealth We Can Live By, Berrett-Koehler Publishing,
San Francisco.
52
ISSN 2326-3636
Yukl, G. A. 2006. Leadership In Organizations (6th Ed.), Pearson/Prentice Hall, Upper Saddle River,
NJUpper Saddle River, NJ.
AUTHOR PROFILE
Ana Martins is a Lecturer in Human Resource Management, Zirve University, the Department of
Business Administration, Faculty of Economics and Administration Sciences, Kizilhisar
Kampusu, 27260, Gaziantep, Turkey. E-mails: [email protected] ; [email protected]
Dr. Isabel Martins is Associate Professor in Organisational Behaviour at the Harold Pupkewitz Graduate
School of Business, Namibia University of Science and Technology, Namibia.
E-mails: [email protected]; [email protected]
Dr. Orlando Pereira is Assistant Professor in Economics, University of Minho, School of Economics and
Management, Department of Economics, Campus de Gualtar, 4710-057 Braga, Portugal. Emails: [email protected]; [email protected]
53
ISSN 2326-3636
RELATIONSHIPS BETWEEN SOCIAL NETWORK OF MULTINATIONAL
ENTERPRISES IN THAILAND
Sutana Boonlua, Mahasarakham University, Mahasarakham, Thailand
Natarpha Satchawatee, Mahasarakham University, Mahasarakham, Thailand
ABSTRACT
This research examines the relationships between social network of multinational enterprises (MNEs) in
Thailand: moderating role of competitiveness improvement. The objectives of this research are 1) to
investigate the role of competitiveness improvement in the relationship between social networks and
MNEs, 2) to develop the conceptual model of social networks and the MNEs’ performance, and 3) to
investigate whether and how competitiveness improvement follows the relationship between the social
networks and MNEs’ performance. Questionnaires (in English) were collected by in-depth interview to
400 CEOs of the MNEs in Thailand. There are 17 independent variables and grouped into four groups as
named as inward and outward internationalization, network ties, trust, and information sharing. The
correlation matrix shows that the competitiveness improvement of the MNEs in Thailand has positive
correlation to all independent variables at the 1% level of significant.
Keywords: Social Network, Inward and Outward Internationalization, Network Ties, Trust,
Information Sharing, Competitiveness Improvement
1. INTRODUCTION
The growing significant of networks in the business world, how social capital, often conceptualized as a
set of social resources that are embedded in networks, contributes to firm performance has attracted
increasing scholarly attention in recent years (Wu, 2008; Burt, 2007; Leana and Pil, 2006). However, the
empirical results from the studies on the direct effects of social capital on company performance so far
remain largely studies on the direct effects of positive relationship (Anderson et al., 2002; Park and Luo,
2001) to a negative relationship (Rowley et al., 2000).
There is an increasing awareness of the significance of this particular research concerned. Further
research should ascertain the mediating role of value-enhancing exchange processes in the relationship
between inter-organisation into such conditions have begun to emerge in recent years (Zaheer et al.,
1998).
The social relations can link to the benefits; such as information, influence, and solidarity, and to value
added (Alder and Kwon, 2002). Social network creates opportunities for social capital transactions, and
the mere fact of a tie implies little about the likelihood that social capital effects will materialize. The
social network and knowledge exploitation are being conducted. The knowledge acquisition can also
merge the relationships between social networks and knowledge exploitation. However, many
researchers have significantly furthers understanding of the social capital and performance relationship
by exploring knowledge and technology acquisition, relatively little is known about the social network and
firms’ performance relationship, especially for the multinational enterprises (MNEs) in Thailand.
The social network defined as the systems of relationships management team members have with
employees and other actors outside of their organization, are a chief source of timely and relevant
information on the state of both the external environment and the organization (Collins and Clark, 2003).
Yu and Chiu (2013) stated that social network refers to a set of organizations that are connected by a
specific type of social relationship. Prior research has stated that interfirm networks facilitate the
transmission of information and the access to unique resources and thus can be thought of as an
inimitable and non-substitution asset (Gulati, 1999). Many researches have also stated that social
54
ISSN 2326-3636
networks provide several benefits for organizations such as learning (Powell, Koput and Smith-Doerr,
1996), collaboration (Uzzi, 1997) and performance (Maurer and Ebers, 2006).
Given the significance of this research topic and the divergent empirical results on the direct effects of
social network on MNE performance in the existing literature, the findings of the currents researches are
expected to enrich the pool of growing knowledge of the direct effects of social networks on MNEs
performance. Thus social network can increase the organization performance and become a dominant
theme in strategy of the organizations (Yu and Chiu, 2013). Westphal, Boivie and Chang (2006) showed
that social network formed by members of the boards of directors helped to obtain useful organization
strategy information and increase organization performance. Inkpen and Tsang (2005) also found that
social network not only promoted knowledge transfer among members of a network but also between
union organizations. Social network promotes organization performance and innovation. In consistent
with Sorenson et al. (2009) showed a positive impact of network ties in family businesses on organization
performance.
1.1. Objectives
1. It is to investigate the role of competitiveness improvement in the relationship between social
networks and MNEs.
2. It is to develop the conceptual model of social networks and the MNEs’ performance.
3. It is to investigate whether and how competitiveness improvement follows the relationship
between the social networks and MNEs’ performance.
1.2. Hypotheses
Hypothesis 1 (H1):
Hypothesis 2 (H2):
Hypothesis 3 (H3):
Hypothesis 4 (H4):
Hypothesis 5 (H5):
Hypothesis 6 (H6):
The social network mediating the relationship between outward
internationalization orientation and competitiveness improvement.
The social network mediating the relationship between inward
internationalization orientation and firm performance.
The closer in the network ties between MNEs and their partners, the
more the MNEs and their partners will improve competitiveness.
The greater the trust between MNEs and their partners, the more the
MNEs and their partners will improve competitiveness.
The greater the information sharing between MNEs and their partners,
the more the MNEs’ competitiveness will improve.
The relationship between social network and competitiveness
improvement is mediating by information sharing.
2.1. Network
Human and Provan (1997) defined ‘network’ as “the formed group of small and medium sized profitoriented companies in which the firms: 1) are geographically proximate, 2) operate within the same
industry, potentially sharing inputs and outputs, and 3) undertake direct interactions with each other for
specific business outcomes”.
2.2. Social Network
Social network, it is broadly defined as “a set of nodes that are connected by a specific type of social
relationship” (Laumann, 1978). “Nodes” refer to individuals, events, organizations or firms (Yu and Chiu,
2013). Therefore, social network could refer to the specific relational connections between a group of
people, individual organizations, or specific events. Social network constructs encompass individual,
inter-organization, and intra-organization networks. In terms of inter-organization network, the
relationships can be different kinds such as supplier-purchaser, organization-customer, government-
55
ISSN 2326-3636
organization, and etc. Actors in the network may repeatedly and consistently interact with each other to
obtain resources, technical, or emotional supports (Yu and Chiu, 2013).
Social network is highly associated with social capital (Yu and Chiu, 2013). Social capital includes all
types of relationship and all level such as individual and organization which can be analyzed from
different perspectives. Based on the network perspective, social capital bears potential value as it
provides an opportunity for actors to access information and resources in their social network (Maurer
and Ebers, 2006). The social capital concept has been discussed extensively since the mid of 1980s
(Coleman, 1990; Yu and Chiu, 2013). The social capital can be resources that are embedded in social
relationships and in the social structure that can mobilized by the organization to increase the success
rate for certain actions (Lin, 2001; Yu and Chiu, 2013). On the other hand, social capital is an investment
in social relationships by an organization in order to expecting the returns from the market (Burt, 1992).
Therefore, this research employs the network perspective to examine whether social network are
valuable and particularly focuses on inter-organization network and individual relationships.
2.3. Social Network and SMEs and MNEs
While network relationships have long been recognized to be indispensable for SMEs to achieve
international growth (Johanson and Mattsson, 1988; Hadley and Wilson, 2003), a particular focus on
social networks has been limited to date (Harris and Wheeler, 2005). Researchers have recently
emphasized that informal social networks or networks of social relationships serve as the initial basis from
which formal networks of business linkages are developed in new era (Chen, 2003; Zhou et al., 2007),
and through which exporting relationships are formed (Ellis, 2000; Ellis and Pecotich, 2001). In particular,
empirical findings support that social networks are significant to discover of new opportunities, to gain
access to foreign markets, and to develop competitive advantages through the accumulation of
international knowledge and/or the development of formal business linkages across nations (Ellis, 2000;
Sapienza et al., 2005; Zhou et al., 2007).
Liesch et al. (2002) point out that building and maintaining network relationships are considered an
integral part of the internationalization process, as both outcomes and inputs into the process. As an
outcome, it is imperative for internationally oriented SMEs to resort to relationship networks such as
‘guanxi’ that can provide valuable information benefits (Ellis, 2000). ‘Guanxi’, the Chinese version of
social networks, can be regarded as a form of relationship exchange that reflects the basic idea of
network capitalism which is a system of reciprocity, trust, and interdependencies that creates value
through the effective use of social capital (Redding, 1990; Tsui et al., 2000). In the business context,
Zhou et al. (2007, p. 676) defined ‘guanxi’ networks as “are often characterized by informal interpersonal
connections that are influenced by hierarchical Chinese cultural values and bonded with reciprocal
expectations”.
As an input, the information benefits of social networks could influence the performance impact of
internationalization strategies (Liesch and Knight, 1999). Therefore, the social builds both the traditional
Chinese culture and a conscious choice on the part of individuals opting for personalized contacts and
relationships. Social networks can provide unique information benefits to those who are connected by
exclusive or non-redundant personal ties, irrespective of whether the nature of the social relation
networks is strong or weak (Burt, 1997). Currently, the ‘guanxi’ networks can reduce transaction costs or
increase transaction values through facilitated exchange of resources, information, and knowledge (Luo,
2003; Zhou et al., 2007).
2.4. Social Network and Organization Performance
Organization’s competitiveness is achieved by controlling the endowment of rare, valuable, nonsubstitutable, and inimitable resources and capabilities (Barney, 1991). Recently, organizations are
starting to find themselves trapped in the uninviting situation that their existing organization-specific
resources and competencies are no longer sufficient to maintain their competitive advantage (Wu, 2008).
Organization needs to increase the motivations to seek complementary resources and develop new
56
ISSN 2326-3636
capabilities through collaboration with other organizations and even longstanding competitors in the form
of both informal and formal network such as strategic alliances (Madhok, 2002; Wu, 2008).
Social network is significant source for the creation and innovation of the inimitable value-generating
resource that are inherent in an organization’s network of relationships (Gulati, Norhria, and Zaheer,
2000). Social network allows people to gain benefit from knowledge accumulated by close contacts and
associates (Uzzi and Lancaster, 2003). The growing significant of the role of business network in
enhancing an organization ‘s competitive advantage, the social network has emerged as a prominent
research area of strategic management (Anderson, Forsgren, and Holm, 2002). However, the existing
empirical results remain largely inconclusive from a positive relationship (Anderson, Forsgren, and Holm,
2002; Wu, 2008) to a negative relationship (Rowley, Behrens, and Krackhardt, 2000). In the context of
multinational organizations, Anderson, Forsgren, and Holm (2002) presented that relational technical
embeddedness has a positive effect on both the expected performance of subsidiaries and their roles in
the development of products and production processes in the multinational organizations. Zaheer (2000)
found that there is a positive relationship between inter-organizational trust and performance. Results
from a study on SMEs suggested that social embeddedness is beneficial to the financial performance of
the organizations (Uzzi and Lancaster, 2003).
On the negative side, a study of technology-based ventures showed that with the exception of the linkage
to venture capital, all of the linkages to other organizations, universities, venture network, financial
institutions, and government did not significantly affect organizational performance (such as sale growth
rate) (Lee et al., 2001). Also Rowley, Behrens, and Krackhardt (2000) presented that strong ties in a
highly interconnected strategic alliance network negatively affect organization performance.
The empirical results from a series of researches on ‘Guanxi’ (personal connection) and its effect on
organization performance in China are equally divergent and inconclusive (Park and Luo, 2001; Peng and
Luo, 2000). ‘Guanxi’ is also regarded as a social network because it involves exchanges of social
obligation and asking for favors (Wu, 2008). It has been argued that Chinese organizations ca circumvent
bureaucratic hurdles through personal connections with government officials (Park and Luo, 2001). Also,
‘Guanxi’ can support organization to secure scare resources and business information (Wu, 2008).
Managerial personal relationships with executives at other organizations such as suppliers, purchasers,
and competitors may help an organization acquire quality materials, good services, and timely delivery
(Peng and Luo, 2002). Thus, this makes ‘Guanxi’ vital for the performance and survival of Chinese
organizations. The ‘Guanxi’ is a business-based variables such as sales force marketing and credit
granting have a systematic and favorable effect on the organization’s profitability, asset turnover, and
domestic sale growth rate. However, Park and Luo (2001) showed mixed empirical results that although
‘Guanxi’ leads to increase sale growth rate, it has little effect on profit growth rate. Also, ‘Gaunxi’ benefits
the market expansion and competitive position of organizations, but it does not enhance internal
operations. Moreover, in an effort to explore a micro-macro link, Peng and Luo (2000) stated that the
micro interpersonal relationships of managers with senior executives at other organizations and with
government officials can improve macro organizational performance. Batjargal and Liu (2004) also
supported Peng and Luo’s results (2000) that strong ‘Gaunxi’ relationships between entrepreneurs and
venture capitalists have significant direct effects on investment delivery time.
2.5. Information Sharing
Information sharing refers to the mutual sharing of business and market information between exchange
partners (Wu, 2008). Information is broadly regarded not only as one of the key benefits of social capital
(Burt, 1997; Coleman, 1988; Uzzi, 1997), but also as a significant antecedent of organization
performance (Gularti, 1998). Uzzi (1997) showed the social capital enables brokering activities that bring
information from other actors to the focal actor. Dyer and Chu (2003) stated that trust, a relationship
capital, has a significant positive effect on information sharing between a supplier and a purchaser.
According to the information sharing researches, Sahin and Robinson (2002) stated that information
sharing is often considered as a generic cure for supply chain. Benefits of information sharing include
improved ordering function, better inventory allocation, and etc. Information sharing or knowledge sharing
57
ISSN 2326-3636
was found to contribute positively to organization performance (Cummins, 2004). Cummings (2004)
showed that knowledge sharing is more strongly associated with performance when work groups are
more structurally diverse.
Most research using information for sharing rather than to acquiring as the mediator between social
capital and organization competitiveness improvement for two reasons as 1) information sharing can be
better capture the reciprocal nature of information flows in network than knowledge acquisition, and 2)
organizations can protect their capabilities more effectively when they share information than when they
acquire knowledge. In comparison to acquisition, sharing is a more effective constraint on exchange
partners because they can take each other’s shared information hostage, and consequently potential
opportunistic free-riding behavior can be kept to the minimum. Information sharing can be an atmosphere
of reciprocity and collaboration, the benefits of social capital into concrete performance enhancement.
2.6. Network Ties
Network ties are considered as the key measures of social capital (Wu, 2008). It is an understanding how
a focal organization’s aggregate network ties affect its competitiveness improvement. Network ties refer
to a focal organization’s aggregate ties with other organizations, government officers, and financial
institutions (Wu, 2008). According to Burt (1992), social capital has three perspectives of information
benefits which are access, timing, and referrals. Ties with other organizations, government officers, and
financial institutions encourage organization to obtain timely access to market information, financial
resources, and government policies. Ties are important sources of referrals that can enable prospective
business patners to identify and learn about each other’s complementary resources and capabilities (wu,
2008).
Moreover, organization’s ties with government agencies and financial institutions have a powerful role in
curbing the opportunities behavior of other organizations. The relationship with government officers and
financial institutions can increase opportunities for organizations. Organizations are able to share
confidential information with others.
2.7. Trust
Trust is used to be variables to manifest the relational dimension of social capital (Wu, 2008). Trust has
four dimensions which are 1) belief in the good intent and concern of exchange partners, 2) belief in their
competence and capabilities, 3) belief in their reliability, and 4) belief in their perceived openness
(Nahapiet and Ghoshal, 1998). Trust defined as a type of expectation that alleviates the fear that one’s
exchange partner will act opportunistically (Bradach and Eccles, 1989). This point of view is adopted and
trust can define as an organization’s confidence in its exchange partners not behaving opportunistically
(Wu, 2008).
Trust is considered to be particularly valuable as a governance mechanism, rendering a safe and low
opportunistic exchange conditions (Wu, 2008). Trust encourages knowledge sharing by increasing the
disclosure of knowledge to others and by granting others access to one’s own knowledge. Moreover,
inter-organizational trust mitigates the information asymmetries that are inherent in inter-organization
exchange by allowing the more open and honest sharing of information (Zaheer, 2000). Trust is positively
correlated with increased information sharing in supplier-purchaser relationships.
2.8. Competitiveness Improvement
The rationale for organizations to join a business network is to share information and other
complementary resources to get rid of obstacle to the enhancement of organization’s capabilities.
Information sharing has three dimension performances which are 1) sharing information with its business
partners not only enhance an organization’s capabilities but also improves its comparability with its
partners, 2) information sharing between purchasers and suppliers can help the latter to not only solve
technical problems, but also to better fulfill the requirements of the former, and 3) information sharing can
reduce information asymmetry and the potential for opportunism.
58
ISSN 2326-3636
Information sharing can lead to unexpected spillovers or leaks that work against exchange partners.
However, problems can be dealt with effectively by social capital. Social network can minimize the
opportunistic behavior of exchange partners and encourage information sharing which leads to improve in
organization competitiveness.
3. RESEARCH METHODOLOY
3.1. Population and Sample
The sampling frame is MNEs in Thailand. To use the most knowledgeable informants, the chief executive
officers (CEOs) of SMEs are targeted. CEOs are considered to be the most suitable and knowledgeable
informants about their own organizations (Wu, 2008). The population frame of unknown exact number of
MNEs in Thailand.
Refer to the sampling table of Yamane, 400 MNEs are selected for collecting data for independent
variables of interest in the process of multiple regression analysis.
The questionnaire is developed and posted to the CEOs of the MNEs around Thailand by random. The
in-depth interviewed will be conducted with 30 senior managers or CEOs in the MNEs in Bangkok to
understand industry practices better. Questionnaire used in this research was modified from Wu (2008).
The MNEs in Bangkok are chosen because most of the MNEs are based in Bangkok and perimeters. The
questionnaire consists of two parts; the first part contains of questions about the independent and
dependent variables, and the second part contains of the general information about the persons who fill
up the questionnaires and their work places.
The pretest will be conducted with 30 managers or CEOs from 30 MNEs in Bangkok. These managers
and CEOs will answer all the survey items and provide feedback about the clarity of the survey questions
and instructions and the appropriateness of the terminologies used. From the pretest, the questionnaires
will be amended and finalized the survey.
3.2. Questionnaire Design
The questionnaires were designed keeping in view the objectives of the research. It was kept as short
and concise a possible as a short questionnaire with conceptually clear and concise statements are
desired by both respondents and the researcher (Jigme, 2006). The questionnaire modified from Wu
(2008) and comprised of two parts. The first part consists of 5 dimensions which are Inward and Outward
Internationalization, Network Ties, Trust, Information Sharing, and Competitiveness Improvement. They
are measured on the Likert scale with “1” as the strongly disagree “5” as the strongly agree. The Likert
scale was applied as it is considered most appropriate and reliable measurement scale for such type of
questions and is easy to construct and manage (Greene, 2003). The second part consists of general
profile of the respondents. To ensure the accuracy, the questionnaires were designed by taking into
account the following factors:
1. Academic literature, research articles and publications
2. Pre-tested to ensure that the respondent understood the questionnaire in right perspective.
The questioners were circulated to experts and knowledgeable persons with the request to provide
feedback of their understanding of the questionnaires. Based on their feedbacks, necessary modifications
were made to the questionnaires to make it more reliable.
3.3. Response Rate
Since this research is about the relationships between social network of MNEs in Thailand: Moderating
Role of Competitiveness Improvement, all the data pertaining to this research was gathered mainly via
questionnaires, and e-mails in few cases. Where possible the data were collected personally and few of
the questionnaires were posted to 50 selected organizations with the phone explanatory before posting.
59
ISSN 2326-3636
th
th
The questionnaires were distributed to MNEs in Bangkok during 5 January to 25 February 2013 with 15
research assistances. In total 50 questionnaires were returned fully completed and 350 questionnaires
were in-depth interview following questionnaires’ questions.
4. RESEARCH FINDINGS
4.1. Response Rate
All the data pertaining to this research was gathered mainly by questionnaires by interview and post in
th
th
few cases. The questionnaires were distributed to 400 MNEs in Bangkok during 5 January to 25
February 2013 with 15 research assistances. In total of 400 questionnaires were fully completed.
4.2. Characteristics of the Respondents
The Table 1 shows the age group of all respondents’ organizations established. The majority of
respondents consists of 3-10 years ago (158 respondents, 39.5%), 11-20 years ago (126 respondents,
31.55%), and 31-40 years ago (52 respondents, 13.0%), respectively.
TABLE 1: AGE GROUP OF RESPONDENTS’ ORGANIZATIONS ESTABLISHED
Age Group (Years Old)
Frequency
Percentage
Less than 3 years
18
4.5
3-10 years ago
158
39.5
11-20 years ago
126
31.5
31-40 years ago
52
13.0
Over 40 years ago
46
11.5
Total
400
100.0
Table 2 shows the numbers of staff are employed in organization of the respondents, mainly 20-100 (194
respondents, 48.5%) and 101-300 comes the second (121 respondents, 30.3%). Only 20 respondents
(5.0%) have over 500 numbers of staff in their organizations.
TABLE 2: NUMBERS OF STAFF EMPLOYED IN ORGANIZATION
Numbers
Frequency
Percentage
Less than 20
37
9.3
20-100
194
48.5
101-300
121
30.3
301-500
28
7.0
Over 500
20
5.0
Total
400
100.0
In term of respondents’ genders, 75.3% of all respondents are male while 24.7% of the respondents are
female (see Table 4-3).
Genders
Male
Female
Total
TABLE 3: GENDERS OF RESPONDENTS
Frequency
Percentage
301
75.3
99
24.7
400
100.0
In term of highest education levels of respondents, 62.3% of the respondents are in the postgraduate
level. Undergraduate level comes the second as 35.8% and the least numbers are lower than
undergraduate only 2.0% (see Table 4).
60
ISSN 2326-3636
TABLE 4: HIGHEST EDUCATION LEVELS OF RESPONDENTS
Highest Education Levels
Frequency
Percentage
Lower Undergraduate
8
2.0
Undergraduate
143
35.8
postgraduate
249
62.3
Total
400
100.0
Table 5 shows work experience with the present organization of respondents. Most of the respondents
have work experiences at the present organizations over 10 years (110 respondents, 27.5%). There are
4-6 (24.0%) years and 1-3 years (23.0%) are almost equally.
TABLE 5: W ORK EXPERIENCE W ITH THE PRESENT ORGANIZATION OF
RESPONDENTS
Work Experience (years)
Frequency
Percentage
Less than 1
24
6.0
1-3
92
23.0
4-6
96
24.0
7-10
78
19.5
Over 10
110
27.5
Total
400
100.0
4.3. Data Analysis
All primary data collected through questionnaires were analyzed by frequency tables and Pearson
correlation analysis. The descriptive statistical analysis was used to transform raw data into a form that
will make raw data to understand, interpret and rearrange if necessary. The techniques like simple
tabulation were used for frequency tables, determination of mean and standard deviations. Pearson
correlation analysis was used to determine the linear correlation among the various factors affecting
relationships between social network of MNEs in Thailand.
4.4. Statistics Indicating the Importance of Factors
The likert scale was used to measure the relationships between social network of MNEs in Thailand. The
higher the score the stronger degree of agreement are the variables as evaluative criteria. Five point
scales were used to measure the relationships between social network of MNEs in Thailand in such a
way that mean score could be calculated to determine the agreement levels to the MNEs in Thailand.
With five point scales, it means that the scores failing between the following ranges could be considered
as:
4.51 – 5.00
Strongly agree
3.51 – 4.50
Agree
2.51 – 3.50
Neutral
1.51 – 2.50
Disagree
1.00 – 1.50
Strongly disagree
The data that were gathered through questionnaires were processed by SPSS in terms of frequency,
mean, and standard deviation. The independent variables were grouped and used to examine the
relationships between social network of MNEs in Thailand by Pearson correlation analysis. In the
following tables; mean, standard deviation and the levels of agreement of each factor are examined
corresponding to the first part of questionnaire.
No.
I1
TABLE 6: THE AGREEMENT LEVEL OF INWARD AND OUTWARD
INTERNATIONALIZATION (TI)
Inward and Outward Internationalization
Mean
S.D.
Agreement Level
Our business partners usually locate in various 3.65
1.32
Agree
regions.
61
I2
I3
TI
ISSN 2326-3636
We do business with international more than
domestic organizations.
We do more business with our long-term business
partners more than the active business partners.
Total
N= 400
3.98
1.07
Agree
4.07
0.98
Agree
3.90
0.62
Agree
Table 6 shows the respondents opinion about the levels of agreement under Inward and Outward
Internationalization factors (mean = 3.90, S.D. = 0.62). The higher mean score indicates higher level of
agreement while lower mean score indicates disagreement. The standard deviation (S.D.) score indicates
the degree of deviation from the mean. The Inward and Outward Internationalization factors considered of
three variables which are ‘Our business partners usually locate in various regions’, ‘We do business with
international more than domestic organizations’, and ‘We do more business with our long-term business
partners more than the active business partners’. Among the three variables, ‘We do more business with
our long-term business partners more than the active business partners’ was ranked the most agreement
with a mean score of 4.07 and S.D. of 0.98. However, all factors are ranked in ‘agree’ level. It may
because the MNEs in Thailand prefer to do business with the long-term partners to new or short –term
partners. The long-term relationship can be easier to communicate and better profit in the long period.
Table 7 shows the mean and standard deviations for variables under Network Ties factors (mean = 3.89,
S.D. = 0.38). It can be seen that under these six variables namely ‘Our organization has close
relationships with purchasers’ (mean = 4.66, S.D. = 0.56) is rated in the ‘Strongly agree’ by respondents
indicating that MNEs in Thailand pay significantly attention to the buyers more than suppliers an
employees. ‘Our organization has a group of close business partners’ (mean = 4.39, S.D. = 0.87), ‘Our
organization has close relationships among employees’ (mean = 4.26, S.D. = 0.91), and ‘Our organization
has close relationships with suppliers’ (mean = 4.24, S.D. = 0.94) are rated in ‘Agree’ by respondents
indicating that employees and suppliers are significantly to the MNEs in Thailand. While ‘Our organization
has close relationships with many financial institutions’ (mean = 2.93, S.D. = 1.15) and ‘Our organization
has established good working relationships with relevant government officers’ (mean = 2.89, S.D. = 1.21)
are considered just ‘Neutral’ by respondents indicating that the financial institutions are less important to
MNEs in Thailand compare to the purchasers, suppliers, and employees. This concludes that for MNEs in
Thailand to improve the competitiveness, it is essential to hold a close relationship to purchasers,
suppliers, and employees.
TABLE 7: THE AGREEMENT LEVEL OF
Network Ties
Our organization has a group of close business
partners.
N2 Our organization has close relationships with many
financial institutions.
N3 Our organization has established good working
relationships with relevant government officers.
N4 Our organization has close relationships among
employees.
N5 Our organization has close relationships with
suppliers.
N6 Our organization has close relationships with
purchasers.
TN Total
N= 400
No.
N1
No.
T1
NETWORK TIES (TN)
Mean
S.D.
Agreement Level
4.39
0.87
Agree
2.93
1.15
Neutral
2.89
1.21
Neutral
4.26
0.91
Agree
4.24
0.94
Agree
4.66
0.56
Strongly agree
3.89
0.38
Agree
TABLE 8: THE AGREEMENT LEVEL OF TRUST (TT)
Trust
Mean
S.D.
Agreement Level
We have never worried about the business partners 3.09
1.18
Neutral
would take advantage of us.
62
ISSN 2326-3636
T2
Our
business
partners
have
never
acted
opportunistically.
T3
We belief in all information we have received from our
business partners.
TT
Total
N= 400
3.08
1.17
Neutral
2.48
1.10
Disagree
2.88
0.73
Neutral
Table 8 shows the mean and standard deviations for variables under Trust factors (mean = 2.88, S.D. =
0.73). It seems ‘Trust’ is not really affect to the respondents’ organizations in their own opinions. The ‘We
have never worried about the business partners would take advantage of us’ (mean = 3.09, S.D. = 1.18)
and ‘Our business partners have never acted opportunistically’ (mean = 3.08, S.D. = 1.17) are considered
to ‘Neutral’. While ‘We belief in all information we have received from our business partners’ (mean =
2.48, S.D. = 1.10) is considered as ‘Disagree’. It indicates that the MNEs in Thailand have less
trustworthy to their partners. The MNEs do not believe in messages or information received from their
partners. Therefore, to improve MNEs’ competitiveness, the MNEs in Thailand must collect the market
information by themselves.
TABLE 9: THE AGREEMENT LEVEL OF INFORMATION SHARING (TS)
Network Ties
Mean
S.D.
Agreement
Level
S1
Our business partners always provide us with general 2.68
1.05
Neutral
business information.
S2
Our business partners always provide us with in- 2.26
1.29
Disagree
depth business information.
S3
We rely on our business partners for market 2.57
1.09
Neutral
information.
S4
Business partners should be willing to share market 3.06
1.37
Neutral
information with each other.
S5
We always obtain timely information from our 3.00
1.26
Neutral
business partners.
TS Total
2.71
0.56
Neutral
N= 400
The Information Sharing factors consist of five variables. Most the variables under this category are rated
as ‘Neutral’ with the mean score ranging between 2.57 and 3.06. The ‘Our business partners always
provide us with in-depth business information’ is only one variable what is fail into ‘Disagree’ (mean =
2.26, S.D. = 1.29) (see Table 4-9). This is indicating that the MNEs in Thailand do not share the in-depth
information to each other. The only general information is spread out and share to business partners. The
information will be not shared among business partners. There may only doing business together is
enough.
No.
TABLE 10: THE AGREEMENT LEVEL OF COMPETITIVENESS IMPROVEMENT (TC)
No. Trust
Mean
S.D.
Agreement Level
C1 We often defeat our competitors in the marketplace.
3.80
1.16
Agree
C2 Our organization can provide higher quality products 4.37
0.67
Agree
and services to clients.
C3 Forming a business alliance with business partners 4.46
0.69
Agree
helps our organization to respond more promptly to
market demands.
TC Total
4.21
0.52
Agree
N= 400
Table 10 shows the mean and standard deviations for variables under Competitiveness Improvement
factors (mean = 4.21, S.D. = 0.52). It can be seen that under three variables namely ‘We often defeat our
competitors in the marketplace’ (mean = 3.80, S.D. = 1.16), ‘Our organization can provide higher quality
products and services to clients’ (mean = 4.37, S.D. = 0.67), and ‘Forming a business alliance with
63
ISSN 2326-3636
business partners helps our organization to respond more promptly to market demands’ (mean = 4.46,
S.D. = 0.69) are rated in ‘Agree’ by respondents.
4.5. Results of Correlation Analysis
All variables have very strong positive correlation at the 1% level of significance indicating that as Inward
and Outward Internationalization factors (.466), Network Ties factors (.327), Trust factors (.658), and
Information Sharing factors (.511) improve, they will lead to improve in the competitiveness for MNEs in
Thailand. The correlation is significant at the 0.01 level of significance. The strongest positive and
significant correlations are demonstrated by Competitiveness Improvement and Trust factors (.658). The
second, the Information Sharing factors show positive and significant correlation at the .511. The least
positive and significant correlation is between Competitiveness Improvement and Network Ties factors
(.327). That means all factors are significant and strongly correlate to the Competitiveness Improvement
of the MNEs in Thailand. The positive and significant correlation of all factors with Competitiveness
Improvement indicates that improvement in all factors lead to improvement in MNEs in Thailand.
However, all independent variables (TI, TN, TT, and TS) have no correlation to each other at the 1% level
of significance. Even some variables are negative relationship such as TI and TN, TT, and TS, and etc.
But they are not significance. This means relations among factors (independent variables) show no
correlation with other, therefore, this has no problem of the multicollinearity (Gujarati, 1988).
TABLE 11: DESCRIPTIVE STATISTICS AND CORRELATIONS MATRIX
Variables Mean
S.D.
TTT
TI
TN
TT
TS
TTT
3.35
0.62
1
**
TI
3.90
0.38
.466
1
**
TN
3.89
0.73
.327
-.040
1
**
TT
2.88
0.56
.658
-.048
.051
1
**
TS
2.71
0.29
.511
-.046
-.014
.107
1
N = 400
**
Correlation is significant at the 0.01 level (2-tailed).
VIFs
1.005
1.005
1.016
1.014
Table 11 shows the mean, S.D., and correlation matrix for all variables. As seen in the Table 11, all the
means are positive and there is not much variance in the S.D.. The correlation matrix was used to
examine the correlation between independent variables (TI, TN, TT, and TS) and dependent variable
(TTT).
The correlation matrix shows that Competitiveness Improvement has a positive correlation with TI (.466),
TN (.327), TT (.658), and TS (.511) indicating that as TI, TN, TT, and TS improves the competitiveness of
MNEs in Thailand will also increase. The strongest relationship between Competitiveness Improvement
and independent variables is Trust factors (TT).
4.6. Results of Regression Analysis
The coefficients of the Inward and Outward Internationalization, Network Ties, Trust, and Information
Sharing variables are estimated in Table 12.
TABLE 12: DETERMINANTS OF THE COMPETITIVENESS IMPROVEMENT IN MNES IN THAILAND
Independent Variables
Coefficients
Constant
4.108***
Inward and Outward Internationalization (TI)
-.046
Network Ties (TN)
.121*
Trust (TT)
.013
Information Sharing (TS)
-.083*
No. of respondents
400
Mean
3.35
S.D.
0.29
64
ISSN 2326-3636
2
R
2
R Adjusted
F-Statistic
Durbin-Watson
Note : * represents statistical significance at 10% level
*** represents statistical significance at 1% level
20%
10%
1.972*
1.890
Table 12 shows the estimated results of the Competitiveness Improvement of the MNEs in Thailand
2
perform alright; there was an adjusted R (10%) for all estimates. The Durbin-Watson test shows no
presence of autocorrelation (Greene, 2003). All independent and dependent variables have relatively
2
2
explanatory power (R and adjusted R ). The F-test failed to accept the null hypothesis that the estimated
parameters are equal to zero. There are only two factors which are Network Ties and Information Sharing
factors (11 variables) are significant at the 10% level of significance. The Network Ties factors show in
the positive direction with the Competitiveness Improvement. On the other hand, the Information Sharing
factors show in the negative direction with the Competitiveness Improvement. This may because the
MNEs in Thailand do not rely on the information shared among the partners or too much information
shared, thus the MNEs in Thailand could not bring to make a decision. MNEs in Thailand may be
received too general information about the market which is the competitors have received too. Thus the
information would not help the MNEs to get the advantage on it. Therefore, the MNEs in Thailand would
not get benefit on information sharing to improve their competitiveness. However, the Network Ties
factors are positive and significant to the MNEs’ competitiveness improvement. This means the MNEs in
Thailand have a very good relationship with their partners and stakeholders. The MNEs can improve their
competitiveness with their groups belonging. The close relationship is very important to do business in
Thailand. Hence, increase in network ties encourages more competitiveness, but decrease in information
sharing will improve the competitiveness of the MNEs in Thailand.
The results also show that Network Ties factors are significant affect to the Competitiveness Improvement
of the MNEs in Thailand at the 10% level of significance. Holding other factors constant, a 1% increase in
Network Ties factors will improve the MNEs’ competitiveness by 0.121%. On the other hand, the
Information Sharing factors are negative and statistically significant at the 10% level of significance.
Holding other factors constant, a 1% decrease in Information Sharing factors will improve the MNEs’
competitiveness by 0.083%. This evidence supports Hypothesis 3 (H3) and Hypothesis 4 (H4).
5. RESEARCH CONCLUSION
From the frequency and simple correlation analysis, this is to examine the agreement level of various
factors improving the MNEs’ competitiveness. There are 17 independent variables and grouped into four
groups as named as TI (Inward and Outward Internationalization factors), TN (network Ties factors), TT
(Trust factors), and TS (Information Sharing factors). The correlation matrix shows that the TTT
(Competitiveness Improvement -- dependent variable) has a positive correlation to all independent
variables at the 1% level of significance. In particular frequency, correlation analysis, and linear
regression analysis were employed. A total of 400 questionnaires were collected from the CEO of the
MNEs in Bangkok, Thailand.
Questionnaire is divided into two parts. Part one is required respondents to rate the factors on the Likert
scale of 1 to 5. There are four factors identified for the research including Inward and Outward
Internationalization factors, Network Ties factors, Trust factors, and Information Sharing factors. Part two
of the questionnaire basically about the general information of the respondents.
The results found that Inward and Outward Internationalization factors (TI) are rated as the most
agreement factors on average with the highest mean score of 3.90. Following the Network Ties factors,
trust factors, and Information Sharing factors have average the mean score of the agreement level at
3.89, 2.88, and 2.71, respectively.
65
ISSN 2326-3636
The multi linear regression analysis was employed to analyze 17 independent variables with the
dependent variable. The regression showed the estimated results of the competitiveness improvement of
2
the MNEs in Thailand in exceptional adjusted R (10%). The Durbin-Watson test showed no presence of
autocorrelation at the score of 1.89). The F-test failed to accept the null hypothesis that the estimated
parameters are equal to zero. There are 6 variables from Network Ties factors are positive and significant
at the 10% level of significance. However, the Information Sharing factors are significant at the 10% level
of significance in the negative direction. The Inward and Outward Internationalization factors and Trust
factors are not significance at the 10% level of significance.
5.1. Limitations of the Research: This research encountered certain limitations which need to be
acknowledged. First, the lack of adequate sample size and information were the major constraints for not
being able to conduct the research from the perspectives of the MNEs in Thailand as desired by the
researcher. This research collected only one source to be the research population and calculated for the
research sample. The respondents are in the highest positions of the organizations who are actually
having limited of time to reluctant the questionnaires. Even the view from the top management would
have made better respondents as they have better understanding of the factors that are ideal for putting
up the business strategic policies for their organizations. We can pick one business sector and collect the
information from every employee to examine whether the information sharing and network ties which
affect to the organization’s competitiveness improvement.
5.2. Suggestions for Future Research: To improve the research hypotheses and results, this section
suggests some recommendations for further researches as follows:
§ This research provides insight regarding the factors that are considered levels of agreement from
the CEOs of MNEs in Thailand. Based on the results of this research, further research could be
undertaken in surveying to lower position in the MNEs in Thailand to understand how employees’
think about the information sharing and network ties to their colleagues. Also some employees
are usually contact to suppliers or purchasers all the time, the research may be appropriated
measures. This research was undertaken using simple statistical tools such as frequencies,
correlations, and regression analysis. More advanced research could be undertaken by using
different statistical method such as cluster analysis or different technique such as Lisrel to
analyse data which were not apply to this research.
§ It would also be useful to examine the MNEs in different countries such as countries from Europe
or Australia and etc. Considering regions of MNEs’ origins to compare the agreement levels
would be the different results. This may help domestic MNEs to improve their performance and
better make decision to collaborate with MNEs in the suture.
Finally, the result would then be much more useful and satisfying.
REFERENCES
Adler, P.S., and Kwon, S.W. 2002. “Social Capital: Prospects for a New Concept”, Academy of
Management Review, Vol. 27, pp. 17-24.
Anderson, U., Forsgren, M and Holm, U. 2002. “The Strategic Impact of External Networks: Subsidiary
Performance and Competence Development in the Multinational Corporation”, Strategic Management
Journal, Vol. 23, pp. 979-96.
Barney, J. B. 1991. “Firm resources and sustained competitive advantage”, Journal of Management, Vol.
17, pp. 99-120.
Batjargal, B. and Liu, M. 2004. “Entrepreneurs’ access to private equity in China: the role of social
capital”, Organization Science, Vol. 15, pp. 159-72.
Boonlua, S. 2011. “A Comparative Analysis of the US and Japan FDI in Thailand”, Journal of Academy of
Business and Economics, Vol. 11, No. 3.
Bradach, J. L. and Eccles, R. G. (1989). “Price, authority, and trust: from ideal types to plural forms”. In
Scoot, W. R. (Ed.), Annual Review of Sociology, Vol. 15, pp. 97-118.
Burt, R.S. 1992. Structural Holes: The Social Structure of Competition, Harvard University Press,
Cambridge, MA.
66
ISSN 2326-3636
Burt, R.S. 1997. The contingent value of social capital, Competition, Harvard University Press,
Cambridge, MA.
Burt, R.S. 2007. “Secondhand Brokerage: Evidence on the Importance of Local Structure for Managers,
Bankers, and Analysis”, Academy of Management Journal, Vol. 50, pp. 119-48.
Chen, T.-J. 2003. “Network resources for internationalization: the case of Taiwan’s electronics firms”,
Journal of Management Studies, Vol. 40, No. 5, pp. 1107-30.
Coleman, J.S. 1990. Foundations of Social Theory, Harvard University Press, Cambridge, MA.
Collins, C.J. and Clark, K.D. 2003. “Strategic Human Resource Practices, Top management Team Social
Networks, and Firm Performance: The Role of Human Resource Practices in Creating Organizational
Competitive Advantage”, Academy of Management Journal, Vol. 46, No. 6, pp. 740-51.
Cummings, J. N. 2004. “Work groups, structural diversity, and knowledge sharing in a global
organization”, Management Science, Vol. 50, pp. 352-64.
Dyer, J. H. and Chu, W. 2003. “The role of trustworthiness in reducing transaction costs and improving
performance: empirical evidence from the United States, Japan, and Korea”, Organization Science,
Vol. 14, pp. 57-68.
Ellis, P. 2000. “Social ties and foreign market entry”, Journal of International Business Studies, Vol. 31,
No. 3, pp. 443-69.
Ellis, P. and Pecotich, A. 2001. “Social factors influencing export initiation in small and medium-sized
enterprises”, Journal of Marketing Research, Vol. 38, No. 1, pp. 119-30.
Greene, W. H. 2003. Econometric Analysis (5th ed.), Prentice Hall, Upper Saddle River, N.J.
Gulati, R. 1999. “Network Location and Learning: The Influence of Network Resources and Firm
Capabilities on Alliance Formation”, Strategic Management Journal, Vol. 20, No. 5, pp. 397-420.
Gulati, R., Norhria, N., and Zaheer, A. 2000. “Strategic networks”, Strategic Management Journal, Vol.
21, pp. 203-15.
Hadley, R.D. and Wilson, H.I.M. 2003. “The network model of internationalization and experiential
knowledge”, International Business Review, Vol. 12, No. 6, pp. 697-717.
Harris, S. and Wheeler, C. 2005. “Entrepreneurs’ relationships for internationalization: functions, origins
and strategies”, International Business Review, Vol. 14, No. 2, pp. 187-207.
Horton, J., Millo, Y. and Serafeim, G. 2012. “Resources or Power? Implications of Social Networks on
Compensation and Firm Performance”, Journal of Business Finance & Accounting, Vol. 39, No. 3 & 4,
pp. 399-426.
Inkpen, A. and Tsang, E. 2005. “Social Capital, Networks and Knowledge Transfer”, The Academy of
Management Review, Vol. 30, pp. 146-65.
Jigme, S. 2006. Determinants Affecting Foreign Direct Investment in Bhutan: Perception of Government
Officers in BIMST-EC Member Countries. A Thesis Submitted in Partial
Fulfilment of the Requirements for the Degree of Master in Business Administration at the University of
the Thai Chamber of Commerce, Thailand. Unpublished Thesis MBA – University of the Thai Chamber
of Commerce 2006.
Johanson, J. and Mattsson, L.G. 1988. “Internationalization in Industrial Systems: A Network Approach”,
in Hood, N. and Vahlne, J.E. (Eds.), Strategies in Global Competition, Croom Helm (pp. 287-314)
London.
Laumann, E. O. 1978. “Community Structure as Interorganizational Linkages”, Annual Review of
Sociology, Vol. 4, pp. 455-84.
Leana, C.R. and Pil, F.K. 2006. “Social Capital and Organizational Performance: Evidence from Urban
Public Schools”, Organization Science, Vol. 17, pp. 353-68.
Liesch, P.W. and Knight, G.A. 1999. “Information internalization and hurdle rates in small and medium
enterprises internationalization”, Journal of International Business Studies, Vol. 30, No. 2, pp. 383-94.
Liesch, P.W., Welch, L.S., Welch, D., McGaughey, S.L., Peterson, B. and Lamp, P. 2002. “Evolving
strands of research on firm internalization: an Australian-Nordic Perspective”, International Studies of
Management and Organization, Vol. 32, No. 1, pp. 16-35.
Luo, Y. 2003. “Industrial dynamics and managerial networking in an emerging market: the case of China”,
Strategic Management Journal. Vol. 24, No. 13, pp. 1315-27.
Madhok, A. 2002. “Reassessing the fundamentals and beyond: Ronald Coase, the transaction cost and
resource-based theories of the firm and the institutional structure of production”, Strategic Management
Journal, Vol. 23, pp. 255-50.
67
ISSN 2326-3636
Maurer, I. and Ebers, M. 2006. “Dynamics of Social capital and Their Performance Implications: Lessons
from Biotechnology Start-Ups”, Administrative Science Quarterly, Vol. 51, pp. 262-91.
Nahapiet, J. and Ghoshal, S. 1998. “Social capital, intellectual capital, and the organizational advantage”,
Academy of Management Review, Vol. 23, pp. 242-66.
Park, S.H. and Luo, Y. 2001. “Guanxi and Organizational Dynamics : Organizational Networking in
Chinese Firm”, Strategic Management Journal, Vol. 22, pp. 455-77.
Peng, M. W. and Luo, Y. 2000. “Managagerial ties and firm performance in a transition economy: the
nature of a micro-macro link”, Academy of Management Journal, Vol. 43, pp. 486-501.
Powell, W. W., Koput, K.W. and Smith-Doerr, L. 1996. “Interorganizational Collaboration and the Locus of
Innovation: Networks of Learning in Biotechnology”, Administrative Science Quarterly, Vol. 41, pp. 11645.
Redding, G. 1991. “Weak Organizations and Strong Linkages: Managerial Ideology and Chinese Family
Business Networks”, in Hamilton, G.G. (Ed.), Business Networks and Economic Development in east
and Southeast Asia, Center for Asian Studies (pp. 30-47), University of Hong Kong.
Rowley, T. J., Behren, B., and Krackhardt, D. 2000. “Redundant governance structures: an analysis of
structural and relational embeddedness in the steel and semiconductor industries”, Strategic
Management Journal, Vol. 21, pp. 36-86.
Sahin, F. and Robinson, E. P. 2002. “Flow coordination and information sharing in supply chains: review,
implications, and directions for future research”, Decision Science, Vol. 33, pp. 505-36.
Sapienza, H.J., De Clercq, D. and Sandberg, W. 2005. “Antecedents of international and domestic
learning effort”, Journal of Business Venturing, Vol. 20, No. 4, pp. 63-83.
Sorenson, R. L., Goodpaster, K. E., Hedberg, P. R. and Yu, A. 2009. “The Family Point of View, Family
Social Capital, and Firm Performance”, Family Business Review, Vol. 22, pp. 239-53.
Tsui, A., Farh, J.L. and Xin, K. 2000. “Guanxi in the Chinese Context”, in Li, J.T., Tsui, A. and Weldon, E.
(Eds.), Management and Organization in the Chinese Context (pp. 225-44), Macmillan, London.
Uzzi, B. 1997. “Social Structure and Competition in Interfirm Networks: The Paradox of Embeddedness”,
Administrative Science Quarterly, Vol. 42, pp. 35-67.
Uzzi, B. and Lancaster, R. 2003. “Relational embeddedness and learning: the case of bank loan
managers and their clients”, Management Science, Vol. 49, pp. 383-99.
Westphal, J. D., Boivie, S. and Chang, D. H. M. 2006. “The Strategic Impetus for Social Network Ties:
Reconstituting Broken CEO Friendship Ties”, Strategic Management Journal, Vol. 27, No. 5, pp. 42545.
Wu, W.-P. 2008. “Dimension of Social capital and Firm Competitiveness Improvement: The Mediating
Role of Information Sharing”, Journal of Management Studies, Vol. 45, pp. 122-46.
Yu, S.-H. and Chiu, W.-T. 2013. “Social Networks and Corporate Performance: The Moderating Role of
Technical Uncertainty”, Journal of Managerial Issues, vol. 25, No. 1, pp. 26-45.
Zaheer, A., McEvily, B. and Perrone, V. 1998. “Does trust matter? Exploring the effects of
interorganizational and interpersonal trust on performance”, Organization Science, Vol. 9, pp. 141-59.
Zhou, L., Wu, W.-P. and Luo, X. 2007. “Internationalization and the performance of born-global SMEs: the
mediating role of social networks”, Journal of International Business Studies, Vol. 28, pp. 673-90.
AUTHOR PROFILE
Dr. Sutana Boonlua (Ph.D., Lincoln University, New Zealand) is a lecturer of Mahasarakham Business
School, Mahasarakham University, Thailand. Her interesting areas of research are FDI, cross cultural
management, and ASEAN studies. She has published articles in various journals such as Journal of
International of Business and Economics, International Journal of Business and research, The Business
Review, International Journal of Business Strategy, European Journal of Management, and Journal of
International Business and Economics.
Ms. Natarpha Satchawatee (Master of Science Program in Information Technology, King Mongkut’s
Institute of Technology Ladkrabang, Thailand) is a lecturer of Mahasarakham Business School,
Mahasarakham University, Thailand. mHer interesting areas of research are Information Technology, and
Innovation Management in Asia.
68
ISSN 2326-3636
HOW EVALUATE ENVIRONMENTAL UNCERTAINTY: A VALIDATION SCALE
FOR DYNAMISM AND COMPLEXITY
Carlos Martins, Lusiada University, Porto, Portugal
Paula Rodrigues, Lusiada University, Porto, Portugal
Francisco Vitorino Martins, Porto Economics Faculty, Porto, Portugal
ABSTRACT
The complexity and dynamism are key elements and influencers of the environment. These factors
lead to the existence of stable, moderate or turbulent environments. The environment states
influence the perception of managers, and in their process of decision making. The construction of
a scale to assess each environment dimension was based on the literature, and submitted to a
universe of high-growth companies (HGC). Based on 172 responses we sought to validate these
scales, using a technique of factor analysis and concluded that uncertainty can be explain trough
some factors which explain, dynamism and complexity.
Key Words: Dynamism, Complexity, Uncertainty, Environment.
1. INTRODUCTION
With the emergence of systems theory, there is a change in approach to the study of organizations,
from an atomistic to holistic view. The systems were seen as needing to raise resources in your
environment, and integrating their policies and practices in order to achieve their goals. The
approach of organizations as open systems, requires continuous adaptation to the environment,
and internal adjustment (fit) under penalty of entropy. These conclusions were supported by Lorsch
Lawrence (1961), Burns and Stalker (1961) and Emery and Trist (1965). Depending on the
environment, organizations should choose and pursue different strategies.
2. DIMENSIONS OF ENVIRONMENTAL UNCERTAINTY
Although organizational theory recognizes the importance of the environment has not been possible
to achieve objectivity and accuracy. The relevance of the environment has crossed the approaches
of Industrial Organization (IO) from Scherer and Ross (1990), Porter (1980) to the approach of
resources, which did depend on the importance of the environment (Aldrich, 1979). Studies on the
environment according to Porto et al. (2009), have been split between a more realistic and objective
perspective (Dess and Beard, 1984; Sharfman and Dean, 1991), and a more nominalist based on
relevance of external information flows and interpretations generated and perceived by managers.
The difficulty in operationalizing the concept of environment should are twofold: first, to its scope
and the difficulty of accurately while external to the organization, which affect their activity factors;
Secondly, the difficulty in separating and defining the environment and the organization itself, a
matter which was marked by the contribution of studies that consider organizations as open
systems (Daft, 2002) . Thus the environmental studies have been partitioned between two streams.
One that considers the environment as a source of information and its interpretation depends on the
perceptions of managers (Robalo, 1997). What gives uncertainty in decision making (Duncan,
1972; Lawrence and Lorsch, 1967) and the perception of uncertainty result of variations in analysis
and interpretation of the environment (Child, 1972; Child, 1997). Another approach analyzes the
environment as a resource whose scarcity acts in shaping the organizational structure (Porto et al.
2009).
69
ISSN 2326-3636
2.1. Complexity
Although it has recognized the importance of complexity (Dill 1958; Milliken, 1987; Duncan, 1972,
Lawrence and Lorsch 1967; Thompson, 1967; Cannon & St. John, 2007) has not always existed
clearly understanding of the concept. The number of elements involved influence the degree of
complexity through their diversity (Lawrence and Lorsch, 1967; Khandwalla, 1972) and the
heterogeneity of the core activities, reported by Thompson (1967 ) and Dill (1958 ) that are
associated to grade and sophistication of required knowledge ( Aldrich , 1979). An organization that
offers a wide range of products to a variety of customers in different geographical areas faces a
heterogeneous context (Volberda, 1997). Beyond the number of elements involved, their
interconnection, transforms the complexity. This plurality of elements can then be broken down due
to the number of elements and their variety (Reilla, et al., 2008).
Interdependence can be decomposed into a double perspective, internal or external. These last
correspond to the influence of partners and stakeholders in organizational activities. Axelrod and
Cohen (2000:7) define all those complex systems, where "there are the strong interactions among
its elements so that current events heavily influence the probabilities of many kinds of later events".
When interdependencies are reduced, may be divided in homogeneous groups, thereby decreasing
the degree of complexity. This is comparable to the analyzability proposed by Perrow (1970).
Ambiguity it´s related to the availability of information. To Maznevski (2007:5) this can be classified
as "too much information with less and less clarity on how to interpret and apply findings". When are
not comprehensible relations of cause and effect of environmental components (Thompson, 1967)
that limits the understanding of managers (Volberda, 1997).
The fast flows describe the other hand, the transient nature of the environment whereas the
complexity is revealed by the number of different states that a system can spend in a given period
of time. Following Volberda (1997) this dimension, vary from predictable to unpredictable. When
transitions are linear, cyclic, or occur simultaneously, managers can make extrapolations about the
future. The cause-effect relationships are predictable allowing anticipates the future. When there is
not causation, the future is uncertain or unknown.
2.2. Dynamism
The dynamism arises associated with variations and constantly changing environmental conditions
(Lawrence and Lorsch, 1967; Miller and Friesen, 1983; Thompson, 1967; Lumpkin and Dess, 2001;
Reilla, et al., 2008). This variability reflects intense competition for resources, imposing an
organizational flexibility as a way to ensure survival (Keats and Hitt, 1988; Porto et al., 2009). Some
studies focus on the dynamics, assessing the impact that the variability originates in organizations
(Duncan, 1972; Dill 1958, Burns and Stalker, 1961). Others deal with the change, as either static or
dynamic state. In dynamic or unstable environments, technological changes, consumer
preferences, or competitive intensity occur. These changes may be envisaged by, their frequency,
or intensity (Volberda,1997; Dill, 1958).
Uncertainty can therefore be variable, depending on the variations of the degree of complexity and
dynamism of the environment (Emery and Trist,1967; Duncan,1972; Daft , 2011; Carvalho and
Rossetto, 2012). These amplitudes transform the environments in stable, intermediate or turbulent
(Eisenhardt and Bingham, 2008; Bingham et al. 2011).
Our preference in the investigation of environmental uncertainty (Elenkov, 1997; Ebrahimi, 2000),
followed the proposed Volberda (1997), using the dimensions of dynamism and complexity
(Duncan,1972; Lumpkin and Dess,2001) on the principle that these perspectives are not equally
important in the perception of managers. The choice of perceptual data is based on the conviction
that the perceptual measures reflect more adequately the behavior of managers (Bourgeois, 1980).
70
ISSN 2326-3636
3. METHODOLOGY
Integrated into Portuguese business we found a group of high-growth companies (HGC) so
designated as a result of the rapid growth, presented both in employment and turnover. During the
period (2008-2011) HGC accounted for 10 % of job creation at Portugal; has also increased by 158
%, the number of employees in its 71 % turnover, and 95 % the volume of exports .The HGC are
the ones with an average annual organic growth of top employees to 20 % for 3 consecutive years;
and having at least 10 employees at the beginning of the reporting period. In the period from 2008
to 2011 were identified 984 HGC businesses from a universe of 275,177 firms (database informa
D&B).
The study was based on the uncertainty range of the dynamism and complexity. In the dimension of
dynamism were encompassed 14 variables, whereas the complexity dimension was integrated 11
variables. Both dimensions sought withdraw environmental factors that could influence the
uncertainty. Each variable were measure in a Likert scale from 1 to 5 positions, which sought to
translate a continuum. At dynamism, the variation was evident from 1 (unimportant) to 5 (very
important), while the dimension of complexity, it sought to highlight its variation from 1 (total
disagreement) to 5 (total agreement). Respondents were top managers of each unit. In a first stage,
questionnaires were sent by "mail" followed contact non-respondents by telephone. The final
numbers of responses were 172. After a first exploratory analysis, at both dimensions of
uncertainty, were select the follow variables.
TABLE 1. DYNAMISM FACTORS ITEMS
DF1
DF2
DF3
The technology involved with our activities has changed significantly in the last 3 years
Technological changes have been very radical
Regulation of the sector has changed frequently over the past three years
When changes occur in legislation are radical
The aggressiveness of our competitors have changed frequently in the past 3 years
Our partners and suppliers have changed a lot of action in the last three years
TABLE 2. COMPLEXITY FACTORS ITEMS
CF1
CF2
The diversity of suppliers and their offerings have increased
There is a great diversity of supply of substitute products
It is difficult to understand how the evolving needs and interests of our clients
It is difficult to get information about our segments to make decisions
3.1. Dynamism Factors
The scale of the construct of environmental dynamism, has been drawn up in accordance with the
proposals of Lumpkin and Dess (2001), Volberda (1997), Temtime (2002), Carvalho and Rosetto
(2012). The initial variables used to classify the dynamism were 14 variables. The statistical
treatment of the data collected was done with the IBM-SPSS version 20, by applying the technique
of exploratory factor analysis. The extraction method of the factors was the principal components
with varimax rotation. The criteria for acceptance of the results were the value of each eigenvalue is
greater than 1.0; the factor loading after varimax rotation are greater than 0.3; the variance
explained by all factor is great than 40 percent and no variable has significant loading on more than
one factor.
Three factors were obtained explain 80.533% of the variance of the data. Factor 1, called for
"Technological change" loaded with 2 items, factor 2, called "regulatory changes" also loaded with
items 2 and factor 3, called for "changes in competitors and suppliers" loaded with 2 items.
71
ISSN 2326-3636
Assuming that the data come from a multivariate normal population, it is convenient to test, through
the Bartlett Sphericity Test, if the correlation matrix used is the identity matrix and if its determinant
is equal to 1. If this hypothesis is rejected, there is statistical evidence that there is a correlation
between the variables and you can proceed with the analysis. The results found for the scales of
personal cultural orientation and perception of socially responsible consumer behavior, rejects the
hypothesis at a significance level of 1%.
In addition to this test, the statistical Kaiser-Meyer-Olin (KMO) allows to evaluate the relationship
between the simple correlations and partial correlations between variables. It is a statistic that
varies between 0 and 1. The factor analysis is considered as the best if KMO statistical approaches
to one. The KMO test (KMO = 0,64) and the Bartlett's Test of Sphericity (2 = 342,034; p = 0,000)
show that factor analysis is appropriate and should be performed.
3.2. Complexity Factors
The same type of analysis was performed to complexity construct. The collection of information on
this construct was made using 11 items taken from the literature review. In this case two factors
were obtained that explain 77.995% of the variance of the data. Factor 1 was termed as "Supplier
Diversity and substitutes" and factor 2 was termed as "Difficulty in understanding the customers."
Here too, the KMO (KMO = 0.55) and Bartlett's Test of sphericity (2 = 134,193; p = 0,000) test
show that factor analysis is appropriate and should be performed.
The reliability of the scales was assessed by Cronbach's Alpha Coefficient yielding to a dynamic
one  = 0.744 and complexity one  = 0.628.
TABLE 3. CONSTRUCT ITEMS
Constructs
Measurement
Dynamism
The technology involved with our activities has
changed significantly in the last 3 years
Technological changes have been very radical
Regulation of the sector has changed frequently over
the past three years
When changes occur in legislation are radical
The aggressiveness of our competitors have changed
frequently in the past 3 years
Our partners and suppliers have changed a lot of
action in the last three years
Complexity
The diversity of suppliers and their offerings have
increased
There is a great diversity of supply of substitute
products
It is difficult to understand how the evolving needs and
interests of our clients
It is difficult to get information about our segments to
make decisions
Factor
Loadings
0,791
Alpha
0,842
0,835
0,883
0,938
0,774
0,926
0,890
0,874
0,842
0,628
0,888
4. CONCLUSIONS
The environmental uncertainty were evaluate based on some tested scales ( (Carvalho and
Rosetto, 2012), which had been improved integrating another views ( (Volberda and Bruggen,
1997) about dynamism and complexity. The final result, can assure that multidimensionality exist
between the constructs. The dynamism construct can be represented by six variables which could
be explained by three factors: DF1 (technological changes), DF2 (regulatory changes), DF3
72
ISSN 2326-3636
(changes in competitors and suppliers. The complexity construct could be translated by four
variables, integrated in two factors: CF1 (supplier diversity and substitutes), CF2 (difficulty in
understanding the customers).
REFERENCES
Aguilar, F. J., 1967. Scanning the Business Environment. New York: MacMillan.
Aldrich, H. A., 1979. Organizations and Environments. NJ: Prentice Hall.
Alvarez, S. A. & Barney, J., 2005. how Do Entrepreneurs Organize Firms under Conditions of
Uncertainty. Journal of Management, pp. 776-793.
Ansoff, H. I., 1965. Corporate Strategy. New York: McGraw-Hill.
Barney, J. B., 1986. Types of Competition and Theory of Strategy: Toward an Integrative
Framework. Academy of Management Review, pp. 791-800.
Barney, J. B.: Oxford University Press.
Beinhocker, E. D., 1999. On the origin of strategies. The McKinsey Quarterly, pp. 167-176.
Beinhocker, E. D., 2& Clark, D. N., 2007. Resource-Based Theory:Creating and Sustaining
Competitive Advantage. Oxford 006. The adaptable corporation. The McKinsey Quarterly, pp. 7687.
Bingham, C. B. & Eisenhardt, K. M., 2008. Position, Leverage and Oportunity: A typology of
strategic Logics linking resources with competitive advantage. Managerial and Decision
Economics, pp. 241-256.
Bingham, C. B., Eisenhardt, K. M. & Furr, N. R., 2011. Which strategy when?. MIT Sloan
Management Review, pp. 71-78.
Bitar, J., 2003. Strategy in Turbulent Environment Continuous Innovation and Generic Dynamic
Capabilities. Cahier de recherche nº 01-04, pp. 1-27.
Bittilingmayer, G., 2001. Regulatory uncertianty and investment: evidence from antitrust
enforcement. Cato Journal, pp. 295-325.
Bourgeois, L., 1980. Strategy and Environment: a conceptual integration. Academy of Managment
Review, pp. 25-39.
Brown, S. L. & Einsenhardt, K., 1998. Competing on the Edge: Strategy as Structured Chaos.
Boston: Harvard Business School Press.
Burns, T. & Stalker, G., 1961. The Management of Innovation. London: Tavistock.
Cannon, A. & St. John, C., 2007. Measuring environment complexity: a theorical and empirical
assessment. Organizational Research Methods, pp. 296-321.
Carvalho, C. E. & Rosetto, C. R., 2012. Dinamismo, Complexidade e munificiencia ambientais:
construçao e validação de escalas para a sua mensuração. EnANPAD, Setembro.
Chakravarthy, B., 1997. New Strategy Framework for coping with turbulence. Sloan Management
Review, pp. 69-82.
Chandler, A., 1962. Strategy and Structure: Chapters in the History of Industrial Enterprise.
Cambridge: MIT Press.
Child, J., 1972. Organizational Structure, Environment Performance: The Role of Strategic Choice.
Sociology, pp. 1-22.
Child, J., 1997. Strategic Choice in the Analysis of Action, Structure, Organizations and
Environment: Retrospect and Prospect. Organization Studies, pp. 43-76.
Choo, C. W., 2003. Environmental Scanning as Information Seeking and Organizational Learning.
Information Research, pp. 1-24.
Christopher B. Bingham, K. M. E. e. N. R. F., 2011. Which strategy when?. MIT Sloan Management
Review, pp. 71-78.
C-Institute, 2006. Dynamic Environments and Complexity-Embedded Strategies. Ciberia Group.
Collis, D. J. & Rkstad, M. G., 2008. Can you say what strategy is?. Harvard Business Review, Abril.
Courtney, H., Kirkland, J. & Viguerie, P., 1997. Strategy under Uncertainty. Harvard Business
Review, Nov-Dez.
Daft, R., 2002. Organizaçoes : Teorias e Projectos. São Paulo: Pioneira Thomson Learning.
Daft, R. & Langel, R., 1986. Organization Information requirements media richness and strctural
designs. Managment Science, pp. 554-571.
73
ISSN 2326-3636
Daft, R., Sormunen, J. & Parks, D., 1988. Chief Executive Scanning,environmental
characteristcs,and company performance. Strategic Management Journal, pp. 123-139.
D'Aveni, R., 1994. Managing the Dynamics of Strategic Maneuvering. New York-NY: Free Press MacMillan.
D'Aveni, R., G.B., D. & K.G., S., 2010. The Age of Temporary Advantage. Startegic Management
Journal, pp. 1371-1385.
Day, G. S. & Shoemaker, P. J. H., 2006. Visão Periférica. Lisboa: Actual Editora.
DeSarbo, W., Benedetto, C. A. D., Song, M. & Sinha, I., 2005. Revisiting the Miles and Snow
Strategic framework: uncovering interrelationships between strategic types, capabilities,
environmental uncertainty, and firm performance. Strategic Management Journal, pp. 47-74.
Dess, G. G. & Beard, D., 1984. Dimensions of organizational tasks environments. Administrative
Science Quarterly, pp. 52-73.
Dill, W. R., 1958. Environment as an influence on managerial autonomy.. Administrative Science
Quarterly, pp. 409-443.
Dixit, M. R. & Bhowmick, B., 2011. Discontinuity in the Environment, Firm Response, and Dynamic
Capabilities. VIKALPA, pp. 1-11.
Downey, H. K., Hellriegel, D. & Slocum, J. W., 1975. Environment Uncertainty: The construct and its
application. Administrative Science Quarterly, pp. 613-629.
Dranone, D. & Narciano, S., 2006. Estrategia: conceitos, ferramentas e modelos profissionais. São
Paulo: Editora Atlas.
Duncan, R. B., 1972. Carcteristics of Organizational Environment and perceived environmental
uncertainty. Administrative Science Quarterly, pp. 313-327.
Ebrahimi, B., 2000. Perceived Strategic Uncertainty and Environmental scanning behavior of Hong
Kong Chinese Executives. Journal of Business Research, pp. 67-77.
Eisehardt, K. M. & Martin, J., 2000. Dynamic Capabilities: What Are They?. Strategic Managment
Journal, pp. 1105-1121.
Eisenhardt, k. M. & Sull, D. N., 2002. Estratégia como regras Simples. Rio Janeiro: Editora
Campus.
Elenkov, D. S., 1997. Strategic Uncertainty and Environmental Scanning: the case for institutional
influences on scanning behavior. Strategic Managment Journal, pp. 287-302.
Emery, F. & Trist, E., 1965. The causal texture of organizational environments. Human relations,
pp. 21-32.
Fields, G., 2009. Poltical Uncertainty Puts Freeze on Small Business. Wall Street Journal, p. A18.
Freeman, M. H. e. J., 1977. The population ecology of organizations. American Journal of
Sociology, pp. 137-152.
Grant, R. M., 1996. Direccion Estrategica - conceptos tecnicas y aplicaciones. Madrid: Editorial
Civitas.
Grant, R. M., 2003. Strategic Planning in a turbulent environment: evidence from the oil majors.
Strategic Managment Journal, pp. 491-517.
Hambrick, D. C., 1983. Environmental Scanning and Orgnaizational Strategy. Strategic Managment
Journal, pp. 147-159.
Hambrick, D. C. & Fredrickson, J. W., 2005. Are you sure you have a strategy?. Academy of
Management Executive.
Hamel, G., 2002. Leading the Revolution: how to thrive in turbulent times by making innovation a
way of life. Boston: Harvard Business School Press.
Hamel, G. & Prahalad, C., 1994. Competing for the Future. Boston: Harvard Business School
Press.
Hannan, M. T. & Freeman, J. H., 1977. The Population Ecology of Organizations. American Journal
of Sociology, pp. 929-963.
Hauschild, S., Knyphausen-Auseb & Ramel, M., 2011. Measuring Industry Dynamics: Towards a
Comprehensive Concept. SBR, pp. 416-454.
Hax, A. C. & Majluf, N. S., 1996. The Strategy Concept and Process. NJ: Prentice Hall.
Hiitt, M. A., D., I. R. & R.E., H., 2000. Administração Estratégica:Competitividade e Globalização.
São Paulo: Pioneira Thomson Learning.
Hofer, C. W. & Schendel, D., 1978. Strategy Formulation: Analytical Concepts. Saint Paul,
Minnesota: West Publishing Co..
74
ISSN 2326-3636
Jacobides, M., 2010. Strategy Tools fo a Shifting Landscape. Harvard Business Review, JaneiroFevereiro, pp. 77-84.
Jaworski, B. J., Kohli, A. K. & Arvind, S., 2000. Market-driven versus driving markets. Journal of the
Academy of Marketing Science, Julho, pp. 45-54.
Johnson, G., Scholes, K. & Wittinghton, R., 2007. Explorando a Estrategia Corporativa. Porto
Alegre: Bookman.
Kaplan, R. & Norton, D., 2000. Organização Orientada para a Estratégia. Rio de Janeiro: Campus.
Kaplan, R. & Norton, D. P., 1997. Estrategia em Acção. Rio de Janeiro: Campus.
Keats, B. W. & Hitt, M., 1988. Linkages among environmental dimensions and macro-organizational
characteristics: a causal modeling approach. Academy Management Journal, pp. 570-598.
Khandwalla, 1975. The Design of Organizations. N. York: Harcourt Brace Jovanovich Inc..
Khandwalla, P. N., 1972. Environment and its Impact on the Organization. International Studies of
Management & Organization, pp. 297-313.
Kotler, P. & Caslione, J. A., 2009. Chaotics vencer em tempo de caos. Lisboa : Actual Editora.
Kumar, N., Scheer, L. & Kotler, P., 2000. From market-driven to market-driving. European
Management Journal, pp. 129-141.
Lafley, A., Martin, R. L., Rivkin, J. W. & Siggelkow, N., 2012. Bringing Science to The Art of
Strategy. Harvard Business Review, September, pp. 57-66.
Lawrence, P. & Lorsch, J., 1967. Organization and Environment-Managing Differentiation and
Integration. boston: Graduate School of Business Administration-Harvard University.
Learned, E. P., Christensen, C. R., Andrews, K. R. & Guth, W. D., 1965. Business Policy.
Homewood,IL: Richard D. Irwin.
Livera, O. R. & Moraes, W. F., 2002. Hipercompetição na Industria de Telefonia Movel Celular.
Recife, PROPAD/UFPE: ANPAD.
Lumpkin, G. T. & Dess, G. G., 2001. Linking two dimensions of entrepreneurial orientation to firm
performance: the moderating role of environment and industry life cycle. Journal of Business
Venturing, pp. 429-451.
Markides, C., 1997. Strategic Innovation. Sloan Management Review.
Markides, C., 1999. Six Principles of Breakthrough Strategy. Business Strategy Review, pp. 1-10.
Markides, C., 2001. Strategy as Balance:From "either-or" to "and". Business Strategy Review, pp.
1-10.
Markides, C. C., 1999. A Dynamic View of Strategy. Sloan Managment Review, pp. 55-63.
Maznevski, M., Steger, U. & Amann, W., 2007. Managing complexity in Global Organizations as the
Meta-Challenge. s.l.:John Wiley & Sons Ltd..
McCann, J., Selsky, J. & Lee, J., 2009. Building Agility, Resilience and Performance in Turbulent
Environments. People&Strategy, pp. 44-51.
McGrath, R. G., 2013. Transient Advantage. Harvard Business Review - Reprint R1306C, Junho,
pp. 1-10.
McMullen, J. S. & Shepherd, D. A., 2006. Entrepreneurial Action and the Role of Uncertainty in the
Theory of the Entrepreneur. Academy Managment Review, pp. 132-152.
Miller, D., 1987. The Structural and Environmental Correlates of Business Strategy. Strategy
Management Journal, pp. 55-76.
Miller, D. & Friesen, P., 1983. Innovation in Conservative and entrepreneurial firms: Two models of
strategic momentum. Strategic Managment Journal, pp. 1-25.
Milliken, F., 1987. Three types of perceived uncertainty about the environment: state, effect and
response uncertainty. Academy of Management Review, pp. 133-143.
Mintzberg, H., 1987. Crafting Strategy. Harvard Business Review.
Mintzberg, H., 1994. The Rise and Fall of Strategic Planning. London: Prentice Hall International.
Montebello, M., 2003. Criação de Valor para o Cliente. Lisboa: Monitor.
Ohmae, K., 1988. Getting back to strategy. Harvard Business Review - adaptado, NovembroDezembro.
Perrow, C., 1970. Organizational Analysis: A sociological view.. London: Tavistock.
Pettus, M. L., Kor, Y. Y. & Mahoney, J. T., 2009. A theory of change in turbulent environments:the
sequence of dynamic capabilities following industry deregulation. Int. J. Strategic Change
Management, pp. 186-211.
75
ISSN 2326-3636
Pfeffer, J. & Salancik, G. R., 1978. The External Control of Organizations: A Resource Dependence
Perspective. New York,NY: Harper & Row.
Porter, M. E., 1980. Competitive Strategy: Techniques for Analysing Industries and Competitors.
New York: Free Press.
Porter, M. E., 1981. The Contribution of Industrial Organization to Strategic Management. Academy
Managment Review, pp. 609-620.
Porter, M. E., 1985. The Competitve Advantage: Creating and Sustaining Superior Performance.
New York: Free Press.
Porter, M. E., 1996. What is strategy. Harvard Business Review, Novembro-Dezembro.
Porter, M. E., 2008. The Five Forces that Shape Strategy. Harvard Business Review, January, pp.
25-40.
Porto, E. P. et al., 2009. Ambientes Organizacionais: uma proposta de classificação com uso de
munificiência, dinamismo e complexidade. BASE-Revista de Administração e Contabilidade da
Unisinos, pp. 101-119.
Prestes Motta, F. C. & Vasconcelos, I. F. G. d., 2002. Teoria Geral da Administração. São Paulo:
Pioneira Thomson Learning.
Pumpin, C., 1990. Estrategia Empresarial,como conquistar posições de escelencia estratégica.
Lisboa : Monitor.
Pun, S. S., n.d. Managing in turbulent environments. Ansoff Associates.
Reeves, M. & Deimler, M., 2011. Adaptability:The New Competitive Advantage. Harvard Business
Review, pp. 135-141.
Reeves, M., Love, C. & Tillmanns, P., 2012. Your Strategy Needs a Strategy. Harvard Business
Review, pp. 76-83.
Reilla, E., Prieto, I. M. & Rodriguez, B., 2008. Dynamism and Complexity as Antecedents of the
Knowledge Strategy in Product Development. IE Business School Working Paper DO8-143-I.
Rifkin, G., 1999. The Art of Hypercompetition. Strategy+ Business, 1 April.
Robalo, A., 1997. Teorias Contingenciais de Organização. Lisboa: Edições Silabo.
Robock, S. H., 1971. Political risk: identification and assessement. Columbia Journal of World
Business, pp. 6-20.
Scherrer, F. M. & Ross, D., 1990. Industrial market structure and economic performance. 3º ed.
Boston: Houghton Mifflin.
Schoemaker, J. P. & Day, G. S., 2009. How to Make Sense of Weak Signals. Sloan Manangement
Review, pp. 81-89.
Sharfman, M. & Dean, J. W. J., 1991. Conceptualizing and Measuring the Organizational
Environment: A multidimensional Approach. Journal of Management, pp. 681-700.
Slater, S. & Narver, J. C., 1995. Market orientation and the learning organization. Journal of
Marketing, pp. 63-74.
Sull, D., 2009. How to thrive in Turbulent Markets. Harvard Business Review, pp. 21-29.
Sull, D., 2010. Competing Trough Organizational Ability. McKinsey Quarterly, pp. 1-9.
Sull, D. & Eisenhardt, K., 2012. Simples Rules for a Complex World. Harvard Business Review,
September, pp. 69-74.
Tan, J. & Litschert, R., 1994. Environment-Strategy relationship and its performance implications:
an empirical study of the Chinese electronics industry. Strategic Management Journal, pp. 1-20.
Teece, D., Pisano, G. & Shuen, A., 1997. Dynamic Capabilities and Strategic Management.
Strategic Managment Journal, pp. 509-533.
Temtime, Z., 2006. Monitoring environmental complexities and changes: some lessons from small
firms. Int. J. Globilisation and Small Business, pp. 286-299.
Thompson, J. D., 1967. Organizations in Action. New York: McGraw-Hill.
Tinker, A. M., 1976. A note on "environment uncertainty" and a suggestion for our editorial function..
Administrative Science Quarterly, pp. 506-508.
Vasconcelos, F. C. & Cyrino, A. B., 2000. Vantagem Competitiva os modelos teoricos actuais e a
convergencia entre estratégia e teoria organizacional.. RAE- Revista de Administração de
Empresas, pp. 20-37.
Venkatraman, N., 1989. The Concept of Fit in Strategy Research: Toward Verbal and Statistical
Correspondence. Academy of Management Review, pp. 423-444.
76
ISSN 2326-3636
Venkatraman, N. & Camillus, J., 1984. Exploring The Concept of Fit in Strategy Management.
Academy Management Review, pp. 513-525.
Volberda, H. W. & Bruggen, G. H. v., 1997. Environmental Turbulence: A look into its
Dimensionality. NOBO Nederlandse Organisatie voor Bredrijfskundig Onderzoek, pp. 137-145.
Zhang, X., Majid, S. & Foo, S., 2011. The Contribution of Environmental Scanning to Organizational
Performance. Singapore Journal of Library & Information Management, pp. 65-88.
AUTHOR PROFILE
Carlos Martins is affiliated with Lusiada University, Porto, Portugal.
Paula Rodrigues is affiliated with Lusiada University, Porto, Portugal.
Francisco Vitorino Martins is affiliated with Porto Economics Faculty, Porto, Portugal.
77
ISSN 2326-3636
STAKEHOLDER ENGAGEMENT AND INTEGRATED REPORTING: EVIDENCE
FROM THE ADOPTION OF THE IIRC FRAMEWORK
Daniela M. Salvioni, University of Brescia, Brescia, Italy Luisa Bosetti, University of Brescia, Brescia, Italy
ABSTRACT
The increasing importance of transparency, sustainability, and integration of responsibilities has induced
progressive modifications in corporate communication. Moreover, the fall of space and time barriers to the
free movement of capital and divulgation of information emphasizes the need for uniform communications
in a globalized world. According to these premises, the paper investigates the connections among sustainability, stakeholder engagement and the introduction of the International Integrated Reporting Framework. The analysis focuses on both innovation and continuity of the Framework compared to previous international reporting guidelines, also presenting the results of an empirical study on the initial adoption of
the Framework in some pilot organizations.
Keywords: Sustainable development; Governance; Communication; Integrated Reporting; IIRC
1. INTRODUCTION
For a large part of the last century corporate governance choices aimed at profit maximization (Berle and
Means, 1932; Friedman, 1962; Jensen and Meckling, 1976) and obtainment of shareholders’ short-term
consent. This approach, typical of Anglo-Saxon corporations, also predominated in most firms of all industrialized countries, affecting their development and communications.
In recent decades, a different role of business in society has been claimed in order to respond to the increasing diffusion of frauds and mismanagement, and to comply with the emerging concepts of sustainable development (Salvioni, 2003; Steurer et al., 2005) and stakeholder relations management (Freeman,
1984; Brondoni, 2003; Freeman et al., 2007).
A firm’s sustainable growth underlines the necessary interdependence between stakeholder relationships
management and integration of economic, social and environmental responsibilities (Clarkson, 1995; Carroll, 1999; Henriques and Richardson, 2004; Crane et al., 2008; Esty and Winston, 2008; Heslin and
Ochoa, 2008; Eccles and Serafeim, 2013; Salvioni and Astori, 2013). Firms aim at creating sustainable
value as a condition for minimizing risks and protecting profitable durability. This causes a rethink of corporate governance purposes and a redefinition of the interaction among the board, the employees and
the external stakeholders; furthermore, it necessitates a careful review of key performance variables and
a new approach of communication. Hence, the importance of a holistic and integrated representation of a
firm’s economic, social and environmental performance has been progressively recognized since the beginning of this century.
According to these premises, the paper focuses on the integrated report as a tool for improving corporate
communication through both stakeholder engagement for the selection of significant information and
transparency on the creation of value over the short, medium and long term. The paper is organized as
follows. Sec. 2 considers the evolution of corporate communication in line with the changes in governance
aims. Sec. 3 analyzes the International Integrated Reporting Framework, stressing its innovation and continuity compared to other internationally accepted external reporting guidelines. Sec. 4 describes some selected cases of first-time application of the Framework. Finally, Sec. 5 contains some concluding remarks
and identifies future research direction based on the possible development of integrated reporting.
78
ISSN 2326-3636
2. STAKEHOLDER ENGAGEMENT AND CORPORATE COMMUNICATION
The transition from the shareholder view to the stakeholder view has produced a deep modification of
corporate governance purposes.
In the Nineties, the dominant purpose of the large corporations was the creation of economic value for
their shareholders as stated, for instance, by The Coca-Cola Company in its Annual Report for 1995:
«We exist for one reason: to maximize share-owner value over time. To accomplish this mission, The Coca-Cola Company and its subsidiaries (our Company) have developed a comprehensive business strategy focused on four key objectives: (1) increasing volume, (2) expanding share of worldwide beverage
sales, (3) maximizing long-term cash flows, and (4) improving economic profit and creating economic value added. We achieve these objectives by investing aggressively in the high-return beverages business
and by optimising our cost of capital through appropriate financial policies».
Conversely, The Coca-Cola Company itself explained in its Annual Review for 2012: «At The CocaCola Company, sustainability is about growing our business as we take positive steps to help enhance
people’s lives, build strong communities and protect the environment we all share. We are committed to
using our marketing expertise, the appeal of our brands and our global scale to create value and make a
lasting, positive difference. This commitment is not only about philanthropy, it is about creating a more
sustainable business».
It appears that large companies have changed their orientation of corporate governance, at least formally,
acknowledging the necessity of integration among economic, social and environmental responsibilities. In
the meantime, the companies have improved the ways to implement stakeholder engagement and to be
accountable, and they have developed new methods and tools of governance to increase their whole performance.
To emphasize the role of the stakeholders, a company should map the most significant ones and identify
their expectations in line with the concept of triple bottom line (i.e., integration of economic, social and environmental concerns); then, it should select strategic objectives and prioritize them according to the expectations it wants to satisfy firstly, through a globally responsible conduct. Moreover, the company
should apply the best mechanisms of governance to spread the culture of corporate responsibility all over
the organization and business. Finally, the company should introduce a plan of internal and external integrated communication towards all the stakeholders, in order to meet their information needs.
Recognizing the importance of sustainability and stakeholder engagement determines an evolution of
corporate disclosure, founded on the choice of the most adequate contents and means of dissemination
to satisfy the information and evaluation needs of the stakeholders. In this regard, the firms have enriched
their communication over the years to improve transparency on corporate governance. To complete the
traditional financial reporting, an increasing number of firms have published different types of documents,
such as a corporate governance statement, a remuneration report, a social report, an environmental report, a sustainability report, and an intellectual capital report. Furthermore, the information divulged by the
firms has become more and more detailed, and sometimes even abounding and overlapping.
The extension of information to improve transparency has been accompanied by new methods for content dissemination, which facilitate both the access to information and the timeliness. The advancement of
ICT has improved the effectiveness of corporate communication, reducing costs and time of information
preparation and dissemination; moreover, ICT has knocked down space barriers, accelerating the fulfilment of information symmetry and international uniformity (Salvioni and Bosetti, 2014).
Participating to a more efficient, environment-oriented and competitive economy involves huge modifications in the complexity of the relationships between a firm and its significant stakeholders; besides, it requires two-way communication, i.e., from the former to the latter and vice versa. Such improvements in
communication also permit the stakeholders to carry out more reasonable comparisons among firms.
Today, successful firms are expected to adopt, maintain and strengthen corporate governance systems in
accordance with the commonly accepted international best practices. Such systems are necessarily
based on transparent and complete information, prepared and disseminated respecting the frameworks
acknowledged all over the world.
To face the insistent demand for transparency, many organizations have been established with the purpose of providing the operators with reporting frameworks that emphasize the principles of sustainable
79
ISSN 2326-3636
development and global responsibility, in order to facilitate a positive and equitable interaction between
the firms and their stakeholders. The Framework released by the International Integrated Reporting
Council (IIRC) in 2013 is one the most interesting proposals in this sense. This Framework recommends
the publication of an integrated report, primarily intended to inform the investors about how a firm has accomplished its responsibilities and how it has performed, in order to raise consents and resources (Eccles
and Krzus, 2010). This evidently involves the necessity for each firm to choose and compose the report’s
contents in the most proper way to meet the expectations, concerns and understanding capability of its
stakeholders.
3. THE IIRC FRAMEWORK BETWEEN INNOVATION AND CONTINUITY
Since 2010 the interest in integrated reporting (<IR>) has considerably increased. Probably, this is due in
part to the activity of the IIRC, a world association that encourages to study, experiment and divulge the
integrated report, «a concise communication about how an organization’s strategy, governance, performance and prospects, in the context of its external environment, lead to the creation of value over the
short, medium and long term» (IIRC Framework, 2013, paragraph 1.1).
The IIRC cooperates with over one hundred businesses and thirty investor organizations that have adhered to two pilot programs to develop and improve the International <IR> Framework, issued on December 9, 2013. The Framework has taken in account opinions and feedbacks provided by the respondents to a previous Consultation Draft, published in April of the same year.
The use of the Framework is normally voluntary, even if its adoption has already been recommended in
some financial markets. It is the case of South Africa, where listed companies are expected to produce
integrated reports according to 2009 King Code of Governance for South Africa, also known as King III.
On March 12, 2014 the Integrated Reporting Committee of South Africa, which includes the Johannesburg Stock Exchange as one of its most influential members, officially endorsed the IIRC Framework,
which it described as the best tool for approaching integrated reporting.
The Framework essentially contains guidelines for for-profit companies of any size that intend to publish
an integrated report to boost transparency towards providers of financial capital, such as equity and debt
holders, including all lenders, creditors and fund managers, both existing and potential. However, the
IIRC does not exclude the possibility that the Framework is applied, adapted if necessary, by public and
non-profit organizations. In the same way, the IIRC acknowledges the informative value integrated reporting for many other stakeholders: employees, customers, suppliers, commercial partners, local communities, regulators, and public authorities.
Indeed, integrated reporting should permit all providers of resources to understand both the significant internal processes and the main external relationships of the firm. In particular, it should demonstrate how
the interaction among financial, manufactured, social, human, intellectual, and environmental factors operates for the creation of value over time.
Integrated reporting requires organizing and linking different pieces of information each other, according
to the connectivity principle, which is a Framework’s peculiarity. As a matter of fact, the firms are expected to give a clear representation of the above-mentioned interaction among different resources for
the production of benefits for both their shareholders and all other stakeholders. To do so, the firms do
not need to prepare an additional, stand-alone document: an enrichment of the traditional annual report or
sustainability report could be enough. For example, the firms could introduce a specific section to provide
details about how they employ the resources in various processes to create value, in other words what
they do to obtain the desired economic, social and environmental performance.
Another innovation proposed by the Framework is a comprehensive view of “capitals”, i.e., stocks of resources that permit a firm to work and are transformed into outputs and outcomes, causing a continuous
flow of value. Consequently, an integrated report should provide explanations of how and to what extent
different types of capitals, as inputs of the business model, produce results in line with the stakeholders’
needs over the short, medium and long term. According to the IIRC, such results consist in an increase, a
decrease, or a transformation of the capitals.
Specifically, the Framework identifies the following types of capitals each organization can adapt to best
match its own characteristics:
80
ISSN 2326-3636
§ financial capital, including the money provided by investors or originated through investments;
§ manufactured capital, referring to tangible assets belonging to the firm (such as buildings and equipment) and infrastructure provided by third parties (such as roads);
§ intellectual capital, comprising the intellectual property of patents, copyrights, software, etc., and the
organizational capital based on knowledge and internal procedures;
§ human capital, composed of the employees’ competencies, capabilities, experience, motivation, loyalty, and spirit of innovation;
§ social and relationship capital, consisting in the contribution of the firm to enhancing the society’s wellbeing, the sharing of values and rules, the firm’s brand and reputation, and its social legitimacy to
work;
§ natural capital, representing the environment (i.e., natural resources, biodiversity and eco-system
health).
In preparing the information about the capitals, the organization should apply some guiding principles
(Table 1), which are recommended by the Framework and reflect the recent evolution of the international
reporting standards and guidelines.
TABLE 1. THE IIRC FRAMEWORK’S GUIDING PRINCIPLES
Strategic focus and future The firm should describe its strategy, specifying how it relates to internal and external opportunities, risks, and deorientation
pendencies that can influence the ability to create value over time and effect on the capitals.
Connectivity of information
The firm should link different types of information to give a picture of the interrelations existing among resources, activities, and results. Connectivity should be applied to quantitative and qualitative information, economic, social and
environmental aspects, and the past, present and future. Cross-reference and links to separate documents or websites improve the connectivity of information.
Stakeholder relationships
The firm should disseminate information about the nature and the quality of its relationships with the main stakeholders it depends on to raise consent and capitals. The firm should also describe the processes carried out to understand
and satisfy stakeholders’ expectations.
Materiality
The firm should focus on the factors that influence the creation of value over time significantly. The firm should also
describe the procedures adopted to identify and prioritize the material issues and to select the relevant information.
Conciseness
The firm should prepare a concise report using clear and plain language. Notwithstanding this, the report should cover
all the material issues: in this regard, the report should contain cross-reference to other documents.
The firm should release a complete, reliable and impartial report, which should contain details concerning internal
Reliability and completeness control on integrated reporting and external, independent assurance.
The firm should guarantee consistency and comparability of its disclosure. For example, consistency in the selection
Consistency and compara- of key performance indicators facilitates the comparison of reports over time, while the general respect of the Framebility
work permits to compare a firm with others.
Moreover, the IIRC has identified the most important content elements of an integrated report (Table 2):
most of them refer to the organization and its external environment, the activities it has carried out and
the results it has achieved, while other recommended information concerns the procedures to prepare the
integrated report itself.
TABLE 2. THE IIRC FRAMEWORK’S CONTENT ELEMENTS
Organizational overview and ex- § Corporate culture and values, ownership, operating structure, market position.
ternal environment
§ Legal, political, macroeconomic, commercial, social, demographic, environmental and technological factors
affecting the firm.
Governance
Leadership, board composition and diversity, decision-making, ethical influence on the use of capitals, remuneration and incentives linked to the use of capitals.
Business model
Description of how inputs are transformed into outputs and outcomes by means of the firm’s activity, and dependencies on key stakeholders.
Risks and opportunities
Strategy and resource allocation
Identification of the events affecting value creation over time; consequent risk assessment and risk response.
Strategic analysis of the environment, also considering the results of stakeholder consultation.
81
Performance
Outlook
ISSN 2326-3636
Comparison between objectives and results by means of a combined use of qualitative explanation and quantitative measures (key performance indicators).
Future challenges and uncertainties, and possible effects on strategy development and performance.
Materiality determination process; reporting boundary; summary of significant frameworks and methods applied
Basis of preparation and presenta- to evaluate material matters.
tion
Alongside the innovative aspects discussed above, the Framework also presents elements of continuity
with other standards and guidelines largely applied worldwide, such as the Sustainability Reporting
Guidelines promoted by the Global Reporting Initiative (GRI) and the AccountAbility1000 series of standards, including the Principles Standard (AA1000APS) the Stakeholder Engagement Standard
(AA1000SES) and the Assurance Standard (AA1000AS).
Continuity can be seen in the multidimensional concerns the report should face according to the triple bottom line, in order to provide all economic, social and environmental information that supports stakeholders’ evaluations.
Moreover, continuity exists in relation to some suggested principles for an effective development of integrated reporting. In this regard, the international best practices recommend that firms adopt mechanisms
of stakeholder engagement, in particular by involving their stakeholders in consultations for optimizing
strategic decision-making. In such a way a firm’s directors could better understand the internal and external expectations that should guide the selection of corporate variables to be monitored and disclosed,
given their ability to affect the creation of value.
Within the process of integrated reporting, stakeholder engagement is connected to the application of
stakeholder relationships and materiality principles, according to an approach that the IIRC Framework
shares with GRI and AA1000.
On the basis of the stakeholder relationships principle an integrated report should inform about «how and
to what extent the organization understands, takes into account and responds to their legitimate needs
and interests» (IIRC Framework, 2013, paragraph 3.10). Such a principle matches perfectly with materiality, by following which «an integrated report should disclose information about matters that substantively
affect the organization’s ability to create value over the short, medium and long term» (IIRC Framework,
2013, paragraph 3.17). Furthermore, «the materiality determination process is integrated into the organization’s management processes and includes regular engagement with providers of financial capital and
others to ensure the integrated report meets its primary purpose [of explaining how the organization creates value over time]» (IIRC Framework, 2013, paragraph 3.20).
4. EMPIRICAL RESEARCH: EVIDENCE FROM THE ADOPTION OF THE IIRC FRAMEWORK
4.1. Aims and Methodology
In the light of innovation and continuity of the IIRC Framework compared to the other international reporting standards and guidelines adopted worldwide, the paper aims at analyzing the state of the art of integrated reporting. Given the very recent issue of the Framework, this study presents and discusses some
cases of first-time application.
We selected the reports from the free Emerging Integrated Reporting Database (http://examples.theiirc.org)
promoted and monitored by the IIRC. The selection took place in late March 2014, considering the latest
integrated report (or equivalent document) released in 2012/2013 or in 2012 financial year by the members of the IIRC’s Pilot Programme Business Network.
By querying the database we obtained 18 reports, which we studied by means of a qualitative content
analysis (Weber, 1990; Krippendorff, 2004; Neuendorf, 2002; Schreier, 2012).
According to the elements of innovation and continuity underlined in the previous section, this investigation is focused on the representation of the capitals, on the one hand, and the adoption of stakeholder relationships and materiality principles, on the other hand.
82
ISSN 2326-3636
4.2. Results and Discussion
4.2.1. The capitals
The empirical investigation developed on the 18 reports collected from the database has brought to light
three different approaches to represent the capitals:
§ an imitation of the Framework;
§ a simplification of the Framework;
§ an original application of the Framework.
Five organizations have described their capitals, but with various levels of conformity to the Framework
(Table 3). However, all their different choices are acceptable, because the Framework permits an adaptation of the categories of capitals to better meet the peculiarities of each organization.
Atlantia, New Zealand Post and Transnet have substantially reproduced the model suggested by the IIRC
(imitative approach), except for the denominations of some types of capitals. In this regard, a high conformity to the Framework makes it easier to conduct space and time comparisons; moreover, such a high
conformity contributes to spreading a common language among the organizations, which is immediately
understandable to the report users.
83
ISSN 2326-3636
TABLE 3. DIFFERENT APPROACHES TO REPRESENT THE CAPITALS
Organization and report
Categories of capitals
Conformity to the capitals model
used in the report
suggested by IIRC
Atlantia
§ Financial capital
Conformity is very high.
2012 Integrated Report
§ Infrastructural capital
The report identifies all the six categories suggested by
the IIRC. Despite the use of different names for two categories (infrastructural capital in place of manufactured
capital, and social capital in place of social and relationship capital), there is full correspondence of meaning.
(the first integrated report issued by § Human capital
the company, according to the IIRC
§ Intellectual capital
Draft Framework)
§ Natural capital
Approach
Imitative
§ Social capital
New Zealand Post
§ Human capital: people
2013 Annual Review
§ Natural capital: environment
the IIRC, specifying how the company interprets them.
(the first report issued as a member § Social and relationships capital:
of the IIRC’s Pilot Programme Busirelationships
ness Network)
§ Manufactured capital: networks
Imitative
§ Financial capital: finances
§ Intellectual capital: expertise
Transnet
§ Financial capital
§ Manufactured capital
the IIRC. Despite the use of a partly different name for
one category (stakeholder relationships capital in place
of social and relationship capital), there is full correspondence of meaning.
(the third integrated report issued § Human capital
by the company, according to the
King III Code and the IIRC Draft § Intellectual capital
Framework)
§ Stakeholder relationships capital
Imitative
Interserve
Conformity is medium.
2012 Annual Report and Financial § Social capital
Statements
§ Knowledge capital
(the first report issued by the company after the launch of its Sustain- § Financial capital
Abilities plan, based on the management of four capitals)
The report identifies three categories of capitals among
the six proposed by IIRC (natural, social, and financial
capital). A fourth category, named knowledge capital,
summarizes the IIRC’s intellectual and human capitals.
CIMA (The Chartered Institute of CIMA refers to capitals as resources.
Management Accountants)
Such resources derive from the relationships with the following stake2012 Annual Review
holders: employees; students; mem(accepted by the IIRC for its online bers; employers; partners and industry bodies; society.
database)
Conformity is very low.
Simplified
Manufactured capital is not emphasized by Interserve.
Original
The report uses different expressions to the ones contained in the IIRC’s capitals model. Moreover, it adopts a
peculiar approach based on the material relationships
CIMA has with its stakeholders.
Interserve has personalized the capitals model, which has been introduced in March 2013 as a part of a
specific project started only few weeks before the issue of the IIRC Draft Framework. Interserve does not
identify the manufactured capital, while it proposes a new category, named knowledge capital, combining
intellectual and human capitals. On the whole, the conformity to the Framework is medium and the approach appears simplified, perhaps because of the necessity to limit the complexity of the capitals model
during the initial step of the cited project.
CIMA has applied an original approach for representing its capitals, making significant efforts to research
and test alternative solutions, consistent with its features but also potentially adoptable by similar organizations. The consequently low conformity to the Framework is fully justified and appreciable.
From a formal point of view, CIMA refers to the capitals as “resources”; in substantial terms, it identifies
such resources as the relationships with its main stakeholders: «our stakeholders represent the resources
on which we draw and are the main beneficiaries of the value which we create». Moreover, CIMA has selected the information to divulge in respect of the materiality principle: for this reason, CIMA’s annual report contains no details on the resources (such as tangible assets and infrastructure) with a limited impact
on the organization’s long-term success.
84
ISSN 2326-3636
4.2.2. Stakeholder Relationships and Materiality
Stakeholder relationships and materiality principles are applied by a lot of organizations for the preparation of their reports. 14 out of 18 reports analyzed provide information on the respect of both of them,
while one report refers only to the stakeholder relationships principle, as shown in Table 4. The remaining
reports have no details in this regard.
The results underline the attention paid by most companies to the disclosure of information concerning
not only the performance, but also the reporting process. This demonstrates greater acknowledge of the
importance of transparency on all corporate activities, even if they only give indirect contribution to creating long-term value.
TABLE 4: APPLICATION OF STAKEHOLDER RELATIONSHIPS AND MATERIALITY PRINCIPLES
Organization and report
Atlantia
Stakeholder relationships
The principle is applied.
In 2012 the company has introduced a
corporate communication strategy to
(the first integrated report issued by enhance and extend relations with its
the company, according to the IIRC stakeholders, based on an ongoing
Draft Framework)
and interactive dialogue. The report
provides a detailed list of initiatives of
stakeholder engagement developed by
the company.
Materiality
A materiality analysis is carried out in
relation to several factors identified for
each category of capitals. The company develops periodical surveys to understand stakeholders’ expectations,
perceptions and level of satisfaction.
Then the findings are compared with
the company’s strategic development
principles in order to determine the
issues considered relevant by both the
stakeholders and the company itself.
Reference to other frameworks, standards, and
guidelines
The report is also based on
GRI – G3.1 principles.
CIMA (The Chartered Institute of The principle is applied, but the proce- The principle is applied, but the proce- N.A.
Management Accountants)
dure is not discussed in detail.
2012 Annual Review
(accepted by the IIRC for its online
database)
Enel
2012 Sustainability Report
The report refers to different initiatives
of stakeholder relationships the com(accepted by the IIRC for its online pany has organized in order to listen
database)
to, involve and talk to its key stakeholders.
The report provides a detailed description of the materiality determination
process, which considers both the
stakeholders’ priorities of intervention
and the impact of the issues in terms
of sustainability. These perspectives
are graphically represented on the two
axes of the company’s materiality matrix. Their combination enables Enel to
recognize which issues are material
for both the stakeholders and the
company itself.
Eni
2012 Annual Report
GRI – G3.1 principles of materiality and inclusivity of stakeholders,
as
well
as
AA1000APS (inclusivity, materiality and responsiveness).
Methods of interaction differ according
to the category of stakeholder in(issued by the company as a mem- volved, each managed by a specific
ber of the IIRC’s Pilot Programme unit.
Business Network)
A materiality analysis considering different factors (economic, political and
social aspects, energy, etc.) involves
both internal and external stakeholders.
Gold Fields
The principle is applied, but the proce- The report is also based on
GRI – G3.1 principles of materiality and inclusivity of stakeHowever, the report contains the holders,
as
well
as
Group strategic performance dash- AA1000APS (inclusivity, mateboard, which focuses on the material riality and responsiveness).
performance measures.
2012 Integrated Annual Review
The report refers to different initiatives
of stakeholder engagement the com(issued in accordance with the King pany has organized to understand the
III Code and mentioning the IIRC’s concerns of its stakeholders and to
definition of integrated reporting)
manage them as risk factors.
85
Hyundai E&C
ISSN 2326-3636
2012 Sustainability Report
The report refers to different commu- The report summarizes the three steps
nication channels the company uses to of materiality analysis:
(accepted by the IIRC for its online support the dialogue with its stake§ creating the issue pool;
database)
holders.
§ collecting opinions from employees,
shareholders, suppliers, and others,
through a stakeholder engagement
survey;
GRI – G3.1 principles. Moreover, an independent assurance
has verified the respect of materiality, inclusivity and responsiveness principles, in line with
the
requirements
of
AA1000AS.
§ selecting important issues.
18 key issues out of a total of 227
have been selected and represented
on a materiality matrix, whose x- and
y-axes refer to internal and external
evaluation respectively.
Marks and Spencer
N.A.
N.A.
2013 Annual Report and Financial The report refers to stakeholder enStatements
gagement, which aims in particular at
the discussion of corporate govern(mentioning the participation to the ance and risk management issues.
IIRC’s Pilot Programme Business
Network)
National Australian Bank
2012 Annual Review
The report refers to a collection of
feedbacks from different types of
(issued by the company as a mem- stakeholders on relevant issues for the
ber of the IIRC’s Pilot Programme company’s success.
Business Network
Every year the company carries out a
formal materiality review to identify the
issues of greatest significance for both
the stakeholders and the board of directors. The report provides a brief
description of the process.
New Zealand Post
The principle is applied, but the proce- N.A.
2013 Annual Review
The report refers to stakeholder engagement, carried out in various ways
(the first report issued as a member as the primary means to identify and
of the IIRC’s Pilot Programme Busi- understand the issues that affect the
ness Network)
stakeholders.
Novo Nordisk
2012 Annual Report
Stakeholders are involved in the de- The report describes the procedure,
velopment of strategic responses to which is based on formal reviews, re(issued in accordance with the IIRC sustainability challenges.
search, stakeholder engagement and
guiding principles and content eleinternal materiality discussions.
ments)
Sasol
2012 Annual Integrated Report
The report refers to different forms of
stakeholder engagement carried out
(issued by the company according regularly, such as focus group, surto the King III Code and the IIRC veys, personal interactions, and feeddiscussion papers)
backs on the company’s reports.
The Group has established quantitative and qualitative criteria to determine if an item is material. The procedure involves the stakeholders, but
there is no description.
Stockland
2012 Annual Review
The report provides cross-reference to Material issues are reviewed annually
the sustainability report, containing all according to the feedbacks of stake(the first report issued as a member the details on stakeholder engage- holder engagement.
of the IIRC’s Pilot Programme Busi- ment.
ness Network)
GRI – G3.1 principles of materiality and inclusivity of stakeholders,
as
well
as
AA1000APS (inclusivity, materiality and responsiveness).
GRI – G3.1 principles. Moreover, an independent assurance
has verified the respect of
AA1000 materiality, inclusivity
and responsiveness principles.
Takeda
The principle, named “responsiveness The principle is applied, but the proce- The report is also based on the
and stakeholder inclusiveness”, is ap- dure is not discussed in detail.
GRI guidelines as a reference
plied.
for CSR disclosure, and the
AA1000 scheme for dialogue
(issued in accordance with the IIRC The report refers to various opportuniwith stakeholders.
guiding principles)
ties for stakeholder communication,
including direct dialogue and participation to global business conferences.
2012 Annual Report
86
The Crown Estate
2013 Annual Report and Accounts
ISSN 2326-3636
The company identifies and prioritizes
each material issue taking into account
(the first integrated report issued by «the degree to which [its] primary
the company)
stakeholders are concerned with it».
N.A.
14 material issues have been identified and scored on a scale of 1-5,
based on their economic impact, concern of stakeholders, and probable
significance in the future.
However, the report does not describe
how the company applies the stake- Performance measurement has alholder relationships principle.
ready interested 6 out of 14 material
issues; targets and results concerning
other material issues will be quantified
in the next integrated report.
Transnet
The principle, named “stakeholder The principle is applied, but the proce- The stakeholder engagement
responsiveness” according to the IIRC dure is not discussed in detail.
for 2012/13 was informed by
Draft Framework, is applied.
the AA1000SES and the
AA1000APS (inclusivity, mate(the third integrated report issued by The integrated report provides crossriality and responsiveness).
the company, according to the King reference to the sustainability report,
III Code and the IIRC Draft Frame- an appendix of which describes the
work)
material issues for each category of
stakeholders, engagement practices,
responsiveness, and targets the company hopes to achieve.
According to the findings of the investigation, many companies seem to give value to stakeholder engagement as an active part of the stakeholder relationships principle. Stakeholder engagement is conducted through various initiatives of dialogue with all types of internal and external stakeholders, in order
to understand their economic, social and environmental expectations and the related information needs.
Typically, it is developed through meetings with investors, financial analysts, employees, trade unions,
suppliers, customers, and representatives of the community, participation to global, regional and local
conferences, roundtables, surveys, and feedbacks (also collected from the corporate website).
All the reports analyzed stress the link between stakeholder dialogue and identification of the material issues that should represent the center of strategic decision-making, internal control, risk management, and
external reporting. However, detailed information on materiality is less frequent than information on
stakeholder relationships.
Finally, Table 4 emphasizes that most organizations apply different reporting frameworks, standards and
guidelines at once, in a combined manner. The adoption of the IIRC Framework usually follows and integrates the application of GRI and AA1000: this induces us to assume that many firms whose report we
have analyzed in this research were already accustomed to stakeholder engagement and materiality determination, since before joining the IIRC’s Pilot Programme Business Network.
5. CONCLUSION
The increasing interest in sustainability and stakeholder responsiveness has been encouraged by important supranational initiatives, such as UN Global Compact and several discussion papers on corporate
social responsibility issued by the European Union.
In the meantime, certain associations operating worldwide have promoted a rethink of corporate reporting, through the release of frameworks, guidelines and standards aimed at improving both the contents of
information and the process for their preparation. In this regard, the IIRC Framework published in 2013
has supplemented the GRI guidelines and the AA1000 standards, already used all over the world.
In our opinion, the IIRC Framework can be considered as both a process standard and a content standard. Indeed, on the one hand, the Framework explains the procedure for selecting the subjects the integrated report should cover, according to a materiality analysis based on stakeholder engagement; on the
other hand, the Framework identifies some general issues the organization should inform about.
Observing the IIRC Framework as a content standard, this paper has stressed its innovation in respect to
the capitals model. In this regard, we have collected evidence from the experimental adoption of the
Framework by organizations participating to the Pilot Programme Business Network, and we have underlined three different approaches: an imitative one, a simplified one and an original one. Each organization
87
ISSN 2326-3636
seems to have chosen a specific approach in accordance with the complexity of its resources and relationships, but also considering the costs and efforts for identifying, monitoring and providing an effective
representation of the variables connected to all the types of capitals. Consequently, it is not difficult to
foresee a simplified application of the capitals model in small businesses and in periods of crisis, when
firms tend to reduce their investment in corporate communication.
As a process standard, the IIRC Framework appears conservative: in other words, it is consistent with
previous international standards and guidelines. From this point of view, our empirical research has emphasized the application of the stakeholder relationships and materiality principles: both of them were often already used by the firms in the respect of GRI and AA1000 principles. Hence, we expect for the future a combined adoption of the IIRC Framework and the other standards and guidelines previously introduced in the corporate communication system, in an attempt to take advantage of the strengthen of each
one and enhance accountability.
The very recent publication of the IIRC Framework represents a limitation for this research at the present
time, but it is also the basis for future studies.
Indeed, the integrated reports existing today still derive from experiments carried out by the pilot organizations; moreover, such reports have been prepared in the light of the IIRC consultation papers and Draft
Framework, which has been modified later. The innovation of certain contents (e.g., the capitals model)
has also complicated the application, which is sometimes resulted selective or partial.
However, the case of South Africa – a country at the forefront as concerns integrated reporting – shows
that a coordinated and well-managed project for the evolution of corporate communication can significantly modify the state of the art even in a three-year period. Therefore, this research can be considered a
starting point for future investigations on integrated reporting.
REFERENCES
Berle, A. and Means, G. 1932. The Modern Corporation and Private Property, NY World Inc., New York.
Brondoni, S.M. 2003. “Network Culture, Performance & Corporate Responsibility”, Symphonya. Emerging
Issues in Management, no. 1, pp. 8-24, DOI: 10.4468/2003.1.02brondoni.
Carroll, A.B. 1999. “Corporate Social Responsibility: Evolution of a Definitional Construct”, Business &
Society, vol. 38, no. 3, pp. 268-295.
Clarkson, M.B.E. 1995. “A Stakeholder Framework for Analysing and Evaluating Corporate Social performance”, Academy of Management Review, vol. 20, no. 1, pp. 92-117.
Crane, A., Matten, D. and Spence, L.J. 2008. “Corporate Social Responsibility: In Global Context” in
Crane, A., Matten, D. & Spence, L.J. (Eds.), Corporate Social Responsibility: Readings and Cases in
Global Context (pp. 3-20), London: Routledge.
Eccles, R.G. and Serafeim, G. 2013. “The Performance Frontier: Innovating for a Sustainable Strategy”,
Harvard Business Review, May, pp. 50-60.
Eccles, R.G., and Krzus, M.P. 2010. One Report. Integrated Reporting for a Sustainable Strategy, John
Wiley & Sons, Hoboken, New Jersey.
Esty, D. and Winston, A. 2008. Green to Gold. How Smart Companies Use Environmental Strategy to Innovate, Create Value and Build Competitive Advantage, John Wiley Publisher, New York.
Freeman, R.E. 1984. Strategic Management: A Stakeholder Approach, Pitman Publishing Inc., Boston.
Freeman, R.E., Martin, K.E. and Parmar, B.L. 2007. “Stakeholder Capitalism”, Journal of Business Ethics,
vol. 74, no. 4, pp. 303-314.
Friedman, M. 1962. Capitalism and Freedom, University of Chicago Press, Chicago.
Henriques, A. and Richardson, J. (Eds) 2004. The Triple Bottom Line, Earthscan, London, UK.
Heslin, P.A. and Ochoa, J.D. 2008. “Understanding and Developing Strategic Corporate Social Responsibility”, Organizational Dynamics, vol. 37, no. 2, pp. 125-144, 2008.
88
ISSN 2326-3636
Jensen, M.C. and Meckling, W. 1976. “Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure”, Journal of Financial Economics, vol. 3, no. 4, pp. 305-360.
nd
Krippendorff, K. 2004. Content Analysis: An Introduction to Its Methodology, 2 edition, Sage, Thousand
Oaks, CA.
Neuendorf, K.A. 2002. The Content Analysis Guidebook, Sage Publications, Thousand Oaks, CA.
Salvioni, D.M. 2003. “Corporate Governance and Global Responsibility”, Symphonya. Emerging Issues in
Management, no. 1, pp. 44-54, DOI: 10.4468/2003.1.05salvioni.
Salvioni, D.M. and Astori, R. 2013. “Sustainable Development and Global Responsibility in Corporate Governance”,
Symphonya.
Emerging
Issues
in
Management,
no.
1,
pp.
1-25,
DOI: 10.4468/2013.1.03salvioni.astori.
Salvioni, D.M. and Bosetti, L. 2014. “Sustainable Development and Corporate Communication in Global Markets”,
Symphonya.
Emerging
Issues
in
Management,
no.
1,
pp.
1-19,
DOI: 10.4468/2014.1.03salvioni.bosetti.
Schreier, M. (2012). Qualitative content analysis in practice, Sage, Thousand Oaks, CA.
Steurer, R., Langer, M., Konrad, A. and Martinuzzi, R.A. 2005. “Corporations, Stakeholders and Sustainable Development I: A Theoretical Exploration of Business-Society Relations”, Journal of Business Ethics, vol. 61, no. 3, pp. 263-281.
nd
Weber, R.P. 1990. Basic Content Analysis, 2 edition, Sage Publications, Newbury Park, CA.
AUTHORS PROFILE
Prof. Daniela M. Salvioni (Department of Economics and Management, University of Brescia, Italy) is a
Full Professor of Business Administration. Her areas of research include all aspects of corporate governance, from direction and control to responsibility and accountability, with specific emphasis on global corporations. She has coordinated national and international research projects and she is author of many
books and articles. She is author of Sections 1 and 2 of this paper.
Dr. Luisa Bosetti (PhD, Department of Economics and Management, University of Brescia, Italy) works
as an Assistant Professor of Business Administration. Her major research fields concern comparative
corporate governance, internal control and risk management, CSR and external disclosure. She is author
of many scientific publications. She is author of Sections 3, 4 and 5 of this paper.
89
ISSN 2326-3636
MANAGING SERVICE QUALITY – DIMENSIONS OF SERVICE QUALITY: A
STUDY IN EGYPT
Niveen M. El Saghier, Arab Academy for Science, Alexandria, Egypt
ABSTRACT
Service quality has emerged an important area in the hotel industry for decades. Thus, it is essential
that service providers understand customer expectations and perceptions as well as the factors that
influence their evaluation and satisfaction with the provided service. Hotel industry is growing with each
passing year in Egypt. Realizing the increase in competition among hotels, hotel managers are focusing
on improving the elements which contribute to service quality for customers of the hotel industry in
Egypt. The quality of service in hotel industry is an important factor of successful business. By providing
quality service, organizations can sustain customers’ confidence and competitive advantages over their
competitors. This study identifies the effects of various elements of hotel industry which affects
customer satisfaction. Almost all researchers utilized Parasuraman, Zeitaml, & Berry’s (1988) service
quality model and adopted their SERVQUAL instrument, based on the concept that service quality
differs from industry to industry. Searches for additional dimensions, identified by customers, which
should be included in the service quality construct it also measures the level of importance of each
specific dimension for the users of hotel services in Egypt.
Keywords: Customer Satisfaction, Service quality, Hotel Industry
.
1. INTRODUCTION
The hotel industry is growing with each passing year in Egypt. Realizing the increase in competition
among hotels, hotel managers are focusing on improving service quality to gain a competitive
advantage (Min&Min, 1996). In general, perceived service quality seems to be positively related to
customers’ likelihood of remaining a loyal customer and their attitudes toward the service provider
(Anton, Camarero, & Carrero, 2007; Bell, Auh & Smalley, 2005; Aydin & Ozer, 2005). According to
Berry, Bennet, and Brown (1989), service quality in the hotel industry affects brand image, customer
satisfaction and loyalty, and profit as well. One of the main reasons is that today’s hotel guests are
better traveled than previous generations and have clear notions of good service (Chacko, 1998).
Providing excellent service quality and high customer satisfaction is the most important issue and
challenge facing the contemporary service industry (Hung, Huang. and Chen, 2003). Kandampully, Mok
and Sparks(2001) suggested that attempt to have effective service quality management is the best way
to achieve superior customer satisfaction.
Oakland (2005) and Kandampully, et al., (2001) showed that service quality can only be achieved if
organizations empower their employees to underpin service quality dimensions. These dimensions
include tangibles (physical facilities, equipment, and appearance of personnel); reliability (ability to
perform the promised service dependably and accurately); responsiveness (willingness to help
customers and provide prompt service); assurance (knowledge and courtesy of employees and their
ability to convey trust and confidence); and empathy (caring, individualized attention provided to
customers).
.
90
ISSN 2326-3636
2. RESEARCH AIM
The objective of this study is to measure and evaluate the service quality in Alexandrian hotels it is
important for hoteliers and marketers to be able to define the importance of service quality dimensions
(tangibility, reliability, responsiveness, assurance, and empathy) and their relative importance to guests’
satisfaction. Having knowledge about guests’ expectations, will help hotel managers know what to
improve upon and whether service quality has been met with service providers or exceeded in their
hotels. This would provide the basis expectations and actual performance to assist managers in
reducing the gap felt by guests between expectations and the actual service provided. Although it is
generally accepted that effective service management has a positive impact on customer satisfaction,
the research still aims to gain more insight into these areas
H1: Hotel customers’ perceptions regarding SERVQUAL dimensions (assurance, tangibles, reliability,
responsiveness and empathy) will have positive impact on their satisfaction
In this work, our aim is to identify factors of service quality in Egypt that affect customer satisfaction and
their behavioral intention which result in competitive advantage for hotel.
Accordingly, the research question that the study seeks to answer is given below:
“What are the main internal service quality dimensions that affect customers’ satisfaction to share in the
Egyptian hotel Industry?”
3. RESEARCH HYPOTHESES
In order to answer the above questions literature has been extensively reviewed to devise the following
hypotheses:
H.1: There is no significant difference between service quality dimensions and customers satisfaction.
H1.1: There is no significant difference between empathy and customers satisfaction.
H1.2: There is no significant difference between reliability and customers’ satisfaction.
H1.3: There is no significant difference between Assurance and customers’ satisfaction
H1.4: There is no significant difference between responsiveness and customers’ satisfaction
H1.5: There is no significant difference between tangibles and customers satisfaction
Service quality is considered the life of hotel (Min &Min, 1996) and core of service management (Chen,
2008)Service quality is related with customer satisfaction (Shi &Su, 2007) and customer satisfaction is
associated with customers revisit intention (Han, Back & Barrett, 2009). If an effective image is
portrayed to customers, it will create competitive advantage for hotel (Ryu, Han & Kim, 2008).
Service quality was defined by Zeithaml (1988) as “the judgment of customers about the overall
superiority of a product or service.” Gronroos (1988) posited that perceived quality is considered good
when the experienced quality of customers meets the expected quality from the brand.They defined
service quality as “a global judgment or attitude relating to the overall excellence or superiority of the
service”. Based on this definition, they operationalized the concept by applying Oliver’s (1980)
disconfirmation model of the gap between expectation and perception of service quality levels. Although
SERVQUAL has been applied to a variety of service businesses, a number of dimensions and the
nature of the construct were industry specific. Related researches showed that the dimensions were not
replicable, and sometimes, the SERVQUAL scale was even uni-dimensional (Babakus & Boller, 1992)
or ten-dimensional (Carman, 1990). These factors or dimensions are tangibles (physical facilities,
equipment and appearance of personnel), reliability (ability to perform the promised service
dependably), responsiveness (willingness to help and provide prompt service), assurance (knowledge
and courtesy of employees and their ability to inspire trust and confidence), and empathy (caring,
individualized attention the firm provides its customers).
91
ISSN 2326-3636
The most famous model of service quality was proposed by Parasuraman et al. (1985, 1988). It had five
dimensions and can be explained as:
1st – Reliability: “the degree to which a promised service is performed dependably and accurately”.
2nd – Responsiveness: “the degree to which service providers are willing to help customers and
provide prompt service”.
3rd – Assurance: “the extent to which service providers are knowledgeable, courteous, and able to
inspire trust and confidence”.
4th – Empathy: “the degree to which the customers are offered caring and
individualizedattention”.
5th – Tangibles: “the degree to which physical facilities, equipment, and appearance of personnel are
adequate.
Mei, Dean, & White (1999) studied service quality in the hotel industry in Australia, using SERVQUAL,
and developed the HOLSERV scale. The results showed that “employees”, “tangibles”, and “reliability”
were the three predictive dimensions of service quality, with “employees” as the best predictor. Another
study conducted by Saleh and Ryan (1992) reported five dimensions of “conviviality”, “tangibles”,
“reassurance”, “avoid sarcasm” and “empathy”, with “empathy” being the most important dimension of
service quality. Sirra, Falces, Delgado, Becerra, & Brinol (1999) designed a similar questionnaire of
HOTELQUAL to examine customers’ perceptions of hotels and delineated three factors of “hotel
facilities”, “appraisal of the staff”, and “functioning and organization of service”. Recently, Ekinci et al.
(2003) found that tangible and intangible dimensions are the only two distinct dimensions measuring
service quality of hotels. Lastly, Akbaba (2006) investigated the service quality expectations of business
hotel’s customers and identified five service quality dimensions, namely tangibles, adequacy in service
quality, understanding and caring, assurance, and convenience.
In hotel industry, as service has direct interaction with customers, that is why customer satisfaction can
be a replication of service quality in hotels(Shi & Su, 2007). Hotel performance is directly allied to
service quality improvement. There is a significant relationship exist between improvement in service
quality and hotel performance change (Narangajavana and Hu, 2008). Customers revisit intention and
emotions are mediated by customer satisfaction (Han, Back & Barrett, 2009). Customer satisfaction
plays a role of mediator in perceived value of hotel and behavioral intention (Ryu, Han & Kim, 2008).
Customers revisit intention and emotions are mediated by customer satisfaction (Han, Back & Barrett,
2009). Customer satisfaction plays a role of mediator in perceived value of hotel and behavioral
intention (Ryu, Han & Kim, 2008).
In every organization service and quality plays a vital role for every customer (Brombacher, 2000).
Customer is the main person who defines the Quality (Berry & Parasuraman & Zeithaml, & Adsit &
Hater& Vanetti & Veale, 1993). For providing good quality service to customers, it is necessary for hotel
managers to understand the expectations of its customers (Shi & Su, 2007; Nilssom. Johnson &
Gustafsson, 2001) and then develop such programs that can address issues of customers
(Narangajavana and Hu, 2008) and bring improvement in service quality (Chen, 2008).
Customer is the main person who defines the Quality (Berry &Parasuraman & Zeithaml, & Adsit &
Hater& Vanetti &Veale, 1993). For providing good quality service to customers, it is necessary for hotel
managers to understand the expectations of its customers (Shi & Su, 2007; Nilssom, Johnson &
Gustafsson, 2001) and then develop such programs that can address issues of customers
(Narangajavana and Hu, 2008) and bring improvement in service quality (Chen, 2008). Customers
demand and expectations continue to change according to market that is why hotel managers must
timely know those expectations and improve their service quality accordingly (Chen, 2008). Besides
this, different customers have different perception of service quality, so there is a need to cater this
problem also (Shi & Su, 2007).
When service quality is improved, then it will lead to customer satisfaction that will result in good
business results (Johnson & Gustafsson, 2001). It is necessary to scrutinize the perceptions of hotel
managers about hotel ranking and they should correlate it with improving service quality and
92
ISSN 2326-3636
performance (Narangajavana and Hu, 2008). To bring improvement in service quality, there is a need to
emphasis on tangible and intangible assets (Narangajavana and Hu, 2008).
3.1. The Link between Service Quality and Customer Satisfaction
Gabbie and O’Neill (1996) observed that in today’s hospitality environment, the true measure of
company success lies in an organization’s ability to satisfy customers continually. There has been some
confusion regarding the differences between service quality and satisfaction (Storbacka, Strandvik, and
Grönroos (1994). Satisfaction would, according to Liljander and Strandvik (1994), refer to an insider
perspective, the customer’s own experiences of a service where the outcome has been evaluated in
terms of what value was received, in other words what the customer had to give to get something.
According to Hunt (1977), satisfaction is an evaluation that an ‘experience was at least as good as it
was perceived to be’.
3.2. Measurement of service quality
Parasuraman et al. (1988) defined service quality as “a global judgment or attitude relating to the
overall excellence or superiority of the service” and they conceptualized a customer’s evaluation of
overall service quality by applying Oliver’s (1980) disconfirmation model, as the gap between
expectations and perception of service performance levels. Furthermore, they propose that overall
service quality performance could be determined by the measurement scale SERVQUAL that uses five
generic dimensions: tangibles (the appearance of physical facilities, equipment, personnel, and
communications materials); reliability (the ability to perform the promised service dependably and
accurately); responsiveness (the willingness to help customers and provide prompt service); assurance
(the competence of the system and its credibility in providing a courteous and secure service); and
empathy (the approachability, ease of access and effort taken to understand customers’ needs).
4. METHODOLOGY
In this research paper, we examined aspects of service quality that affect customer satisfaction and
results in success of hotels. The current research uses a questionnaire as a tool to collect data from the
sample group whom are international tourists who were visiting Alexandria and staying at hotels tourists
during the time the survey was conducted. The samples for this survey were selected regardless of
their nationality, age and gender, and included all types from those wanting luxury to backpackers, etc.
In the questionnaire the questions were adopted from previous research. It measures service quality by
implementing the five dimensions of the “SERVQUAL” instrument: each dimensions followed by four
questions. The 5-point Likert -scale is used for all responses with (1 = strongly disagree, 2 = disagree, 3
= neither agree nor disagree, 4 = agree, 5 = strongly agree).
93
ISSN 2326-3636
FIGURE 1: RESEARCH FRAMEWORK
Reliability
Responsiveness
Assurance
Empathy
Service
quality
Customer
satisfaction
satis
Tangibles
TABLE 1. QUESTIONNAIRE SUMMARY
Questionnaire Items
Empathy
Friendliness and courtesy of staffs
Providing a menu for diet
Understands specific needs of guests
Special attention given by staff to know each guest
Reliability
Well-trained and knowledgeable staff
Handled complaints and problems graciously
Provides services as promised
Performs services right at the first time
Assurance
Instilling confidence in guests
Convenience of service availability
Occupational knowledge of employees
Provides a safe and secure place for guests
Responsiveness
Gives individual attention to guests
Provides prompt services
Willingness of staffs to help guests
Availability of employees when needed
Tangibles
Attractiveness of the hotel decorate and design
Attractiveness of the hotel decorate and design
Neat and professional appearance of staffs
Modern-looking and well-maintain hotel equipments
Quietness of the hotel environment for purpose of stay
94
ISSN 2326-3636
Customer Satisfaction
Overall, I am satisfied with the hotel services
In the questionnaire, the questions are divided into two sections (Dependent variable and the
Independent variable).
This research targeted 150 respondents. However, only 130 questionnaires were returned. Since the
respondents did not properly complete the, questionnaires. Those questions were adopted from
previous research. It measures service quality by implementing the five dimensions of the
“SERVQUAL” the each dimensions followed by four questions 5-point Likert-scale is used for all
responses with labels (1 = strongly disagree, 2 = disagree, 3 =neither agree nor disagree, 4 = agree, 5
= strongly agree).
Group 1: The items for measuring Empathy are Questions (1-4)
Group 2: The items for measuring reliability are questions (5-8)
Group 3: Items for measuring assurance are Questions (9-12)
Group 4: Items for measuring responsiveness are Questions (13-16)
Group5: Items for measuring tangibles are Questions (17-20)
Group 6: Items for measuring customer satisfaction is question 21.
5. STATISTICAL ANALYSIS
In order to analyze the questionnaire data, statistical analysis was done using the Statistical Package
for Social Science (SPSS) software.
Statistical Inferences used are as follows:
•
Reliability Analysis, used to measure reliability using Cronbach alpha.
•
Chi-Square Testing, used to test if there is a difference between two variables.
•
Regression analysis, used to assess how much do each independent affect Customer
Satisfaction (dependent variable). It also gives an indication of the relative contribution of each
independent variable.
•
Stepwise Regression analysis, used to assess the most effective independent variables which
affect Customer Satisfaction (dependent variable).
5.1. Reliability Analysis
Reliability test is an assessment of the degree of consistency between multiple measurements of a
variable. Cronbach’s alpha is the most widely used measurement tool with a generally agreed lower
limit of 0.6.
The following Table provides an overview of the reliability scores. As can be seen from this table, all the
alpha coefficients were above the required level of 0.6.
TABLE 2. RELIABILITY
Variable
Empathy
Reliability
Assurance
Responsiveness
Tangibles
Number of items
Cronbach’s Alpha
3
4
4
4
3
0.634
0.743
0.607
0.647
0.804
95
ISSN 2326-3636
5.2. Testing Hypotheses using Chi-Squared Test
In order to understand and determine the main factors that affect the Customer Satisfaction towards
banking services, a number of hypotheses were devised and tested as shown below:
H01: There is no significant difference between Empathy and Customer Satisfaction
Testing this using the relevant questions, Chi-square = 37.586 (DF=8, sig. =0.000).
This shows a significant relation between Empathy and Customer Satisfaction. This would enable the
authors to reject the null hypothesis.
H02: There is no significant difference between Reliability and Customer Satisfaction
This shows a significant relation between Reliability and Customer Satisfaction. This would enable the
H03: There is no significant difference between Assurance and Customer Satisfaction
This shows a significant relation between Assurance and Customer Satisfaction. This would enable the
H04: There is no significant difference between Responsiveness and Customer Satisfaction
This shows a significant relation between Responsiveness and Customer Satisfaction. This would
enable the authors to reject the null hypothesis.
H05: There is no significant difference between Tangibles and Customer Satisfaction
This shows a significant relation between Tangibles and Customer Satisfaction. This would enable the
5.3. Regression Analysis
Regression analysis shows how much assessment do each independent variable affect Customer
Satisfaction (dependent variable). By using this regression analysis, one may assess the direct
relationship between variables as well as show the causal relationship and the nature of relationship
between variables (Aiken et al., 1991; Foster et al., 2004).
The stepwise regression model is defined as the step-by-step iterative construction of a regression
model that involves automatic selection of independent variables. Stepwise regression can be achieved
either by trying out one independent variable at a time and including it in the regression model if it is
statistically significant, or by including all potential independent variables in the model and eliminating
those that are not statistically significant, or by a combination of both methods. Stepwise regression
analysis was recommended by several scholars, such as Aiken et al., 1991; Berenson and Levine,
1992).
The SPSS stepwise regression procedure was employed in the table below to ascertain the proposed
relationships between the independent variables and the dependent variable.
Regression Analysis is shown in equation:
Estimated Y = a + b1 x + b2 x + …. ,
where Y is the dependent variable, a is the Y intercept, that is the value of Y when x = 0, b1, b2, …. is
the regression coefficients which indicate the amount of change in Y given a unit change in x1, x2, …..,
and x1, x2, ….. are the values for the independent variables.
96
ISSN 2326-3636
TABLE 3. REGRESSION ANALYSIS
Unstandardized Coefficients
Model
B
Std. Error
(Constant)
.169
.556
Reliability
.344
.106
Responsiveness
.397
Tangibles
.204
Standardized
Coefficients
Beta
t
Sig.
.304
.762
.254
3.235
.002
.119
.254
3.329
.001
.088
.181
2.330
.021
Based on the stepwise regression shown in the above table, the results are as follows:
Estimated Y = 0.169 + 0.344*Reliability + 0.397*Responsiveness + 0.204*Tangibles
Where:
Constant a=0.169
Reliability Coefficient = 0.344
Responsiveness Coefficient = 0.397
Tangibles Coefficient = 0.204
This means that in the presence of all variables together, only Reliability, Responsiveness and
Tangibles variables show a significant impact on Customer Satisfaction in hotels, while both Empathy
and Assurance variables impact become insignificant.
The highest impact is shown to be for Responsiveness (Coefficient = 0.397), then comes Reliability
variable (Coefficient = 0.344), while the least variable in its impact was Tangibles (Coefficient = 0.204)
The above results illustrate the impact of the responsiveness on the Customer satisfaction, where an
increase in responsiveness by 0.397 will cause an increase in the customer satisfaction in hotel.
Similarly, the reliability in hotel in Egypt is directly affected by the customer satisfaction where an
increase in reliability 0.344 will cause a direct increase in the customer satisfaction in hotels. Also, the
customer satisfaction in hotel in Egypt will be affected by Tangibles where an increase in Tangibles
0.204 will cause a direct increase in the customer satisfaction within hotels.
6. CONCLUSION
This study examined the aspects of service quality in hotels that influence the satisfaction of customers.
The findings of this study suggested that impact of service quality affects the customer satisfaction that
results in success of hotel and it is an irrefutable fact. Furthermore, sustaining the customer satisfaction
level is an ongoing process that requires continuous improvement in service quality at hotels.
Based on study findings, it can be concluded that customers’ perceptions regarding hotel brand quality
dimensions such as “responsiveness”, “reliability” and “empathy” contributed to build their satisfaction
rather than “empathy” and “assurance”. Interestingly, favorable perceptions on hotel responsiveness
predicted relatively stronger satisfaction than did reliability and empathy perceptions.
It is therefore essential for managers in hotel industry to apply the SERVQUAL model for the
measurement of service quality, in order to satisfy the guest’s expectations.
6.1. Limitations and avenues for future research
This research has certain limitations, and interpretation of its findings therefore needs to be undertaken
with caution.
97
ISSN 2326-3636
First, the sample in this study is small and is limited to a relatively specific group of tourists – citizens
who stayed in certain hotels in Alexandria.
6.2. Implications
This study was aimed to diagnose the perceived service quality of Egyptian customers to determine the
customer satisfaction level in Alexandrian hotels. The findings of this study reveal that the SERVPERF
scale successfully maintains its reliability. Hence, customers’ evaluation of perceived service quality in
consists of two dimensions: tangibles and intangibles. This study supports previous empirical studies in
the hospitality and tourism literature (Karatep and Avci, 2002; Ekinci et al., 2003). Therefore, the
findings of this study are important for practitioners in Egypt.
REFERENCES
Akbaba, A. (2006), “Measuring service quality in the hotel industry: a study in a business hotel in
Turkey” Hospitality Management, Vol. 25 No. 2, pp. 170-192.
Anton, C., Camarer, C. and Carrero, M. (2007), “Analysing firms’ failures as determinants of consumer
switching intentions: The effect of moderating factors” European Journal of Marketing, Vol. 41 No
(1/2) ,pp. 135 -158.
Asubonteng, P., McCleary, K. J. and Swan, J. E. (1996), “SERVQUAL revisited: a critical review of
service quality” The Journal of Service Marketing, Vol.10 No. 6, pp. 62-81.
Babakus, M. N., and Boller, G. W. (1992), “An empirical assessment of the SERVQUAL scale” Journal
of Business Research, Vol.24 No. 3, pp. 253-268.
Berry, L. L., Bennet, D. R., & Brown, C. W. (1989). Service Quality: A Profit Strategy for Financial
Institutions. Homewood, IL: Dow-Jones-Irwin.
Chen, J.V., and Aritejo, B.A. (2008), “Service quality and customer satisfaction measurement of mobile
value-added services: A conceptual review” International Journal of Mobile Communications, Vol. 6,
pp. 165–176.
Ekinci, Y., Prokopaki, P., and Cobanoglu, C. (2003), “Service quality in Cretan accommodations:
marketing strategies for the UK holiday market” International Journal of Hospitality Management, Vol.
22 No. 1, pp. 47-66.
Gabbie, O., and O'Neill, M.A. (1996), “SERVQUAL and the Northern Ireland hotel sector: A comparative
analysis – Part 1” Managing Service Quality, Vol.6 No.6, pp. 25-32.
Gro¨nroos, C. (1990). Service management and marketing: managing the moments of truth in service
competition. Lexington, MA: Lexington Books.
Han, H., Back, K., and Barrett, B. (2009), “Influencing factors on restaurant customers’ revisit intention:
The role of emotions and switching barriers” .International Journal of Hospitality Management, Vol.
28No.4, pp. 563-572.
Hokey Min and Hyesung Min (1996), “Benchmarking the quality of hotel services: managerial
perspectives” International Journal of Quality & Reliability Management, Vol. 14 No. 6 , pp. 582-597.
Hung, Huang. and Chen, 2003.Service quality evaluation by service quality performance matrix. Total
Quality Management & Business Excellence,14(1),pp.79.
Johnson, M. D. and Gustafsson, A. (2001). Improving customer satisfaction, loyalty and profit: an
integrated measurement and management system. San Francisco, CA: Jossey-Bass
Kandampully, J., C. Mok, and Sparks, B., (2001). Service quality management in hospitality, tourism
and leisure. Binghamton: Haworth.
Karatepe, O.M. and Avci, T. (2002), “Measuring service quality in the hotel industry: evidence from
Northern Cyprus”, Anatolia: An International Journal of Tourism and Hospitality Research, Vol. 13 No.
1, pp. 19-32.
Liljander, V. and Strandvik, T. 1994. The Nature of Relationship Quality: Proceedings, Quality
Management in Services IV, European Institute for Advanced Studies in Management (EIASM),
Paris, May 1994
Mei, A.W. O., Dean, A. M., and White, C. J. (1999), “ Analyzing service quality in the hospitality
industry” Managing Service Quality ,Vol. 9 No. 2, pp.136-143
98
ISSN 2326-3636
Narangajavana, Y., and Hu, B. (2008), “The relationship between the hotel rating system, service
quality improvement, and hotel performance changes: A canonical analysis of hotels in Thailand”
Journal of Quality Assurance in Hospitality and Tourism, Vol. 9 No. 1, pp.34-56.
Oliver, R. L. (1980), “A cognitive model of the antecedents and consequences of satisfaction decisions”
Journal of Marketing Research, Vol. 17 No.4, pp. 460-469.
Parasuraman, A., Zeithaml, V. A., and Berry, L. L. (1988), “SERVQUAL: a multi-item scale for
measuring consumer perceptions of service quality” Journal of Retailing, Vol. 64, pp. 12–40.
Ryu, K., Han, H., and Kim, T. (2008), “The relationships among overall quick-casual restaurant image,
perceived value, customer satisfaction, and behavioral intentions” International Journal of Hospitality
Management, Vol. 27 No. 3, pp.459-469.
Saleh, F., and Ryan, C. (1992), “ Analyzing service quality in the hospitality industry using the
SERVQUAL model” The Service Industries Journal, Vol.11 No. 3 pp. 324-343.
Shi, J.H., and Su, Q. (2007), “Evaluation of hotel service quality based on customer satisfaction”
Service Systems and Service Management, Vol. 9 No. 11, pp. 1-5.
Sierra Diez, B., Falces Delgado, C., Becerra Grande, A., and brinol Turnes, P. (1999). HOTELQUAL:
Una Escala Para Medir Calidad Percibida en Servicecios de Alojamiento. Estudios Turisticos, 139:
93-108.
Storbacka, K., Strandvik, T., Grönroos, C. ( 1994), “ Managing Customer Relationships for Profit: The
Dynamics of Relationship Quality” International Journal of Service Industry Management, Vol.5, No.5,
pp. 21-38.
Valia T. Petkova, Peter C. Sander, Aarnout C. Brombacher (2000). ‘The use of quality metrics in
service centres’, International Journal Production Economics 67, pp. 27-36.
AUTHOR PROFILE
Dr. Niveen M. El Saghier is affiliated with the College of Management and Technology and
International Business Department of the Arab Academy for Science, Alexandria, Egypt.
.
99
ISSN 2326-3636
EASTERN CULTURE-ORIENTED LEADERSHIP COMPETENCY SCALE
Salim Atay, Istanbul Technical University, Istanbul, Turkey
Elena Lvina, Saint Joseph's University, Philadelphia, USA
Banu Cırakoglu, Senior Researcher, Namar Consulting Inc., Istanbul, Turkey
Aslı Dogan, Istanbul University, Istanbul, Turkey
Nese Gulmez, Marmara University, Istanbul, Turkey
ABSTRACT
Leadership is a key driver of organizational success. Leadership competencies—the skills that make a
leader effective—are highly dependent on culture. However, most of the leadership studies in the literature
reflect only Western cultures. This study was aimed at developing a leadership competency scale in
accordance with Eastern culture, based on the notion that every culture is unique in its own context. To
achieve this aim, a survey was carried out with 418 managers. The suitability of the four-factor model of
the developed leadership competency scale with 27 items was confirmed. The Cronbach’s alpha value of
the scale was .92, and the corrected item-total correlations for each item in the scale ranged from .31 to
.66.
Keywords: Leadership, Competency, Eastern culture
1. INTRODUCTION
Leadership as a topic has been increasingly studied since the beginning of the 19th century; in the current
era of globalization, it is one of the most investigated subjects. In today’s competitive business world,
effective leaders have become a key factor for business success. Hence, a variety of studies about
leadership in terms of definitions, theories, models, and scales have been conducted to determine what
makes a leader effective. Although a large body of literature examines effective leadership prototypes and
practices from the Western world, very few studies have investigated effective leadership prototypes from
the Eastern world, particularly the Middle Eastern region. Given that cultural norms between the West and
the East are largely different, Western originated leadership prototypes may not be compatible for the East
(Kabasakal et al., 2012.).
Cross-cultural research into leadership has grown in importance, but to date, it has been characterized by
the modernist assumptions underlying Western, Anglo-Saxon views on the individual leader. Despite the
predominance of Western-originated leadership studies (Hofstede, 2007) and their generalization (Hogan
et al., 2010), several studies have found that the scores obtained from the four cultural dimensions of
Hofstede differ between Western and Eastern countries (Hofstede, 2007; Aycan et al., 2000; House et al.,
2004; CakmakCı and Karabatı, 2008; Kabasakal et al., 2012). This differentiation means that leaders are
established and assessed in specific ways for these countries.
Turkey currently has the 16th largest economy in the world and the 6th largest in Europe (Republic of
Turkey Prime Ministry Under secretariat of Treasury, 2012). It has also shown progress in its free market
economy. Consequently, it is faced with the need to establish its own leadership approach because of its
Middle Eastern managerial attitudes, values, and behaviors (Aycan, 2008; Aycan and Keles, 2011).
In our study, we therefore aimed to develop a valid scale for evaluating leadership competencies in
accordance with Eastern culture, using Turkey as a case study. Within this scope, we based the
leadership competency scale on the competency models of Hogan et al. (2010) and Mumford et al.
(2007). Based on these reference models and other studies of leadership, we generated four clusters and
27 items.
100
ISSN 2326-3636
2.1. Leadership and Leader Competencies
Leadership has been defined based on a wide range of approaches that include factors such as leaders’
behavior, traits, and roles in the organization. However, leadership is generally summarized as a process
of persuasion (Hogan et al., 2010).
To improve their understanding, researchers have established classifications of leadership; the most
commonly used are “competency models.” A competency model includes the competencies required for a
person to perform a job, occupation, or a specific role in an organization or industry (Hollenbeck et al.,
2006; Steers et al., 2012). These compact models, as a summary of leadership competencies, have
become an instructional tool with which people can learn how to become more effective in their work
(Yukl, 1989; Boyatzis, 2008, pp. 7; Oyinlade, 2006; Mumford et al., 2007; Hogan et al., 2010; Takahashi et
al., 2012).
We used two up-to-date and comprehensive competency models to guide our study, as follows.
First, Mumford’s Leadership Skill Requirements Strataplex defines cognitive, interpersonal, business, and
strategic skill requirements. The strategic dimension involves planning the related skills of visioning and
systems perception, identification of downstream consequences and key causes, significant problem
solving and identification skills, and solution appraisal and objective evaluation skills (Mumford et al.,
2007).
Second, Hogan identifies four competency clusters for management and leadership: interpersonal,
intrapersonal, business, and leadership skills. Leadership skills include building and maintaining teams,
selling a vision or an agenda, and guiding the team to the realization of vision or agenda (Hogan and
Warrenfeltz, 2003).
2.2. Leadership Scales
Along with the definitions, theories, and models, leadership competencies have also been assessed with
several different measurements. One of the earliest measurements is the Ohio State Leader Behavior
Description Questionnaire, which dates from 1973 (Schrisheim and Stogdill, 1975). The Management
Excellence Inventory, developed in 1985, combines the “what” of management functions and the “how” of
management effectiveness characteristics, including leadership and strategic focus (Flanders and
Utterback, 1985). The Leadership Practices Inventory was developed by Posner and Kouzes (1988). The
Management Skills Profile includes 19 job-related dimensions, including leadership (Hazucha et al., 1993).
The Substitutes for Leadership Scale was developed by Podsakoff, MacKenzie, and Fetter (Podsakoff and
MacKenzie, 1994). The Multifactor Leadership Questionnaire was developed to examine transformational
and transactional leadership (Avolio et al., 1999). The Empowering Leadership Questionnaire was
constructed to evaluate the five factor model to measure leader empowering behavior (Arnold et al.
(2000). The Developmental Leadership Questionnaire was developed to measure parts of the
development leadership model for use in the Swedish Armed Forces (Larsson, 2006). Finally, the Penn
State Leadership Competency Inventory was developed in 2007 at Penn State University (Yoon et al.,
2010).
In our study, we examined all of the abovementioned scales and used them based on their factor and item
structures prior to generating the item pool.
2.3. Effects of Culture on Leadership
Culture forms the basis of group identity and shared thought, belief, and feeling. One of the most decisive
and important functions of leaders, particularly the founders of a company, is the creation and
management of its culture (Dickson et al., 2012). Explicit differences exist between cultures, particularly in
101
ISSN 2326-3636
terms of the values, attitudes, and behaviors of individuals, and this divergence has implications for
leadership in organizations (Hofstede and Hofstede, 2005).
In recent years, interest has been paid to a broad spectrum of leadership behaviors as well as to their
cross-cultural construct (Butler, 2008; Aycan and Keles, 2011; Lvina et al., 2012; Onea and Tatarusanu,
2012). Because the majority of theories and studies of leadership reflect Western, Anglo-Saxon
perspectives, their widespread application has resulted in limited leadership theories and implementations
based on national dimensions (Pinnington, 2011).
An increasing number of studies find that different leadership behaviors and actions are interpreted and
evaluated differently depending on their cultural environment and are due to variations in people’s notions
of the ideal leader (Festing and Maletzky, 2011; Onea and Tatarusanu, 2012; Kabasakal et al., 2012; Atay
and Ayan, 2012.), with some approaches to leadership being favored and others perceived to be less
effective. These variations exist because the meaning and importance given to the concept of leadership
appear to vary between cultures (Jepson, 2009; Dorfman et al., 2012). As leadership perceptions differ
among cultures, the need for a culture-oriented perspective becomes greater.
Hofstede developed four main groups for work-related values. These cover a large number of countries
and define the cultural values of 67 countries according to four common dimensions: Individualism versus
Collectivism, Masculinity versus Femininity, Power Distance, and Uncertainty Avoidance. For East-Asian
countries, a fifth dimension, Confucian Dynamism, refers to long-term or short-term orientation (Hofstede,
2007).
Middle Eastern countries such as Turkey rank highly for Collectivism, whereas Western countries rank
highly for Individualism (Hofstede, 2007). Eastern countries rank more highly than Western countries for
Power Distance (Aycan et al., 2000). According to the Global Leadership and Organizational Behavior
Effectiveness (GLOBE) study, which researched 62 societies, Eastern countries rank more highly than
Western countries for Uncertainty Avoidance and Collectivism (House et al., 2004, pp. 468, 622–623).
Eastern countries rank highly for Femininity, whereas most Western countries such as the United States
rank highly for Masculinity (House et al., 2004, pp. 243, 346). No significant difference has yet been found
for short- or long-term orientation (Confucian Dynamism) (Hofstede, 2007).
3. THE MODEL
Because of the diversity in the definitions and assessment methods of leadership, we developed a scale
for leadership competencies that also takes culture into account. Our model combines leadership
definitions, theories, models, and scales from the literature with cultural dimensions. A scale reflects the
values of the culture where it is developed. The items, validation, and reliability for a country also fit the
country’s culture and will not work for a different culture. Our main objective was to examine existing
leadership scales and to develop a leadership scale for an Eastern culture.
First, we analyzed the leadership concept, including definitions and leadership theories. We researched
leadership models from the literature and decided to base our model on Hogan’s leadership competencies
model (Hogan et al., 2010) and the Leadership Skill Requirements Strataplex (Mumford et al., 2007).
These were chosen as the two most up-to-date and comprehensive models to define leadership clusters.
Four clusters were established: visioning, building and maintaining team, problem identification, and
change management. These are defined as follows:
Visioning: Ability to give direction to the organization and develop and share the vision. (Yoon et al., 2010;
Mumford et al., 2007; Hogan et al., 2010).
Building and Maintaining Team: Ability to attract competent people and build and maintain a team (Hogan
et al., 2010).
102
ISSN 2326-3636
Problem Identification: Ability to identify problems from different perspectives (Mumford et al., 2007).
Change Management: Ability to manage and lead change (Mumford et al., 2007).
4. METHOD
a. Scale Development and Item Generation
In developing a measurement scale, the critical step is to identify the main purpose of the scale (Clark and
Watson, 1995). Our literature survey enabled us to find different approaches to the same or to a similar
problem and to determine whether there was a need for a particular scale (Clark and Wilson, 1995). As
mentioned in the Introduction, the need for a leadership competency scale consistent with Eastern culture
is clear. In today’s competitive business world, it is essential to measure leadership competencies. Current
leadership scales ignore cultural differences among countries, and thus the scope of this study was to
develop a leadership competency scale for Eastern culture by surveying Turkish managers.
After identifying the goal of the scale and establishing the need for it, the next step was to generate an
item pool (DeVellis, 2003). As an item-generation strategy, we used Hinkin’s (1998) deductive method and
obtained published articles to develop our item pool. We examined all of the nine leadership scales
mentioned in section 2.2, for clear item examples. In total, based on our four clusters based on Hogan’s
and Mumford’s models (visioning, building and maintaining team, problem identification, and change
management), 96 leadership competency items were generated from existing items mentioned in the
literature. We chose to use a Six-Point Likert-Type scale with the following statements indicating
participants’ scores: “I have no idea” (rating 0), “never” (rating 1), “rarely” (rating 2), “sometimes” (rating 3),
“mostly/frequently” (rating 4), and “always” (rating 5).
b. Construct Validation
4.1. Face Validity and Convergent Validity
Face Validity: First, to determine whether “on the face of it” the scale would be a good translation of the
construct, the 96 items were commented on by four experts. Based on their comments, 35 items were
dropped. The remaining 61 items were then classified into four clusters by judging their content. With the
participation of two academics and six experts, we dropped 19 further items, which were judged to be
misclassifications or items with similar or ambiguous meanings. Each judge commented on and explained
extensively in an open-ended format on separate questionnaires why certain items should be dropped
from the scale and which items needed to be reworded to clarify their intended meaning. At the end of this
process, 11 items were revised. The final scale consisted of 42 items.
For content validity, we used Convergent Validity and Confirmatory Factor Analysis methods.
Convergent Validity: We examined via correlation analysis the degree to which other dimensions are
similar to (converge on) those of other scales and that theoretically should be similar to ours. Leadership
and managerial skills generally differ, and a good leader must have both managerial and leadership skills
(Hogan et al., 2010; Mumford et al., 2007). Managerial and leadership skills have also been found to be
positively related to one another (Emiliani, 2003; Porter and McLaughlin, 2006; Hamlin and Sawyer,
2007). We therefore chose four managerial skills relevant to our leadership clusters. These four
managerial clusters with similar definitions to our leadership clusters were as follows: goal setting for
visioning, teamwork and cooperation for building and maintaining a team, problem solving for problem
identification, and planning and organization for change management. Because of the lack of a leadership
competency scale in Turkish, we translated two items from Arnold et al.’s (2000) Empowering Leadership
Questionnaire approach for teamwork and cooperation, two items for problem solving, two items for goal
setting, and four items for planning and organization from Yoon et al.’s (2010) Penn State Leadership
Competency Inventory approach. For the planning and organization cluster, we took four items, because
103
ISSN 2326-3636
this cluster reflects two dimensions in its own context. These items were presented to the respondents
together with the original scale.
TABLE 1. DESCRIPTIVE STATISTICS
Age
Frequency
Percentage (%)
24-29
30-34
35-39
40-44
45-49
50 +
76
141
83
40
35
43
18,2
33,7
19,9
9,6
8,4
10,3
7
17
213
155
26
1,7
4,1
51
37,1
6,2
30
115
81
192
7,2
27,5
19,4
45,9
Lower
Middle
Upper
124
185
109
29,7
44,3
26,1
Working Experience (Year )
0-3
4-7
8-11
12-15
16 +
25
106
104
61
122
6
25,4
24,9
14,6
29,2
173
110
50
28
57
41,4
26,3
12
6,7
13,6
Education
High School
Two-year degree
Graduate
Masters
Doctorate
Company Size
Micro
Small
Medium
Large
Levels of Management
Managing Experience (Year)
0-3
4-7
8-11
12-15
16 +
4.2. Pilot Test
Based on Clark and Wilson (1995), we conducted pilot tests before introducing the scale to a major group.
In the pilot tests, the scale was sent to 153 managers via a web-based survey tool by e-mail. Of 153
responses, 24 were eliminated because of missing data or because all items were ranked the same, for
104
ISSN 2326-3636
example, all items given a rating of “4.” Finally, 129 of 153 responses were analyzed via SPSS 15.0 for
Windows.
The results of the pilot tests were used to check the comprehensibility of items and analyze the statistical
aspects of the scale. Five items with an item-total correlation lower than .40 were immediately eliminated.
The scale internal consistency was measured via Cronbach’s alpha coefficient, which had a value of .92
for the pilot test phase.
4.3. Major Group
4.3.1.Participants
We invited 742 managers by e-mail to complete the online survey. Data were collected from managers via
the “snowball” method from our database to create variation between sectors, hierarchical levels, work
experience, etc. Tracking data indicated that 649 managers began the survey, and 418 of them submitted
the completed survey, with a 64.4% response rate. All participants were volunteers and were assured of
the confidentiality of their responses.
Table 1 above shows the descriptive statistics of participants. Participating managers were 36% female
(152) and 64% male (266). Most participants were in the 30–34 age group (34%; 141). The majority of the
participants had an undergraduate-level education (51%; 213) and worked in large firms (46%; 192).
Some 26% of the participants were upper level managers (109), 44% were middle level managers (185),
and 30% were lower level managers (124). Most had 16 or more years of work experience (29%; 122) and
0–3 years of managing experience (41%; 173). Participants were from various sectors, including banking,
insurance, finance, automotive, retail, education and consulting, electronics, informatics, e-commerce,
energy, services, manufacturing, construction, government, press, communication, advertising, health and
social services, agriculture, food, fishery, tourism, transportation and logistics, and non-profit
organizations. The predominant sector of the managers was transportation and logistics, with 95
managers (23%) in this sector.
5. RESULTS
We verified the scale and determined its reliability through confirmatory factor analysis, item-total
correlation, and Cronbach’s alpha coefficients. The four-factor leadership competency scale comprising
visioning, building and maintaining a team, problem identification, and change management clusters
accounted for 48% of the variance. KMO (.91) and Bartlett’s test (p < .00) results show that the data were
suitable for factor analysis. Based on exploratory factor analysis and the proposed model, the fit of the
four factors of the leadership competency scale was confirmed. In general, factor loadings of .30 or
greater were used as a criterion for including an item in a particular factor. All items had factor loadings
greater than .30 in the final scale (Table 2).
TABLE 2. FACTOR LOADING AND EIGENVALUES OF SCALE ITEMS
Items
Item-total
Correlations
Factor 1
Factor 2
1
2
3
4
5
,632
,663
,554
,556
,586
,756
,614
,640
,600
,616
,317
,298
,115
,361
Factor 3
Factor 4
,166
,216
,344
,260
,194
,105
105
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
,589
,468
,595
,493
,552
,525
,604
,516
,515
,507
,549
,451
,471
,500
,463
,346
,528
,381
,311
,597
,526
,457
Eigenvalues
Percentage of
Variance
ISSN 2326-3636
,568
,555
,589
,139
,276
,173
,467
,210
,247
,358
,110
,158
,206
,183
,382
,306
,124
,113
,187
,281
,184
,281
,216
,169
,199
,538
,653
,625
,522
,395
,509
,548
,286
,359
,684
,571
,606
,521
,596
,420
,411
,416
,203
,125
,347
,329
,144
4,360
16,148
3,258
12,066
,125
,199
,296
,171
,234
,177
,327
,387
,155
,324
-,106
,113
,710
,666
,543
,488
,529
2,962
10,969
2,453
9,084
,186
,196
,409
,298
,428
,275
Cronbach’s alpha coefficients for each factor ranged from .74 to .85 (Table 3). The coefficient for the
overall scale was .92. This verified the reliability of the newly defined factors and the acceptability of the
overall scale. The corrected item-total correlations for each item in the scale ranged from .31 to .66. To
determine the cut-off point, we used an item-total correlation of .30 or less. Therefore, the results of the
corrected item-total correlation were also found to be acceptable.
To assess convergent validity, we used Pearson’s correlation coefficient and examined the relationship
between 10 items (Table 4) and the 27 items in our scale. As expected, we found positive correlations
between all of the leadership clusters and the goal setting, teamwork and cooperation, problem solving,
and planning and organization clusters (r = .30–.89, p < .01), with the following results: for visioning and
goal setting, r = .54; for building and maintaining a team and teamwork and cooperation, r = .56; for
problem identification and problem solving, r = .51; and for change management and planning and
organization, r = .48 (p < .01) (Table 5. Please see below). Cronbach’s alpha coefficient was .77 for the 10
items, which was sufficient to assess convergent validity.
TABLE 3. RELIABILITY SCORES
Measures
Cronbach’s Alpha
Number of Items
Visioning
Change Management
Problem Identification
Build and Maintain a Team
Total Scale
,854
,790
,756
,712
,916
8
7
7
5
27
106
ISSN 2326-3636
TABLE 4. THE ITEMS USED FOR CRITERION VALIDITY
Goal Setting
Teamwork and
Cooperation
Problem Solving
Planning and
Organization
1. Translates business/function strategies into clear objectives and
tactics
2. Anticipates consequences before action is taken
1. Shows concern for work group members' well-being
2. Takes the time to discuss work group members' concerns
patiently
1. Deals with abstract concepts and complexity comfortably
2. Effectively and positively confronts others on relevant issues
1. Uses time effectively
2. Appropriately prioritizes tasks and responsibilities
3. Run an efficient department
4. Manage resources, people, product
TABLE 5. MEANS, STANDARD DEVIATIONS AND CORRELATIONS AMONG ALL CLUSTERS
Variables
M
SD
1
2
3
4
5
6
7
1.Visioning
3,96
0,57
2.Building & maintaining a
team
4,15
0,53
,52
3.Problem identification
4,02
0,48
,65
,52
4.Change management
4,07
0,51
,71
,43
,67
5.Goal setting
4,19
0,54
,49
,39
,52
,45
6.Planning and
organization
4,09
0,53
,53
,51
,56
,48
,50
7.Problem solving
4,07
0,60
,35
,36
,51
,49
,35
,39
8.Teamwork & cooperation
4,23
0,57
,42
,56
,43
,40
,30
,38
,35
9.Leadership-total
4,04
0,44
,89
,70
,85
,86
,55
,62
,56
8
,53
*Correlations are significant at the level 0,01. According to the four-factor model, the first factor includes
eight items of visioning, the second factor includes seven items of change management, the third factor
includes seven items of problem identification, and the fourth factor includes five items of building and
maintaining a team.
Based on the results of our exploratory analysis and the theoretical properties of the scale, we defined the
four factors to measure leadership competencies. According to the exploratory factor analysis (EFA)
results, the four-factor model of our leadership competency scale with 27 items was confirmed to be
appropriate, thus indicating that the factor structure model of our proposed measurement scale is valid.
Sample items of the scale are shown in the Table 6 below.
107
ISSN 2326-3636
TABLE 6. LEADERSHIP COMPETENCY SCALE SAMPLE ITEMS
Factor 1: Visioning (Vizyon Belirleme)
1.
2.
3.
Örgutumuzun gelecegine dair vizyon olustururum
Örgutumuzun gelecegi hakkında ikna edici bir tablo ortaya koyarım
Örgutumuz iCin net bir vizyon belirler ve paylasırım
Factor 2 : Change Management (Degisim Yönetimi)
1.
2.
3.
Degisim gerekli oldugunda sistemi zorlarım
Surekli degisime uyum saglamak iCin, yeni beceriler edinir ve gelistiririm
Statukoyu sorgular ve degisime önayak olurum
Factor 3 : Problem Identification (Problem Tanımlama)
1.
2.
3.
Problemi degisik yönlerden ele alarak farklı boyutlarını tanımlarım
Asıl problemin ne oldugunu, her zaman aCıkCa ve dogrudan tanımlarım
Problemin aslına iliskin pek Cok soru sorarak, gerCekte sorunun ne oldugunu anlamaya
yönelik alternatif fikirler gelistirmeye Calısırım
Factor 4 : Build and Maintain a Team (Takımı Kurma ve Yasatma)
1.
2.
3.
Bir grup insanın, bir takım olarak Calısmasını saglamakta basarılıyımdır
Personelimle onları motive edecek sekilde etkilesim kurarım
Takım uyelerini cesaretlendirme ve takıma dahil olmalarını saglamada basarılıyımdır
5. CONCLUSION AND DISCUSSION
Leadership has been a significant research area involving many different definitions, theories, models,
and scales. However, because the majority of these studies reflect Western culture, other countries must
develop their own leadership competency scales based on a perception compatible with their own distinct
cultural values. A scale reflects the cultural values in which it is developed. Its items, validation, and
reliability also fit the culture in which they were developed, and thus a scale cannot usually be applied
successfully to a different culture.
We therefore developed a four-dimensional leadership competency scale for an Eastern culture, based on
a literature review of leadership models. Through validation of the multidimensional leadership scale,
reliability analysis results supported the proposed scale as an acceptable tool. Four factors were
developed based on existing models and clusters for leadership from the literature. The items were
analyzed with data gathered from independent respondents from various organizations and sectors and
showed an acceptable item-total correlation with the scale. All of the dimensions of visioning, building and
maintaining team, problem identification, and change management showed high reliability and were
assessed as having internal consistency. Leadership is directly related to a culture and its people;
therefore the items that we developed reflect the perspectives of Turkish leaders. As various researchers
have found and our results have verified, Western originated leadership prototypes are not compatible
with Eastern cultures (Jepson, 2009; Jogulu, 2010; Kabasakal et al., 2012; Dorfman et al., 2012).
108
ISSN 2326-3636
The items in our scale are not intended to be used to support any perception of “good” or “bad” leadership.
Rather, the scale is aimed at guiding leaders to understand leadership competencies and to assess their
strengths and weaknesses based on the items in the scale. In this regard, the scale provides leaders with
a proposed combination of competencies to enhance their skills and increase their effectiveness as
leaders.
The dataset of 418 was sufficient for the development of the 27-item scale. However, the scale may be
tested with more participants to enhance its validity and reliability. To develop the scale further, a
replication study may be conducted to improve its efficiency and reliability. Moreover, all of the managerial
and leadership skills may be tested together. Other topics that should be addressed in future studies
include the utility of the scale by organization, and the long-term validity and comprehensibility of the four
leadership dimensions. This scale was developed in Turkey and reflects Turkish cultural values. A
comparative study with a different culture would strengthen our results. The need for a leadership model
that includes cultural values should also be addressed in future research.
REFERENCES
Arnold, A., Arad, S., Rhoades, J. and Drasgow, F. 2000. “The Empowering Leadership Questionnaire: The
Construction and Validation of a New Scale for Measuring Leader Behaviors”, Journal of Organizational
Behavior, vol. 21, no. 3, pp. 249-269.
Atay, S. and Ayan, D. 2012. “The Effects of Narcissism on Cognitive Style for Leaders”, Paper presented
at the 12th Annual Meeting of the European Academy of Management, Rotterdam, June.
Avolio, B. C, Bass B. M. and Jung D. I. 1999. “Re-examining the Components of Transformational and
Transactional Leadership Using the Multifactor Leadership Questionnaire”, Journal of Occupational and
Organizational Psychology, vol. 72, pp. 441-462.
Aycan, Z. 2008. “Leadership in Cultural Context” in. Smith, P. & Peterson M. (Eds), Handbook of CrossCultural Management (pp. 219-239). London: Sage Publication.
Aycan, Z., Kanungo, R. N., Mendonca, M., Yu, K., Deller, J., Stahl, G., and Khursid, A. 2000. “Impact of
Culture on Human Resource Management Practices: A Ten Country Comparison”, Applied Psychology:
An International Review, vol. 49, no. 1, pp. 192–220.
Aycan, Z. and Keles, S. 2011. “The Relationship of Managerial Values and Assumptions with Performance
Management in Turkey: Understanding Within Culture Variability”, The International Journal of Human
Resource Management, vol. 22, pp. 3080-3096.
Boyatzis R. E. and Richard E. 2008. “Competencies in the 21st Century”, Journal of Management
Development, vol. 27, no. 1, pp. 5-12.
Butler, C. 2008. “Leadership In a Multicultural Arab Organization”, Leadership & Organization
Development Journal, vol. 30, pp. 139-151.
Clark, L. A. and Wilson, D. 1995. “Constructing Validity: Basic Issues in Objective Scale Development”,
Psychological Assessment, vol. 7, no. 3, pp. 309-319.
CakmakCı, U. M. and Karabatı, S. 2008. “Exploring Managerial Values in the Changing Turkish Business
Context”, Journal of Management Development, vol. 27, no. 7, pp. 693-707.
DeVellis, R. F. 2003. Scale Development: Theory and Applications. Sage Publications, USA.
Dickson, M. W., Castano, N., Magomaeva, A. and Hartog D. N. 2012. “Conceptualizing Leadership Across
Cultures”, Journal of World Business, vol. 47, pp. 483-492.
Dorfman, P., Javidan, M., Hanges, P., Dastmalchian, A. and House, R. 2012. “GLOBE a Twenty Year
Journey Into the Intriguing World of Culture and Leadership”, Journal of World Business, vol. 47, pp.
504-518.
Emiliani, M. L. 2003. “Linking Leaders’ Beliefs to Their Behaviors and Competencies”, Management
Decision, vol. 41, no. 9, pp. 893-910.
109
ISSN 2326-3636
Festing, M. and Maletzky, M. 2011. “Cross-Cultural Leadership Adjustment - A Multilevel Framework
Based on the Theory of Structuration”, Human Resources Management Review, vol. 21, pp. 186-200.
Flanders, L. R. and Utterback, D. 1985. “The Management Excellence Inventory: A Tool for Management
Development”, Public Administration Review, vol. 45, no. 3, pp. 403-410.
Hamlin, R. G. and Sawyer, J. 2007. “Developing Effective Leadership Behaviors: The Value of EvidenceBased Management”, Business Leadership Review, vol. 4, no. 4, pp. 1-16.
Hazucha, J. F., Hezlett, S. A. and Schneider, R. J. 1993. “The Impact of 360-Degree Feedback on
Management Skills Development”, Human Resource Management, vol. 32, no. 2-3, pp. 325-351.
Hinkin, T. R. 1998. “A Brief Tutorial on the Development of Measures for Use in Survey Questionnaires”,
Organizational Research Methods, vol. 1, no.1, pp. 104-121.
Hofstede, G. 2007. “Asian Management in the 21st Century”, Asia Pacific Journal of Management, vol. 24,
pp. 411-420.
Hofstede, G. and Hofstede, G. J. 2005. Cultures and Organizations: Software of the Mind. McGraw-Hill,
New York, USA.
Hogan, J., Hogan, R. and Kaiser, R. B. 2010. “Management Derailment: Personality Assessment and
Mitigation”. in Zedeck, S. (Eds). American Psychological Association Handbook of Industrial and
Organizational Psychology vol.3, (pp. 555-575). American Psychological Association, Washington DC,
USA.
Hogan, R. and Warrenfeltz, R. 2003, “Educating the Modern Manager”, Academy of Management
Learning and Education, vol. 2, no. 1, pp. 74-84.
Hollenbeck, G. P., McCall Jr., M. W. and Silzer, R. F. 2006. “Leadership Competency Models”, The
Leadership Quarterly, vol. 17, pp. 398-413.
House, R. J., Hanges, P. J., Javidan, M., Dorfman P. W. and Gupta, V. 2004. Culture, Leadership, and
Organizations the GLOBE Study of 62 Societies. Sage Publications, USA.
Jepson, D. 2009. “Studying Leadership at Cross-Country Level: A Critical Analysis”, Leadership, vol. 5,
no. 1, pp. 61-80.
Jogulu, U. 2010. “Culturally-Linked Leadership Styles”, Leadership & Organization Development Journal,
vol. 31, pp. 705-719.
Kabasakal, H., Dastmalchian, A., Karacay, G. and Bayraktar, S. 2012, “Leadership and Culture in the
MENA Region: An Analysis of the GLOBE Project”, Journal of World Business, vol. 47, pp. 519-529.
Larsson, G. 2006. “The Developmental Leadership Questionnaire (DLQ): Some Psychometric Properties”,
Scandinavian Journal of Psychology, vol. 47, pp. 253-262.
Lvina, E., Johns, G., Treadway, D. C., Blickle, G., Liu (Lucy), Y., Liu, J., Atay, S., Zettler, I., Solga, J.,
Noethen, D. and Ferris, G. R. 2012. “Measure Invariance of the Political Skill Inventory (PSI) Across
Five Cultures”, International Journal of Cross Cultural Management, vol. 12, no. 2, pp. 171-191.
Mumford, T. V., Campion, M. A. and Morgeson, F. P. 2007, “The Leadership Skills Strataplex: Leadership
Skill Requirements Across Organizational Levels”, The Leadership Quarterly, vol. 18, pp. 154-166.
Onea, A. N. and Tatarusanu, M. 2012. “Cultural Specificity and Leadership”, Procedia Economics and
Finance, vol. 3, pp. 746-751.
Oyinlade, A. O. 2006. “A Method of Assessing Leadership Effectiveness”, Performance Improvement
Quarterly, vol. 19, no. 1, pp. 25-40.
Pinnington, A. H. 2011. “Leadership Development: Applying the Same Leadership Theories and
Development Practices to Different Contexts?”, Leadership, vol. 7, no. 3, pp. 335-365.
Podsakoff, P. M. and MacKenzie, S. B. 1994. “An Examination of the Properties and Nomo Logical
Validity of Some Revised and Reduced Substitutes for Leadership Scales”, Journal of Applied
Psychology, vol. 79, no. 5, pp. 702-713.
Porter, L. W. and McLaughlin, G. B. 2006. “Leadership and the Organizational Context: Like the
Weather?”, The Leadership Quarterly, vol. 17, pp. 559-576.
110
ISSN 2326-3636
Posner, B. Z. and Kouzes, J. M. 1988. “Development and Validation of the Leadership Practices
Inventory”, Educational and Psychological Measurement, vol. 48, pp. 483-496.
Republic of Turkey Prime Ministry Undersecretary of Treasury. 2014. Turkish Economy in the World.
http://www.treasury.gov.tr/File/?path=ROOT/Documents/General%20Content/Ekonomi_Sunumu_ENG.
pdf, Accessed Jan. 15, 2014.
Schriesheim, C. A. and Stogdill, R. M. 1975. “Differences in Factor Structure Across Three Versions of the
Ohio State Leadership Scales”, Personnel Psychology, vol. 28, pp. 189-206.
Steers, R., Sanchez-Runde, C. and Nardon, L. 2012. “Leadership in a Global Context: New Directions in
Research and Theory Development”, Journal of World Business, vol. 47, pp. 479-482.
Takahashi, K., Ishikawa, J. and Kanai, T. 2012. “Qualitative and Quantitative Studies of Leadership in
Multinational Settings: Meta-analytic and Cross-Cultural Reviews”, Journal of World Business, vol. 47,
pp. 530-538.
Yoon, H. J., Song, J. H., Donahue, W. E. and Woodley, K. K. 2010. “Leadership Competency Inventory: A
Systematic Process of Developing and Validating a Leadership Competency Scale”, Journal of
Leadership Studies, vol. 4, no. 3, pp. 39-50. Page Template is retrieved from
http://drmtree.com/sites/default/files/LCI_PageTemplate%20Sample.pdf
Yukl, G. 1989. “Managerial Leadership: A Review of Theory and Research”, Journal of Management, vol.
15, no. 2, pp. 251-289.
AUTHOR PROFILES
Dr. Salim Atay (Ph. D., Faculty of Management) is Assoc. Prof. of Management Engineering, Adviser to
the Rector and Director of ITU Career Center at Istanbul Technical University. His areas of research
include leadership development, organizational psychology & behavior, career counseling and personality.
He has published “Narcissistic Leader” book, book chapters in “Political Skill at Work: Impact on Work
Effectiveness” and “Job and Vocational Counselling”. Also he is editor of “Job and Vocational Counselling”
book. His articles have been published in various journals including International Journal of Cross-Cultural
Management, Review of Public Administration, Journal of Instructional Psychology, and he has
declarations in Eastern Academy of Management, European Academy of Management and European
Association Work and Organizational Psychology Congress etc. Mr. Atay has developed and managed
many European Union Grant Scheme projects in ERASMUS Academic Networks, Life Long Learning and
Leonardo da Vinci programs. (Corresponding Author, e-mail: [email protected])
Dr. Elena Lvina (Ph.D. in Business Administration) is Assist. Prof. at Saint Joseph’s University. She has
two terminal degrees in Psychology and Business Administration. Her areas of teaching include
organizational behavior, cross-cultural management, social psychology and change management. She
has several refereed publications in Corporate Governance: An International Review, International Journal
of Cross-Cultural Management, International Journal of Human Resources Development and
Management etc.
Banu Cırakoglu graduated from İstanbul Technical University, Industrial Engineering Department. She is
working as Senior Researcher at Namar Consulting Inc.
Aslı Dogan (MA in Psychology) graduated from Ege University Psychology Department. She has studied
Experimental Psychology Master Program in Istanbul University.
Nese Gulmez (Ph.D. Candidate, Management and Organization Department) graduated from Marmara
University Business and Administration Department. She had M.A. Degree from Marmara University,
Management and Organization Department.
111
ISSN 2326-3636
THE IMPACT OF TECHNOLOGICAL AND MARKET TURBULENCES ON CAPACITY
TO INNOVATE: MEDIATING ROLE OF MARKET ORIENTATION
Borut Milfelner, Faculty of Economics and Business, University of Maribor, Slovenia
ABSTRACT
In the present study we examine the impact of market and technological turbulence on the development
of market orientation capacity to innovate. The results of research conducted on a sample of 415
companies in Slovenia with more than 20 employees confirm the positive relationship between market
turbulence and market orientation and technological turbulence and market orientation. While market and
technological turbulence have no direct impact on capacity to innovate, market orientation has a positive
impact. Technological turbulence has indirect impact on capacity to innovate through market orientation.
Keywords: technological turbulence, market turbulence market orientation, capacity to innovate
1. INTRODUCTION
Several studies in the field have examined a relationship between market orientation and company
innovativeness. In the majority it was established, that market orientation is one of the most important
predecessors of innovation (e.g., Han et al. 1998). According to Greenwall et al. (2013), about 75% of all
research examining the relationship between market orientation and innovation resources proved positive
relationship between both concepts. Same was also confirmed in the meta-analytical study by Cano et al.
(2004). In terms of examining the moderators (market and technological turbulence) impact, very mixed
results were reported, since more than half of the studies established that moderator impact of market
and technological turbulence on the relationship between market orientation and innovation resources
were not statistically significant. According to this, the main research questions are as follows. First, can
environmental variables, such as market and technological turbulence actually impact the link between
market orientation and innovativeness and, second, what is the impact of those environmental factors on
adoption of both concepts.
With the exception of Wang et al. (2013), the authors by now did not include technological and market
turbulence in terms of predecessors of market orientation and innovativeness, although marketing
literature indicates that external factors can be antecedents of market orientation. The research objective
of this study is to test the impact of environmental factors (such as technological and market turbulence)
on a company capacity to innovate. In doing so, we are particularly interested whether technological and
market turbulences affect the company's capability to innovate directly or indirectly through market
orientation. In this study market orientation is therefore included as a mediator. Second contribution of our
research is in testing those relationships in the contexts of a developing CEE country, which can serve as
a good example for countries following its path and provide a unique opportunity to examine such effects
in environments where companies are confronted with a radical switch from a so called central planning
to the western-type economic system based on hyper market competition. Due to the historical socioeconomic heritage in CEE settings, market orientation - innovation relationship research has so far whit
rare exceptions (Bodlaj, 2012) been neglected.
2. CONCEPTUAL MODEL AND HYPOTHESES
We define market orientation as a business philosophy including customer orientation, competitor
orientation, and inter-functional coordination (Narver & Slater, 1990). Technological turbulence is defined
in accordance with Jaworski and Kohli (1993) as the extent and speed of technological change in the
industry. Jaworski and Kohli (1993) state that company’s competitive advantages when operating in the
rapidly changing technological environment can be achieved through innovation, particularly technological
innovation. This may increase the importance of marketing resources such as market orientation.
112
ISSN 2326-3636
Although some authors believe the opposite, namely that technological turbulence can reduce the
company’s need to develop a market orientation, the latest research shows the opposite (Wang et al.
2013). We expect that companies when introducing new products based on new technologies can reduce
uncertainty with obtaining and using information about customers and competitors. Thus, we argue that:
H1: Companies operating in the environments with higher technological turbulences are more market
oriented.
Market turbulence can be defined as continuous changes in preferences, desires and needs of customers
(Jaworski and Kohli, 1993). Some authors include further changes in terms of pricing and cost structures
by competitors (Calantone et al., 2003). Organizations operating in turbulent markets must quickly
change and adapt their products and market-based approaches to the preferences of customers.
Disturbances to the markets may be derived from real innovations, from changes in customer
expectations, from competitor’s actions or from other environmental factors. Therefore in such settings
market orientation can be an important resource. Increased changes in customer markets will lead to
increased sensibility of marketing managers to environmental changes and thus to a greater emphasis on
market orientation culture. Accordingly, we hypothesize:
H2: Companies operating in the environments with higher market turbulences are more market oriented.
We define the capacity to innovate in accordance with Rogers (1983), who refers to it as the pre-diffusion
aspect of innovation, that is, the early production or adoption of innovation by a company (Hurley et al.,
2004). That also promotes motivation for improvement of existing and introducing new products and
processes. According to Deshpande and Farley (2004) successful innovation is the most important result
of market orientation. Companies that are highly market oriented can easily respond to new market
opportunities. The results of some recent research showed that the capacity to innovate is positively
associated with both the cultural components (Hurley et al., 2004). This leads to our third hypothesis:
H3: Market orientation is positively related to the capacity to innovate.
Technological innovation (in production and service processes) is important in technologically turbulent
markets. They are employed primary to better serve needs and wants of the target consumers. Therefore,
we claim that the link between technological turbulence and capacity to innovate is not direct but rather
indirect. Capacity to innovate on technologically turbulent markets can only be deployed through the
intelligence provided by market orientation. According to that we speculate that technological turbulence
has an indirect impact on the capacity to innovate and can be developed mainly by market oriented
organizations. So, we suggest:
H4: Market orientation mediates the technological turbulence impact on capacity to innovate.
Openness of organizations to search for new ideas in production and services and understanding of
customers’ needs and wants on turbulent markets is crucial. Several studies (e.g. Han et al. ,1998; Hurley
et al., 2004) have have empirically proved that market oriented companies on turbulent markets can be
more effective in innovation processes. This leads to our final hypothesis:
H5: Market orientation mediates the market turbulence impact on capacity to innovate.
3. METHODOLOGY
Measurement instrument for technological and market turbulence, market orientation and capacity to
innovate was developed in three stages. After the review of the relevant literature in the field we
summarized the scales for measurement of the concepts. For the measurement of market and
technological turbulence a scale developed by Narver et al. (2004) was used. For the measurement of
market orientation, we used a scale developed by Narver and Slater (1990). For the measurement of the
capacity to innovate, a new scale was developed, which was based on the findings of Hurley et al., 2004).
In the second stage, in-depth interviews with marketing managers from 17 companies in Slovenia were
implemented. To ensure content validity, the questionnaire was further examined by four experts in the
field of marketing. In the final version of the questionnaire, five items for the measurement of
technological turbulence were used and four for the measurement of market turbulence. Market
orientation was measured with 10 items and capacity to innovate with two. All items were measured on a
seven point Likert scale (from 1 "strongly disagree" to 7 "completely agree").
113
ISSN 2326-3636
Senior marketing manager were used as informants (Board Member responsible for marketing, directors
of marketing, sales, or sales, etc.) in this study. The questionnaire was sent to 3,000 randomly selected
companies in Slovenia with more than 20 employees. 415 usable questionnaires were returned,
representing a response rate of 13.8%. The sample structure according to the industry type was as
follows: manufacturing - 40.8%, trade - 11.0%, real estate - 10.0%, food industry - 4.0%, other industries 14.7%.
In order to test dimensionality of the constructs, confirmatory factor analysis was performed (CFA). The
results of CFA indicate that market orientation can be explained with three sub-constructs. Indices of the
2
single factor model of market orientation were: χ /df = 396.35 / 27 ; p = .000 ; RMSE = .173 ; NFI = .862 ;
NNFI = .827 ; CFI = .870 ; RMR = .101 ; GFI = .777. The three factor solution proved to be more valid:
2
χ /df = 36,39 / 24 ; p = 0.053 ; RMSE = .0335 ; NFI = .988 ; NNFI = .994 ; CFI = .996 ; RMR = .0531 ; GFI
= .974 . In the final solution four items were eliminated, since their loadings were too low or they were
cross-loaded on multiple constructs. In accordance with the cited literature the sub-constructs were
named customer orientation, competitor orientation and inter-functional coordination. One item for the
technological turbulence and one for the market turbulence were also eliminated. Table 1 shows the
mean values, standardized loadings, composite reliabilities (CR) and average variances extracted (AVE).
From Table 1 it can be seen that all CR values were higher than .6 meaning that composite reliability is
achieved. Most of the loadings were also greater than .6 (with the exception of one) and AVE values were
greater than .5, which confirms the convergent validity of the constructs. Discriminant validity was
2
assessed by calculating the χ differences between all pairs of constructs, first assuming a fixed
2
relationship and then freed. In all cases (for all the pairs of the constructs) calculated differences in χ
statistics were statistically significant (p <.05), which is a proof of discriminant validity. Additionally, all
squared correlations between constructs were lower than AVE values (Fornell and Larcker, 1981).
TABLE 1. CONSTRUCTS, THEIR INDICATORS WITH MEANS, STANDARDIZED LOADINGS,
COMPOSITE RELIABILITIES (CR) AND AVERAGE VARIANCES EXTRACTED (AVE)
CONSTRUCTS / INDICATORS
Technological turbulence
The technology in our markets is changing
rapidly.
Technological changes provide big
opportunities in this market.
A large number of new products in this
market have been made possible through
technological breakthroughs.
Technological developments in this market
are rather minor. (R)
Market turbulence
In this market, customers’ preferences
change quite a bit over time.
Customers in this market are very receptive
to new-product ideas.
Market orientation
Customer orientation
We measure customer satisfaction
systematically and frequently.
Our strategy for competitive advantage is
based on our understanding of customers’
needs.
We give close attention to after-sales
Means
Factor
loadings
4.679
0.835
5.036
0.739
4.787
0.722
3.648
0.726
4.208
0.557
4.567
0.845
5.352
0.851
5.679
0.799
4.753
0.582
Composite
reliabilities
(CR)
Average
variances
extracted
(AVE)
.841
.57
.668
.51
.793
.56
114
ISSN 2326-3636
service.
Competitor orientation
We respond to competitive actions that
threaten us.
The top management team regularly
discusses competitors' strengths and
strategies.
We regularly monitor marketing activities of
our competitors.
Inter-functional coordination
Data on customer satisfaction are
disseminated at all levels in this business
unit on a regular basis.
We communicate information about our
successful and unsuccessful customer
experiences across all business functions.
All departments of the company are
integrated in business strategy
development.
Capacity to innovate
Our company is often the first to market with
new products and services.
Our new product introduction has increased
over the last 5 years.
5.189
0.776
5.078
0.788
4.933
0.740
4.525
0.618
5.106
0.865
5.057
0.797
4.217
0.859
4.797
0.749
.812
.59
.808
.59
.795
.66
2
All fit indices of the measurement model were within the suggested limits: χ /df = 144,90/104; p = .049;
RMSE = .029; NFI = .975; NNFI = .991; CFI = .993; RMR = 0.0356; GFI = .947. Due to the simplification
of the final structural model market orientation was constructed as a second-order construct with three
indicators, namely customer orientation, competitor orientation and inter-functional coordination. This was
achieved by averaging the corresponding indicators leading to a single composite indicator.
4. RESULTS
The hypotheses were tested with structural equation modelling (SEM). Concerning the fourth and fifth
hypothesis, we examined the indirect relationships in the structural model through market orientation.
Indirect impacts were assessed with a procedure proposed by Baron and Kenny (1986). Therefore a
series of mediation tests were employed. The significance of indirect effects was further evaluated with
bootstrapping, following the procedure of Preacher and Selig (2012). In Table 2 the results of the
structural model are presented. In the final model the direct relationship between market turbulence and
capacity to innovate and between technological turbulence and capacity to innovate was not proposed,
since such alternative model proved to be less valid. Also, the two relationships were not statistically
significant, meaning that market and technological turbulence do not have a direct relationship with the
capacity to innovate.
TABLE 2. DIRECT, INDIRECT IMPACTS AND GLOBAL FIT INDICES OF THE MODEL
Relationships
Standardized coefficients
(t values and sig.)
Hypotheses
testing
H1: Technological turbulence → Market orientation
0,25 (p<0,05; t=2,01)
confirmed
H2: Market turbulence → Market orientation
0,24 (p<0,10; t=1,65)
confirmed
H3: Technological turbulence → Capacity to
innovate
0,17 (p<0,05; t=1,98)
confirmed
115
ISSN 2326-3636
(indirect impact)
H4: Market turbulence → Capacity to innovate
0,16 (p<0,10; t=1,45)
confirmed
0,68 (p<0,01; t=4,90)
confirmed
(indirect impact)
H5: Market orientation → Capacity to innovate
2
Fit indices: χ = 16.74; df = 40; p=.065; RMSEA = .000; NFI = .993; NNFI = 1.013; CFI = 1,000;
GFI = .969; SRMR = .0467
2
Fit indices of the model were all inside the acceptable intervals. χ test was statistically significant at p <
.10). Table 2 indicates the positive relationship between technological turbulence and market orientation
(β = .25 , p < .05), so the first hypothesis was confirmed. Relationship between market turbulence and
market orientation was also positive (β = .24, p < .10) but significant only at p < .10. Therefore we also
confirmed the hypothesis H2. This means that the level of market orientation is greater in companies
operating in conditions of higher market and technological turbulences. The third relationship between
market orientation and capacity to innovate was also positive. The results indicate that this was the
strongest relationship in the model (β = 0.68 , p < 0.01), and that also H5 could be confirmed. As already
mentioned the indirect relationship between market orientation and technological / market turbulences of
the alternative model was not statistically significant, meaning that the market orientation fully mediates
the impact of both types of environmental turbulences on the capacity to innovate. Indirect relationship
between technological turbulences and capacity to innovate through market orientation was positive (β =
0.17) and statistically significant at p<0.05, so H4 was confirmed. On the other hand results in Table 3
show that the mediated relationship between the market turbulence and the capacity to innovate (through
market orientation) was not statistically significant. In accordance with that H4 was rejected.
5. DISCUSSION
This paper highlights the role of market orientation for firms operating in different settings of market and
technological turbulences. First, we confirmed the positive relationship between market orientation and
market turbulence and positive relationship between technological turbulence and market orientation.
This follows the presumption that companies operating in markets where customer preferences and
competitive activities rapidly changes have higher levels of market orientation. It is interesting that the
impact of technological turbulences is even greater than the impact of market turbulences. Apparently
when technological changes are fast, companies are forced to pay close attention to customers and
competitors in order to better adapt the products to the new technology in a way that creates value for
their customers. Second, like our predecessors (e.g. Han et al., 1998) we confirmed the positive
relationship between market orientation and capacity to innovate. Companies with more market oriented
culture have a greater potential for effective and efficient development of new products and for their
introduction to the market.
Third, we demonstrated that market and technological turbulences has no direct effect on adoption of
capabilities to innovate, but rather indirect through market orientation. In the technologically changing
environments, the companies that are more market oriented will therefore be more successful. The nonsignificant indirect impact of market turbulence on capacity to innovate however is somewhat surprising.
One possible explanation is that, when the markets are too unpredictable, managers cease to seek
information of customers expressed needs. Therefore, the future studies should also include the
component of proactive market orientation which is aimed at sensing latent customer needs. Another
possible explanation is that market information on turbulent markets are more often used for making the
changes in the sales process, rather than in the processes of innovation, since it is harder and more time
consuming to adapt the products and services to customers in short time intervals.
Finally, some limitations of the research should be addressed. Other environmental influences, such as
the competition density, entry and exit barriers, and sociocultural dimensions could be included in our
study. The inclusion of further mediators that impact the capacity to innovate could also give more
complete answers to the research problem. As already mentioned, responsive market orientation could
116
ISSN 2326-3636
clarify the non-significant indirect market turbulence – capacity to innovate relationship. Concerning the
sampling, using two or more informants within a single company could diminish the possibility of common
method bias.
REFERENCES
Baron, R. M. and Kenny, D. A. 1986. “The moderator–mediator variable distinction in social psychological
research: Conceptual, strategic, and statistical considerations. Journal of personality and social
psychology”, vol. 51, no. 6, pp. 1173-1182.
Bodlaj, M., Coenders, G. and Žabkar V. 2012. “Responsive and proactive market orientation and
innovation success under market and technological turbulence”, Journal of Business Economics and
Management, vol. 13, pp. 666-687.
Bourgeois, L. J. and Eisenhardt, K.M. 1988. “Strategic decision processes in high velocity environments:
four cases in the microcomputer industry”, Management Science, vol. 34, no. 7, pp. 816–835.
Calantone, R., Garcıa R. and Dröge, C. 2003. “The effects of environmental turbulence on new product
development strategy planning”, Journal of Product Innovation Management, vol. 20, pp. 90–103.
Cano, C. R., Carrillat, F. A. and Jaramillo, F. 2004. “A meta-analysis of the relationship between market
orientation and business performance: evidence from five continents”, International Journal of
research in Marketing, vol. 21, no. 2, pp. 179-200.
Deshpande, R. and Farley, J. U. 2004. “Organizational culture, market orientation, innovativeness, and
firm performance: an international research odyssey”, International Journal of Research in Marketing,
vol. 21, pp. 3–22.
Fornell, C., and Larcker, D. F. 1981. “Evaluating structural equation models with unobservable variables
and measurement error”, Journal of Marketing Research, vol. 18, pp. 39–50.
Greenley, G. E. 1995. “Market orientation and company performance: Empirical evidence from UK
companies”, British Journal of Management, vol. 6: pp. 1–13.
Greenwal, R., Chandrashekaran M., Johnson, J. L. and Mallapragada, G.. 2013. “Environments,
unobserved heterogeneity, and the effect of market orientation on outcomes for high-tech firms”,
Journal of the Academy of Marketing Science, vol. 41, no. 2, pp. 206-233.
Han, J. K., Kim, N. and Srivastava, R. K. 1998. “Market orientation and organizational performance: Is
innovation a missing link?”, Journal of Marketing, vol. 62 no. 4, pp. 30–45.
Hult, G. T. M., Hurley, R. F. and Knight, G. A. 2004. “Innovativeness: Its antecedents and impact on
business performance”, Industrial Marketing Management, vol. 33, pp. 429–438.
Jaworski, B. J. and Kohli, A. K.. 1993. “Market orientation: antecedents and consequences.” Journal of
Marketing, vol. 57, no. 3, pp. 53–70.
Matsuno, K., Mentzer, J. T. and Ozsomer, A. 2002. “The effects of entrepreneurial proclivity and market
orientation on business performance”, Journal of Marketing, vol. 65, pp. 18–32.
Narver, J. C. and Slater, S.F. 1990. “The Effect of a Market Orientation on Business Performance”,
Journal of Marketing, vol. 54, pp. 20–35.
Narver, J. C., Slater, S. F. and MacLachlan, D. L. 2004. “Responsive and Proactive Market Orientation
and New-‐Product Success”, Journal of Product Innovation Management, vol. 21, no. 5, pp. 334-347.
Preacher, K. J. and Selig, J. P. 2012. “Advantages of Monte Carlo confidence intervals for indirect
effects”, Communication Methods and Measures, vol. 6, pp. 77-98.
d
Rogers, E. M. 1983. The Diffusion of Innovation (3 ed.), New York, The Free Press.
Wang, Y., Zeng, D. Di Benedetto, C. A. and Song, M. 2013. “Environmental determinants of responsive
and proactive market orientations”, Journal of Business & Industrial Marketing, vol. 28, no. 7, pp. 565–
576.
117
ISSN 2326-3636
AUTHOR PROFILE
Dr. Borut Milfelner (PhD, Faculty of Economics and Business, University of Maribor) is an assistant
professor of marketing and tourism at the University of Maribor, Slovenia, Faculty of Economics and
Business. He received his PhD degree at the University of Ljubljana, Faculty of Economics in 2010. His
research interests include the areas of marketing research, internal marketing, consumer behavior,
tourism marketing and the resource based theory. His scientific bibliography consists of 25 published
scientific articles (10 of them in JCR indexed journals), 28 scientific conference contributions, 3 scientific
monographs, and of participations in several research projects. He is also a member of Editorial board of
two Scientific Journals in the field of marketing and a reviewer for several domestic and international
scientific journals.
118
ISSN 2326-3636
LEVERAGING INNOVATION IN FAMILY STARTUPS: A STEWARDSHIP
APPROACH
Patricio Mori, Montana State University Billings, Billings, Montana, USA
ABSTRACT
Family firms are often criticized for failing to seek new ventures, being conservative and resisting change.
On the other hand, researchers believe that certain characteristics in family relationship can foster
strategic flexibility. Drawing on Stewardship theory, this paper, rather than arguing in favor or against
family business innovation, takes a contingency approach and analyzes variables that may affect
innovation in family startups and the conditions that leverage their family resources as competitive
advantage. Specifically, this paper proposes that altruism, power concentration and their interaction affect
strategic flexibility. It is also argued that family business with main founders high in altruism and low on
power concentration can become more innovative than when the main founder is low in altruism and high
in power concentration. Finally, it is suggested that the effect of altruism on strategic flexibility should be
stronger in family business than in non-family business. Implications for theory and practice are derived.
Keywords: Strategic Flexibility, Family startups, Altruism, Power Concentration
1. INTRODUCTION
Family businesses represent 40 to 60% percent of the gross national product in the US (and more
worldwide, and employ upward of 80 percent of the US workforce (Neubauer & Lank, 1998). Given the
importance of innovation for economic development and the strong impact of family business in the
overall economy, scholars are interested in understanding what makes a family business more
innovative.
Most of the research on family businesses has focused on the performance of family firms, but no
research has been done on the drivers of innovation in family startups. There is a controversy regarding
family businesses and innovation. Family business startups can provide an important social capital that
allows flexibility to adapt to changing environments (Granovetter, 1985; Burt, 1992) and are considered a
fertile ground for innovation (Zahra, Hayton & Salvato, 2004). On the one hand, Family founders are
considered an important resource for imprinting an innovative capability by calling on their family and
others in their family network for different kinds of help and support (Rosenblatt et al, 1985. On the other
hand, family businesses have often criticized for failing to seek new ventures (Cabrera-Suarez, SaaPerez & Almeida, 2001), being conservative and resisting change (Morris, 1998).
Stewardship theory offers an alternative explanation as to why family businesses can outperform non
family businesses (Corbatto & Salvato, 2004). Basically, Stewardship theory argues that family firms are
not only moved by self-interested motives, but rather by collective motives, in which family business
members are willing to sacrifice their personal welfare in behalf of the family business. This collectivistic
motivation leads to the formation of trust and commitment, which may become a source of competitive
advantage over non family businesses, which are more moved by self-interest (Habbershon et al., 2003).
Recently, Zahra, Hayton, Neubam, Dibrell, and Craig (2008) used Stewardship theory to propose and
empirically test that family members’ commitment is related to strategic flexibility. Zahra and colleagues
argued that family members’ commitment to the family business results in long term organizational goals
which lead family business members to embrace change in order to enhance the long term survival of the
firm. Moreover, the authors suggest that this family commitment is not sufficient to achieve strategic
flexibility. A stewardship culture also needs to be present, which puts emphasis on the quality of the
interactions among family members and other stakeholders. Although it is important to understand the
relevance of commitment and the existence of a stewardship culture in the development of strategic
flexibility, there is still a gap in research regarding the conditions in which a stewardship culture and the
commitment of family founders facilitate the development of strategic flexibility.
119
ISSN 2326-3636
Davis, Schoorman and Donaldson (1997) described Stewardship theory as a participatory approach in
which the motivation comes from a need for growth and advancement with a long term orientation.
Stewards are motivated to contribute to the business because satisfaction of the collective goals is more
important than individual satisfaction. Stewardship theory, suggests that any form of direct or indirect
control may lower stewards’ motivation, negatively, affecting their pro-organizational behavior, both in the
short and in the long term. Contrarily, agency theory suggests that direct control, monitoring and
monetary incentives are necessary in order to preclude opportunistic behaviors from agents which may
threaten the interests of the principals (Jensen and Meckling, 1976).
Based on agency theory, Chrisman, Chua and Litz (2004) proposed that family businesses will have less
agency costs because management and ownership are held within the family control, which maximizes
alignment between personal interests and the family business goals. On the other hand, Corbetta and
Salvato (2004) suggested that it is not self-interest which drives family businesses, but other noneconomics motives related to self-actualization, need of affiliation, need of power identification and
belongingness, better captured by Stewardship theory (Davis et al., 1997).
Beyond this debate, Davis et al. (1997) took a neutral approach in which neither agency nor stewardship
approach can exclusively explain performance in family businesses. Davis and colleagues argued that
either stewardship or agency approaches can be the preferred model depending on the situational
conditions and the psychological characteristics of the founders. Similarly, this study, drawing on
stewardship theory proposed by Davis et al. (2007), asks the research question: What is the effect of the
situation and psychological characteristics of the main founder on innovation in family startups and how
do these effects differ from non-family startups?
Based on recent findings based on stewardship theory application to family business performance
(Eddlestone and Kellermmann, 2007), it is proposed that the psychological characteristics of the main
founder, the situational conditions of startups, and their interaction should affect strategic flexibility.
Specifically, it is proposed that altruism of the main founder and his/her Power concentration interact and
directly affect strategic flexibility.
This study makes important contributions three important contributions to the field of family businesses
and innovation. First, it is the first to propose, using Stewardship theory, that the psychological
characteristics of the main founder (altruism) and the situational characteristic in the family startups
(power concentration) of the main founder influence strategic flexibility. Second, this study takes a
contingency approach in which power concentration of the main founder interact with altruism of the main
founder to affect the degree of strategic flexibility. This, in turn, has implication for practitioners in
clarifying under what conditions family businesses’ can be more innovative and leverage their source of
competitive advantage (Eisenhardt and Martin, 2000). Finally, this study is the first to propose a direct
association between altruism and strategic flexibility, which in sheds light to the source of family
businesses’ competitive advantage.
In the following section I will use stewardship theory to draw propositions about the relationship between
psychological characteristics and situational conditions. First, I will review the literature regarding the
association of altruism of the main founder and strategic flexibility. Then, I will make the case that power
concentration should interact and have a direct effect on strategic flexibility. Finally, the strength of the
relationship between altruism in family versus non-family startups is analyzed using Stewardship theory.
Propositions are derived and further discussed.
2. LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT
The following propositions are based on Fig. 1 which summarizes our model.
120
ISSN 2326-3636
FIGURE1. STEWARDSHIP MODEL FOR STRATEGIC FLEXIBILITY IN FAMILY STARTUPS
2.1. Psychological Factors and Strategic Flexibility
2.1.1. Stewardship and Altruism
Most research has focused on how family relationships can negatively impact firm performance
(Kellermanns & Eddlestone, 2004). However, recently it has been argued that “familiness” can be a
source of competitive advantage for family firms (Sirmon & Hitt, 2003).
Some researchers in family business field agree that altruism may explain why in some family firms
members are able to successfully work together and run a business while in others, family members are
laden with animosity that deteriorates performance (Kellermanns & Eddlestone, 2004; Eddlestone &
Kellermann & Sarathy, 2008). Altruism has been reported to contribute to positive and effective family
relationships and family business performance. It is considered an important source of competitive
advantage that is unique to family firms (Kellermanns & Eddlestone, 2004).
At the core of stewardship theory is the idea that involvement of the principals in achieving a collective
goals for the organization leads agents to align with the organizational goals, which in turn reduces
opportunism and reduces agency costs (Davis et al., 1997). Principals with an altruistic orientation are
more likely to be trusted and to instill in the other family members trustworthiness and reciprocity
(Kellerman and Eddlestone, 2004). This can foster pro organizational behaviors and increase involvement
of the other family members working for the business consistent with an stewardship orientation (Corbetta
and Salvato, 2004).
Zahra (2003) suggested that family members with high levels of altruism will put more emphasis on the
achievement of collective goals rather than in individual needs of the principals. Zahra suggested that
altruism is closely related to stewardship orientation because a steward fosters a common family
responsibility to see the business prosper (Cabrera-Suarez et al., 2001). Altruism can also foster
interdependence, loyalty and commitment among family members who see the business as part of their
identity as a family and as a business (Ward, 1987). Previous studies demonstrate that family members
are more committed and have higher expectations for performance than non-family members (Beehr,
1997). Kellermann and Eddlestone (2007) found a negative correlation between altruism and relationship
conflict and a positive correlation with family members’ participation. A stewardship culture can also lead
a firm to emphasize long-term rather than short-term financial performance (Davis et al., 1997) which
favors a safe environment for mutual reciprocity. Therefore altruistic culture seems to be closely related to
predictions of Stewardship theory.
2.1.2. Altruism and Strategic Flexibility
Zahra et al. (2008) found, using Stewardship theory, that family businesses with stewardship culture not
only directly affect strategic flexibility, but also interacts with family commitment culture to enhance the
relationship between family commitment culture and strategic flexibility—the ability to pursue new
opportunities and respond to threats in the competitive environment. Given the association between
altruism and stewardship altruism, this study proposes that altruism should affect strategic flexibility.
Innovation may be an important resource that distinguishes family firms and contributes to their
competitive advantage (Zahra et al., 2004). Researchers have suggested that altruism is a resource that
121
ISSN 2326-3636
may create a sustainable competitive advantage through “familiness”, which must be properly assessed
and managed in a family business (Cabrera-Suarez, et al., 2001). Altruism has also been found to be
positively related with family firm’s performance and this effect becomes stronger as technological
opportunities increases (Eddlestone et al., 2008).
Amabile, Barsade, Mueller and Staw (2005) using quantitative and qualitative data demonstrated in a
longitudinal study that affect in teamwork increases creativity. This connection is an interesting one as
family businesses have the potential to be a fertile ground for positive emotions due to the presence of
the other family members and their positive interactions. According to Andriopulos’ (2001) literature
review many antecedents of creativity has been proposed such as the organizational climate, leadership
style, organizational culture, resources and skills and the structures and systems of an organization.
Altruistic family founders, therefore, are likely to foster a positive climate that will reflect their values and
contribute to a stewardship culture characterized by active participation and engagement in pro
organizational goals that foster the common wealth of all family members and stakeholders, rather than
individualistic agendas. This stewardship culture, according to Zahra et al. (2008), interacts and directly
affects strategic flexibility.
Since altruistic main founders imprint the policies and culture according to their preferences and values
(Carroll & Hannan, 2000; Boeker, 1989), it seems reasonable to conclude that altruistic principals will
foster a positive climate that will enhance a culture of reciprocity that leads to strategic flexibility. This
flexibility is necessary because it allows coming out with new ideas and avoid rigidities that may lead to
failure (Leonard-Barton, 1995). This is particularly important at the startup level where strategy needs to
be aligned with the environment in order to buffer against environmental changes and increase survival
rate. Moreover, a fast response and flexibility can lead family startups to have the first mover advantage
over larger and older firms. Therefore,
Proposition 1: Main family founders’ altruism is positively related to strategic flexibility
2.2. Interaction Person Situation and Strategic Flexibility
Although altruism has many positive outcomes for family firms, researchers recognize that there is a dark
side to altruism as well (Schulze, Lubatkin & Dino, 2003b)
Altruism may put challenges on the effective management of resources. For example, when family firms
place noneconomic goals --such as avoiding family conflict or creating unnecessary jobs for family
members, ahead of economic considerations, performance can be compromised (Chrisman et al., 2003;
Schulze et al., 2003b).
Another problem in managing family businesses resources stems from family employees who often work
for a firm not because of their qualifications, but because of their family status (Schulze et al., 2003b). An
excessive altruism of the main founder can distort the allocation of resources by giving excessive priority
to non-economic over economic considerations. This can be a source of relationship conflict especially if
more qualified family members regret the poor performance of the less qualified family members
(Kellermanns & Eddlestone, 2004).
Eddeleston et al. (2008) argue that family businesses members need to be motivated to participate in
strategic planning and implement strategies, if the firm wants to benefit from these human resources
(Sirmon & Hitt, 2003) and improve strategic flexibility. Therefore, whether a family business member’s
abilities can or cannot be deployed is of the utmost importance (Kellermanns & Eddlestone, 2004).
However, research is still mute about what conditions favor the proper allocation of family resources in
order to avoid the negative externalities of altruistic transfers from the main founders on strategic
flexibility. This study proposes that there are circumstances that reduce the challenges and maximizes
the benefits of altruistic transfers on strategic flexibility.
The concept of strategic flexibility is closely related to creativity. Amabile proposed a componential model
in which creativity depends on personal factors and situational factors (Amabile 1983). This model
proposes 3 components: expertise, creative thinking and task motivation. According to Amabile (1996),
122
ISSN 2326-3636
although all of these components are important, task motivation is the most important of all. In Amabile’s
model, the characteristics of the task can exert an important influence on intrinsic motivation. Intrinsic
motivation depends on individual interests and goals and it is also sensitive to slight influences of social
changes (Deci and Ryan, 19850. Intrinsic motivation explains why people are willing to put effort on a
task regardless of extrinsic motivation, or incentives not related to the task itself, such as organizational
rewards. Moreover, Amabile (1996) suggests that no amount of skills or method of creative thinking can
compensate for the lack of intrinsic motivation, and, although the other two skill components determine
what a person is capable of doing in a given domain, it is the task motivation component which
determines what a person will actually do.
Similarly, Woodman and Schoenfeldt (1990) proposed an interactionist model for creative behaviors at
the individual level. Woodman, Sawyer and Griffin (1993) applied this model at the organizational level
and argued that “…the creative behavior of organizational participants is a complex person-situation
interaction influenced by events of the past as well as salient aspects of the current situation” (p. 294). In
particular, they proposed that social interaction and individual characteristics can facilitate or hinder
creativity accomplishment either by affecting the continuous innovation based on current competencies
and experiences, or the radical innovations that allows for a “creative destruction” (Schumpeter, 1965. Put
differently, the interactionist model provides an integrating frame-work that combines elements of the
personality (e.g., Woodman, 1981, cognitive (e.g., Hayes, 1989), and social psychology (e.g. Amabile,
1983) to explain creative behaviors related to strategic flexibility.
Given the importance of the context and its interaction with psychological variables on creativity and
innovation, this study incorporates situational contingencies that may foster innovation at the startup level.
Specifically, this study is interested on how power concentration affects the positive relationship between
altruism of the main founder and strategic flexibility.
2.2.1. Interaction between Power concentration and Strategic Flexibility.
Power or control concentration corresponds to the relative power of the most influential founder(s over the
rest of the founders. This control concentration depends on the relative contribution of the most powerful
founder (i.e. main founder relative to the rest of the founders in terms of experience, resources,
reputation, and/or social capital (Finkelstein, 1992).
Eddlestone and Kellermann (2007) argue that power concentration and altruism, are two important
factors which affect family business performance through two intervening variables related to stewardship
culture: participation and relationship conflict. Although Eddlestone and Kellerman used altruism and
power concentration as major determinants of performance in family businesses, they didn’t analyzed
their interaction effect on strategic flexibility.
Zahra et al. (2008) tested the interaction of altruism and strategic planning, but they didn’t analyze the
role of power concentration on explaining resource allocation. We argue that power concentration is a
situational variable which affects the positive behavioral effect of a family business (i.e. altruism) and also
the extent of strategic flexibility.
In order to understand how altruism interacts with power concentration of the main founder we need to
pay more attention to the positive and negative effects of altruism in family businesses..
2.2.2. Dark Side of Altruism
Literature on altruism in family businesses points out the positive and the negative effects of altruism,
which has also been called the “dark side of altruism”. The dark side of altruism has been related to
negative outcomes such as free riding, shirking, lack of monitoring, self-serving bias and escalation of
commitment (Kellermanns & Eddlestone, 2004, Schulze et al., 2001; Schulze et al., 2003b).
These negative outcomes stem from parents’ desire to enhance their family and business welfare by
being generous to other family members, even though that increased generosity may cause their children
to free-ride. Some authors argue that the dark side of altruism “… can give both parents and children
incentives to take actions that can threaten the welfare of the family and firm alike” (Schulze et al., 2003b
p.472). This dark side of altruism is analogous to the children leaving an assigned household chore for a
123
ISSN 2326-3636
parent to complete, or to squander their parent’s money. This has been identified as an agency cost for
the founders, which is very common in family firms, especially when a family founder controls almost all of
the firm’s resources (Schulze et al., 2001). These agency costs for the founder include perquisites, lack of
monitoring and adverse selection, which are typically the result of the founder’s altruistic transfers to other
family members and suggests a “Samaritan dilemma”.
Altruism may limit the founder’s ability to monitor and discipline family members. The consequences that
such actions might have on familial relationships can be significant (Donovan, 1995). For example,
relationship conflict might arise among family members when a powerful founder unilaterally rewards
some family members whose contribution to the business are not compatible with the position or level of
responsibility in the company. Altruism can distort “what is good for the business” and “what is good for
the family” and lead some family members to maximize their welfare by free riding on other family
members with better skills and qualifications for the job.
This threat can be increased if the CEO’s has more power relative to the other family members Moreover,
powerful founders can make altruistic transfers to other family members, which may evoke a sense of
entitlement on those family members (Gersick et al., 1997). Therefore, we argue that a strong power
concentration of the main founder makes the effects of altruism on strategic flexibility weaker. Therefore,
Proposition 2: Main Founder Power moderates the relationship between altruism and strategic flexibility.
For higher levels of altruism this relationship would be decreased.
2.3. Power concentration and Strategic Flexibility
Main Founders in Family businesses tend to concentrate a great amount of power over the rest of the
founding team (Taguiri & Davis, 1992). The reason for this is 1) most of the time one founder is the major
stakeholder in the company therefore it is in his/her best interest to make the decisions him/herself to
maximize predictability; 2) The main founder most likely has experience in the business and has some
scarce resources (tacit knowledge, capital, human capital), that he/she can apply in the business in a
unique way, which, according to Resource Based View (e.g. Habbershon & Williams, 1999; Wernerfelt,
1984; Barney, 1991), would represent a competitive advantage and 3) Family founders have invested
themselves into the business in a way that their business is part of their identity and a source of
identification that some scholars have labeled “Socio emotional wealth” (see Gomez-Mejia et al., 2011 for
a review) which leads them to use more power in order to protect that source of satisfaction.
Entrepreneurship and family business literature provides anecdotal and empirical evidence = that
individuals who have a higher concentration of power, have a strong desire for leadership and authority
for decision making (Harvey & Evans, 1994), which can impede sensible decision making (Daily &
Dollinger,1992). They also can dictate strategy, choose the developmental path of the company (Schulze
et al., 2003a) be authoritarian, lack trust and planning (Dyer & Handler, 1994; Kelly, Athanassiou, &
Crittenden, 2000) and use just a few managerial tools (Kelly et al., 2000). Indeed, start-up teams with
high ownership concentration tend to have less participative atmosphere (Ronstadt, 1984). Not only do
the other members refrain from challenging the belief structure of the powerful controlling individuals with
new insights (Walsh & Fahey, 1986), but they are often reluctant to seek out advice and assistance from
other members (Gersick et al., 1997).
This creates two problems. First, family members will follow the decisions of the most powerful founder,
reducing their contribution to the family business. Second, a unilateral decision making of a powerful
founder can lead to escalation of commitment.
2.3.1. Socio-emotional Wealth and Strategic Change
Family founders perceive a non-economic benefit on their involvement on the family business. This is
consistent with the concept of psychological ownership (see Pierce, Kostova and Dirks, 2003 for a
review) in which the identification with the business and the family leads them to perceive a sense of
purpose, belongingness and identity which is a source of satisfaction for the founder.
Family business researchers have recently pointed out that non- economic factors embedded in family
ties is pivotal to differentiate family from non-family business, and their differences in processes and
124
ISSN 2326-3636
outcomes (Gomez-Mejia, Cruz & Berrone, 2011). Gomez-Mejia et al. (2007) labeled these factors “Socioemotional wealth”, or “affective endowments”, to refer to the non-economic factors embedded in family
relationships among the owners such as altruism, sense of belongingness, identification and control (see
Gomez-Mejia et al., 2011 for a review). These affective endowments represent a non-economic welfare,
which is not reflected in economic value, and represent a source of satisfaction of affective needs
(Gomez-Mejia et. al., 2007).
In Gomez-Mejia et al.’s (2007) empirical study, family businesses were three times more likely to refuse to
join a cooperative of Spanish oil mills than non-family businesses, even if joining the cooperative reduced
performance hazards and the probability of failure. The authors reasoned that these firms refused to join
the cooperative to avoid losing their source of affective satisfaction represented by their involvement in
their family business. These findings suggest that family startups may be constrained by the presence of
affective endowments because family ties are salient for founders and thus need to be protected, which
may lead them to be less explorative in order to avoid losing those endowments.
Consistent with the idea that this source of satisfaction is valued by a powerful founder, he /she would
likely see it as an “affective endowment” which needs to be protected and nourished. This means that
ideas that are generated by the founder are overrepresented and ideas that are external are disregarded.
2.3.2. Escalation of Commitment and Strategic Flexibility
A powerful founder can also lead to escalation of commitment. Literature on escalation of commitment
(see Brockner 1992) for a review suggests that, in conditions of uncertainty and when facing a negative
feedback, decision makers tend to escalate their commitment to failing courses of actions (Arkes &
Blumer, 1985; Brockner & Rubin, 1985; Northcraft & Wolf, 1984; Staw, 1981; Teger, 1980; Thaler, 1980).
One of the most accepted explanations of escalation of commitment is self-justification (Brockner, 1992),
that is, individuals are willing to escalate commitment to prove to themselves and others that the
resources invested were not in vain. This problem is aggravated when the goals pursued are relatively
high in value (Brockner, 1992).
A powerful founder will have many expectations to protect their status which gives him/her a source of
satisfaction or “Socio-emotional wealth”. Since the perceived probability of success will match the
expectations of the founder, projects that might be too risky to undertake will be preferred in order to
maintain their Socio-emotional wealth and what it represent psychologically for the founder (e.g. a source
of identification, control and belongingness. In other words, if a decision threatens this Socio emotional
wealth, it will be avoided in favor of the decision that maintains and preserves the perceived control or
power of the main founder (Gomez-Mejia et al., 2007; Gomez et al., 2011).
Putting these arguments together, it is proposed,
Proposition 3: Main founder’s power concentration is negatively related to strategic flexibility in family
businesses startups.
Finally, it is proposed that the differences in the Effect of Altruism on Strategic Flexibility differ in Family
versus non family status. According to Stewardship theory, family businesses, due to the family ties
among the family members, are infused with mutual reciprocity and affect. This is the case of altruistic
transfers that occur amongst family members. Since family businesses are more likely to present this
unconditional reciprocity than non-family members, it is expected that, for a given level of power
concentration, the effect of altruism on strategic flexibility would be stronger for family startups than for
non-family startups. Therefore,
Proposition 4: Family status moderates the relationship between altruism and strategic flexibility. For
family startups this relationship would be stronger than for non-family startups.
3. DISCUSSION AND CONCLUSIONS
Scholars have researched how Stewardship theory can be applied to family businesses to shed light on
their competitive advantage (Corbetta & Salvatto, 2004; Eddlestone & Kellerman, 2007). Altruism and
powerful concentration have been related to Stewardship theory and to family business performance
125
ISSN 2326-3636
(Eddlestone & Kellermann, 2007). Studies suggest that strategic flexibility is achieved by a family culture
and a stewardship culture. However, no study has analyzed the effect that altruism and power
concentration of the main founder have on innovation through strategic flexibility.
Some debate still holds regarding whether ownership and management concentration (Christman et al.,
2004) or the stewardship culture of family businesses (Corbetta & Salvatto, 2004) leads to less agency
costs. Davis et al. (1997) proposed a Stewardship model which uses both paradigms and proposes that
any combination of both depends on the context in which the family business is placed.
This study complements Davis et al.’s view by proposing certain conditions that may facilitate or hinder
strategic flexibility. It draws on Stewardship theory to propose that altruistic founders increase the main
effect on strategic flexibility but it has a stronger effect when the main founder has lower power
concentration. This implies that family businesses need to make a tradeoff between altruism and Power
concentration if they want to increase their strategic flexibility, that is, strategic flexibility requires that the
main founder gives up control represented by their power concentration.
This has important implications for theory and practice because imprinting strategic flexibility in family
startups placed in dynamic environments can imprint an innovative culture which should help in
recognizing more opportunities otherwise ignored and to avoid getting caught in competency trap or
learning myopia (Levitt and March, 1988. This, in turn, should lead to more innovation and to reduce
survival hazards (March, 1991).
This study has implications for practitioners because it helps to understand how family business startups
can become more innovative. According to this study’s predictions, family founders in dynamic
environments should foster a more participative climate in which decision making is shared putting
emphasis in achieving the business goals rather than the main founder’s agenda. This is more likely the
case when family founders are altruistic as they are more likely to act like stewards akin to
transformational leaders (Zahra et al., 2008). An altruistic orientation of the main founder nurtures positive
relationship, which should help in creativity and innovation. However, a powerful founder can stymie this
creativity by creating dependencies from him/her in order to maintain his/her power status and the Socioemotional wealth associated with it.
Another implication for practitioners is that altruistic founders who want to leverage innovation should
allocate family resources so that their contribution to the business is valuable. This will allow founders to
share power and decisions with other family members, reduce dependence from the main founder while
allowing for the materialization of their contributions. This, in turn, should foster participation and the
emergence of a stewardship culture, (Zahra et al., 2008) which should enhance strategic flexibility.
For theory, this study introduces attenuating and triggering circumstances for the emergence of an
innovative culture at the startup level. Previous research on ambidexterity --the ability to exploit (i.e.
incremental innovation and explore (i.e. radical innovation simultaneously, suggests that firms that are
able to develop this dynamic capability earlier in time (Eisenhardt & Martin, 2000) are more likely to have
better performance and survival (e.g. March, 1991. If family firms are more likely to exploit than explore
as they are often criticized for failing to seek new ventures (Cabrera-Suarez et al., 2001), being
conservative and resisting change (Morris, 1998), increasing strategic flexibility can lead family startups to
screen a broader pull of options that may, explore new alternatives or lead to radical innovations.
Moreover, since family businesses possess valuable and scarce resources that foster creativity and
innovation (Zahra et al., 2004), identifying the facilitating conditions for innovation in family business in
rapidly changing environments may be a productive research stream that may unleash their innovative
capacity and thus boost economic development (Schumpeter, 1965).
The propositions on this study can be useful for researchers interested in pitting agency theories and
stewardship theory. This study proposes that power concentration and altruism are two aspects related to
either theory, which can be appropriate depending on the degree of environmental uncertainty. In
environmental conditions that require predictability, accountability and predictability, predictions of agency
theory can work well for non-family business, however in family business in dynamic environments –such
as hi tech industry, which require creativity and flexibility, altruistic founders with low power
concentrations are better prepared to deal with environmental changes.
126
ISSN 2326-3636
REFERENCES
Amabile, T. M. 1996. Creativity and innovation in organizations Vol. 5. Boston: Harvard Business School.
Amabile, T. M., & Amabile, T. M. 1983. The social psychology of creativity Vol. 11. New York: SpringerVerlag.
Amabile, T. M., Barsade, S. G., Mueller, J. S., & Staw, B. M. 2005. Affect and creativity at work.
Administrative science quarterly, 503, 367-403.
Andriopoulos, C. 2001. Determinants of organizational creativity: a literature review. Management
decision, 3910, 834-841.
Arkes, H., & Blumer, C. 1985. The psychology of sunk costs. Organizational Behavior and Human
Decision Processes, 35: 124-140.
Barney, J. B. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17:
99-120.
Beehr, T.A., Drexler Jr., J.A., Faulkner, S. 1997. Working in small family businesses: empirical
comparisons to non-family businesses. Journal of Organizational Behavior 18, 297–312.
Boeker, W. 1989. Strategic change: The effects of founding and history. Academy of Management
Journal, 323, 489-515.
Brockner, J. 1992. The escalation of commitment to a failing course of action: Toward theoretical
progress. Academy of Management Review, 171, 39-61.\
Brockner, J., & Rubin, J. Z. 1985. Entrapment in escalating conflicts: A social psychological analysis. New
York: Springer-Verlag
Burt, R .S. 1992. Structural holes. Cambridge : Cambridge University Press .
Cabrera-Suárez, K., De Saá-Pérez, P., & García-Almeida, D. 2001. The succession process from a
resource-and knowledge-based view of the family firm. Family Business Review, 141, 37-46.
Carroll, G. R., & Hannan, M. T. 2000. The demography of corporations and industries. Princeton
University Press.
Chrisman, J. J., Chua, J. H., & Litz, R. A. 2004. Comparing the Agency Costs of Family and Non-‐Family
Firms: Conceptual Issues and Exploratory Evidence. Entrepreneurship Theory and Practice, 284, 335354.
Corbetta, G., Salvato, C. 2004. Self-serving or self-actualizing? Models of man and agency costs in
different types of family firms: a commentary on “Comparing the agency costs of family and non-family
firms: conceptual issues and exploratory evidence”. Entrepreneurship Theory and Practice 28 4, 355–
362.
Daily, C. M., & Dollinger, M. J. 1992. An empirical examination of ownership structure in family and
professionally managed firms. Family business review, 52, 117-136.
Davis, James H., F. David Schoorman, and Lex Donaldson 1997:."Toward a stewardship theory of
management." Academy of Management review 221: 20-47.
Deci, E. L., & Ryan, R. M 1985. Intrinsic motivation and self-determination in human behavior. New York:
Plenum.
Donovan, K. 1995. Just one tiny share can make a difference: they’re battling over the family fortune and
the brother has the upper hand. Natl. Law J. 1742 12.
Dyer, W.G. & Handler, W. 1994. Entrepreneurship and family business: Exploring the connections.
Entrepreneurship Theory and Practice, 19, 71–84.
Eddlestone, K. A., & Kellermanns, F. W. 2007. Destructive and productive family relationships: A
stewardship theory perspective. Journal of Business Venturing, 224, 545-565.
Eddlestone, K. A., Kellermanns, F. W., & Sarathy, R. 2008. Resource configuration in family firms: Linking
resources, strategic planning and technological opportunities to performance. Journal of Management
Studies, 451, 26-50.
Eisenhardt, K. M., & Martin, J. A. 2000. Dynamic capabilities: what are they? Strategic management
journal, 2110-11, 1105-1121.
127
ISSN 2326-3636
Finkelstein, S. 1992. Power in top management teams: Dimensions, measurement, and validation.
Academy of Management Journal, 353, 505-538.
Gersick, K.E., Davis, J.A., Hampton, M.M., & Lansberg, I. 1997. Generation to generation: Life cycles of
the family business. Boston, MA: Harvard Business School Press.
Gomez-Mejia, L. R., Cruz, C., Berrone, P., & De Castro, J. 2011. The bind that ties: Socioemotional
wealth preservation in family firms. The Academy of Management Annals, 51, 653-707.
Gomez-Mejia, L., Haynes, K., Nunez-Nickel, M., Jacobson, K. and Moyano-Fuentes, J. 2007. ‘Socioemotional wealth and business risks in family-controlled firms: Evidence from Spanish olive oil mills’.
Administrative Science Quarterly, 52,106-137.
Grannovetter, M. 1985. “Economic Action and Social Structure: The Problem of Embeddedness”,
American Journal of Sociology 913:481-510
Habbershon, T. and Williams, M. 1999, A resource-based framework for assessing the strategic
advantage of family firms. Family Business Review, 12, 1–25.
Habbershon, T.G., Williams, M., MacMillan, I.C. 2003. A unified systems perspective of family firm
performance. Journal of Business Venturing 18, 451–465.
Hardy, C. 1996, ``Understanding power: bringing about strategic change'', British Journal of Management,
Vol. 7, pp. 3-16.
Harvey, M., & Evans, R. E. 1994. Family business and multiple levels of conflict. Family Business
Review, 74, 331-348.
Hayes, J. P. 1989. Altitudinal and seasonal effects on aerobic metabolism of deer mice. Journal of
Comparative Physiology B: Biochemical, Systemic, and Environmental Physiology, 1594, 453-459.
Jensen, M.C. & Meckling, W.H. 1976. Theory of the firm: Managerial behavior, agency costs, and
ownership structure. Journal of Financial Economics, 3, 305–360.
Kellermanns, F.W. & Eddlestone, K. 2004. Feuding families: When conflict does a family firm good.
Entrepreneurship Theory and Practice, 283, 209–228
Kelly, L.M., Athanassiou, N., & Crittenden, W.F. 2000. Founder centrality and strategic behavior in the
family-owned firm. Entrepreneurship: Theory and Practice, 252, 27–42.
Levitt, B., & March, J. G. 1988. Organizational learning. Annual review of sociology, 319-340.
Leonard-Barton, D. 1995. Wellspring of knowledge. Harvard Business School Press, Boston, MA.
March, J. G. 1991. Exploration and exploitation in organizational learning. Organization Science, 21, 7187.
Morris, M.H. 1998. Entrepreneurial intensity. Westport, CT: Quorom Books.
Neubauer, F., & Lank, A. G. 1998. The family business—1st governance for sustainability London:
MacMillan.
Northcraft, G. B., &W olf, G. 1984. Dollars, sense, and sunk costs: A life-cycle model of resource
allocation decisions. Academy of Management Review, 9: 225-234.
Pierce, J. L., Kostova, T., & Dirks, K. T. 2003. The state of psychological ownership: Integrating and
extending a century of research. Review of general psychology, 71, 84.
Ronstadt, R. 1984. Entrepreneurship. Dover, MA: Lord Publishing.
Rosenblatt, P.C., de Mik, L., Anderson, R.M., & Johnson, P.A. 1985. The family in business. San
Francisco: Jossey-Bass.
Schulze, W.S., Lubatkin, M.H., & Dino, R.N. 2002a. Altruism, agency, and the competitiveness of family
firms. Management and Decision Economics, 234,5, 247–259.
Schulze, W.S., Lubatkin, M.H., Dino, R.N. 2003b. Toward a theory of agency and altruism in family firms.
Journal of Business Venturing 18 4, 473–490.
Schulze, W.S., Lubatkin, M.H., Dino, R.N., Buchholtz, A.K. 2001. Agency relationship in family firms:
theory and evidence. Organization Science 12 9, 99–116.
Schumpeter, J.A. 1965. Economic theory and entrepreneurial history. In: Aitken, H.G.J. Ed., Explorations
in Enterprise. Harvard University Press, Cambridge, MA, pp. 45–64.
128
ISSN 2326-3636
Shleifer, A., Vishny, R., 1997. The limits of arbitrage. Journal of Finance 52, 35-55.
Sirmon, D. G., & Hitt, M. A. 2003. Managing resources: Linking unique resources, management and
wealth creation in family firms. Entrepreneurship Theory and Practice, 274: 339-358.
Staw, B. M. 1981. The escalation of commitment to a course of action. Academy of Manage-ment
Review, 6: 577-587.
Taguiri, R. & Davis, J.A. 1992. On the goals of successful family companies. Family Business Review,
teams. Journal of Organizational Behavior, 22, 309–328.
Teger, A. 1980. Too much invested to quit. New York: Pergamon Press.
Thaler, R. 1980. Toward a positive theory of consumer choice. Journal of Economic Behavior and
Organization, 1: 39-60.
Walsh, J.P. & Fahey, L. 1986. The role of negotiated belief structures in strategy making. Journal of
Management, 123, 325–338.
Ward, J.L. 1987. Keeping the family business healthy: how to plan for continuing growth. Jossey-Bass,
San Francisco.
Wernerfelt, B. 1984. A resource-based view of the firm. Strategic Management Journal, 5: 171-180.
Woodman, R. W. 1981. Creativity as a construct in personality theory. The Journal of Creative Behavior,
151, 43-66.
Woodman, R. W., & Schoenfeldt, L. F. 1990. An Interactionist Model of Creative Behavior. The Journal of
Creative Behavior, 244, 279-290.
Woodman, R. W., Sawyer, J. E., & Griffin, R. W. 1993. Toward a theory of organizational creativity.
Academy of management review, 293-321.
Zahra, S. A., Hayton, J. C., & Salvato, C. 2004. Entrepreneurship in family vs. non-family firms: A
resource-based analysis of the effect of organizational culture. Entrepreneurship Theory & Practice,
284: 363-381.
Zahra, S. A., Hayton, J. C., Neubaum, D. O., Dibrell, C., & Craig, J. 2008. Culture of family commitment
and strategic flexibility: The moderating effect of stewardship. Entrepreneurship Theory and Practice,
326, 1035-1054.
Zahra, S.A. 2003. International expansion of U.S. manufacturing family businesses: the effect of
ownership and involvement. Journal of Business Venturing 19, 495–512.
AUTHOR PROFILE
Dr. Patricio Mori (Ph.D., Florida International University, 2013) is currently Assistant Professor at
Montana State University. His research interests include Innovative strategies, Global Businesses, Small
Business Entrepreneurship, International Entrepreneurship, Strategic Management and Family
Businesses. As a researcher, Patricio Mori has successfully participated in three major conferences
(Strategic Management Society, Academy of International Bossiness, and Academy of Management). He
has one publication at the Journal of Strategic and International Studies. He is currently working in
sending the results from his dissertation to several journals. In his dissertation, he analyzes how the
family ties of the founding team and the psychological traits of the main founder, such as achievement
motivation and internal locus of control, interact and directly affect innovative strategies related to
exploration, exploitation and ambidextrous orientations. The data for his dissertation is based on an
archival database from a Panel Study of Entrepreneurs.
129

JSIS_May 2014

Transcription

Similar documents

Franz Schubert Impromptus, Moments Musicaux, Klavierstücke for

Pimp my memory - Temple University

Studs Terkel, with Tony Parker

Supporting Information Metal-Ion Catalysis in Alkaline Ethanolysis of

GrauS NeWs - Robinsons Bookshop

tailgate - Staples Promotional Products

PDF (Extract)

CONTENTS OF HISTORIA SCIENT/ARUM: International Journal of

Content 2 - Regional Institute of Education, Bhubaneswar

here - Leonardo Electronic Almanac